DineEquity Inc. ( DIN - Snapshot Report ) recently announced that it has struck a deal with Apple Franchise Capital, LLC to sell 33 company-owned Applebee's restaurants in Missouri and Indiana for about $26 million. The company intends to reduce its financial obligations and shift toward a franchise-based model through this deal. The transaction is expected to close in the third quarter of 2012.

Moreover, on the first day of this month, the company also announced the sale of 39 company-operated Applebee's restaurants in Virginia and expects to clinch this deal also in the third quarter of 2012.

During the first quarter, DineEquity completed the sale of 17 company-operated Applebee's restaurants located in a six-state market around Tennessee, consistent with the company’s strategy of becoming highly franchised.

Following the footsteps of other noted restaurant companies in the U.S., DineEquity is also shifting its focus toward franchised operations from company-owned restaurants as a de-risking strategy, given that expansion through franchising is less capital intensive and income is fixed in the form of fee.

DineEquity acquired Applebee’s International in November 2007 in a $2 billion leveraged buyout. Since then, the company has sold a total of 342 Applebee's company-operated restaurants.

The sale of company-owned Applebee’s restaurants has reduced the debt burden of the company considerably by the use of free cash flow. As of March 31, 2012, the company’s long-term debt liability was $1,338.0 million compared with $1,411.4 million as of December 31, 2011. During the quarter, the company reduced its total debt burden by $85.9 million.

At the end of the first quarter, more than 95% of DineEquity's Applebee's and IHOP restaurants were franchised. Upon completion of the pending sale, this percentage will rise to 97%. Although DineEquity’s transition to a more franchise-based model will decrease company-owned revenues, this will enhance free cash flow generation by reducing capital employed.

For fiscal 2012, Applebee's franchise plans to open 30 to 40 restaurants, half of which are expected to open in the U.S.

With more than 3,500 Applebee's and IHOP restaurants combined, DineEquity is the largest full-service restaurant company in the world with brands leading in their respective categories of casual and family dining.

DineEquity's primary competitors are Brinker International Inc. ( EAT - Analyst Report ) and Denny's Corporation ( DENN - Snapshot Report ) .