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OVERLAND PARK, KS-Frustration over lingering difficulties for the country’s largest casual dining chain has boiled over into the boardroom after a major shareholder proposed a slate of four directors to sit on the 12-member group. Fund manager Breeden Capital Management LLC filed SEC documents on Thursday nominating the quartet, a step CEO Richard Breeden attributed to “Applebee’s period of deteriorating operating performance,” a decline he charged is now entering its fourth year.

“Our nominees will provide fresh thinking, and they are completely independent from the mistakes of the past,” says Breeden. “With changes in both personnel and policies, we believe that Applebee’s can be a competitive success, not a study in stagnation.” Connecticut-based BCM owns 4.02 million shares of Applebee’s stock, or 5.42% of the total outstanding shares.

After a disappointing fourth quarter of 2006, Applebee’s announced this month that it would shutter 24 of its 1,940 stores after company officials hunkered down in February to consider ways for ending the weak stretch. According to some observers, the firm has been hurt for much of the decade by changes in dining trends. One analyst told GSR in a recent article that the company was squeezed at both ends of the market given its traditional presence as a middle-level eatery.

The analyst told GSR that the store closings seemed insufficient to address Applebee’s larger issues, and Breeden reiterated that notion in his proxy filing. According to the CEO, Applebee’s “has yet to take significant actions to cut bloated expenses, to deploy capital only where it will generate the highest return, and to restructure the business to meet today’s market conditions such as by re-franchising hundreds of restaurants currently owned by the company,” of which there were 528 prior to the latest closings.

In a prepared statement released after the SEC filing, Applebee’s CEO Dave Goebel insisted that the “strategic alternatives review process” will yield positive results if given time to work, and also blamed some of the struggles to “a competitive environment.”

“It’s the toughest environment in 15 years for casual dining,” Goebel lamented while stressing that the company is “aggressively working to build sales and traffic.” Goebel also maintained that the board did respond to Breeden’s concerns by offering BCM partner Steve Quamme a seat on both the board of directors and on the ad hoc strategy committee. Quamme was further invited to sit on the board’s Governance Committee, and Goebel said management then offered seats to two of the four other nominees—Raymond Seitz and Laurence Hams—when Quamme declined to participate. Quamme and Breeden are the other two board members nominated by BCM.

“It is difficult for us to understand why Mr. Breeden, who says he wanted to be a constructive force, would reject these offers in favor of an expensive, time-consuming and distracting proxy fight,” Goebel said. “For our part, we intend to articulate our position with our investors and aggressively pursue a process designed to deliver value to all shareholders.”

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