UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)
[ X ]   QUARTERLY  REPORT  PURSUANT  TO SECTION 13  OR 15(d)  OF  THE SECURITIES
        EXCHANGE ACT OF 1934

For the quarterly period ended                   September 25, 2005
                               -------------------------------------------------
                                       OR

[    ]  TRANSITION  REPORT PURSUANT  TO SECTION  13 OR  15(d) OF THE  SECURITIES
        EXCHANGE ACT OF 1934

For the transition period from                         to
                              -------------------------  -----------------------

Commission File Number:           000-17962
                       -------------------------------

                         Applebee's International, Inc.
              ----------------------------------------------------
              (Exact name of registrant as specified in its charter)

              Delaware                                    43-1461763
  ---------------------------------         ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)

                4551 W. 107th Street, Overland Park, Kansas 66207
 -------------------------------------------------------------------------------
              (Address of principal executive offices and zip code)

                                 (913) 967-4000
               ---------------------------------------------------
               (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.          Yes  X      No
                                               -----      -----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined by Rule 12b-2 of the Exchange Act). Yes  X      No
                                               -----      -----

Indicate by check mark whether the  registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).            Yes         No  X
                                               -----      -----

The number of shares of the registrant's  common stock outstanding as of October
26, 2005 was 76,280,910.

                                       1
<PAGE>

                         APPLEBEE'S INTERNATIONAL, INC.
                                    FORM 10-Q
                     FISCAL QUARTER ENDED SEPTEMBER 25, 2005
                                      INDEX

<TABLE>

                                                                                                                Page
<CAPTION>
<S>                                                                                                             <C>
PART I              FINANCIAL INFORMATION

Item 1.             Condensed Consolidated Financial Statements:

                    Consolidated Balance Sheets as of September 25, 2005
                       and December 26, 2004................................................................      3

                    Consolidated Statements of Earnings for the 13 Weeks and 39 Weeks
                       Ended September 25, 2005 and September 26, 2004 (as restated)........................      4

                    Consolidated Statement of Stockholders' Equity for the
                       39 Weeks Ended September 25, 2005....................................................      5

                    Consolidated Statements of Cash Flows for the 39 Weeks
                       Ended September 25, 2005 and September 26, 2004 (as restated)........................      6

                    Notes to Condensed Consolidated Financial Statements....................................      8

Item 2.             Management's Discussion and Analysis of
                       Financial Condition and Results of Operations........................................     18

Item 3.             Quantitative and Qualitative Disclosures About Market Risk..............................     32

Item 4.             Controls and Procedures.................................................................     32


PART II             OTHER INFORMATION

Item 1.             Legal Proceedings.......................................................................     33

Item 2.             Unregistered Sales of Equity Securities and Use of Proceeds.............................     33

Item 6.             Exhibits................................................................................     33

Signatures .................................................................................................     34

Exhibit Index...............................................................................................     35

</TABLE>

                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1.           Condensed Consolidated Financial Statements

                 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>

                                                                                       September 25,        December 26,
                                                                                           2005                 2004
                                                                                      ----------------     ---------------
                                       ASSETS
<S>                                                                                    <C>                   <C>
Current assets:
     Cash and cash equivalents.....................................................     $    10,140          $    10,642
     Short-term investments, at market value.......................................             284                  282
     Receivables (less allowance for bad debts of $346 in 2005 and $417 in 2004)...          36,171               39,152
     Receivables related to captive insurance subsidiary...........................           3,248                2,566
     Inventories...................................................................          21,499               35,936
     Prepaid and other current assets..............................................          13,035               12,079
                                                                                      ----------------     ---------------
         Total current assets......................................................          84,377              100,657
Property and equipment, net........................................................         567,157              486,548
Goodwill...........................................................................         138,788              116,344
Restricted assets related to captive insurance subsidiary..........................          20,186               17,386
Other intangible assets, net.......................................................           7,921                8,524
Other assets, net..................................................................          29,699               24,972
                                                                                      ----------------     ---------------
                                                                                        $   848,128          $   754,431
                                                                                      ================     ===============

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt.............................................     $       254          $       222
     Notes payable.................................................................           9,700                  --
     Accounts payable..............................................................          53,755               42,830
     Accrued expenses and other current liabilities................................          76,294               89,064
     Loss reserve and unearned premiums related to captive insurance subsidiary....          13,481               12,137
     Accrued dividends.............................................................             --                 4,867
     Accrued income taxes..........................................................          14,930                2,578
                                                                                      ----------------     ---------------
         Total current liabilities.................................................         168,414              151,698
                                                                                      ----------------     ---------------
Non-current liabilities:
     Long-term debt - less current portion.........................................         126,280               35,472
     Deferred income taxes.........................................................          27,589               28,995
     Other non-current liabilities.................................................          47,112               41,539
                                                                                      ----------------     ---------------
         Total non-current liabilities.............................................         200,981              106,006
                                                                                      ----------------     ---------------
         Total liabilities.........................................................         369,395              257,704
                                                                                      ----------------     ---------------
Commitments and contingencies (Note 4)
Stockholders' equity:
     Preferred stock - par value $0.01 per share:  authorized - 1,000,000 shares;
       no shares issued............................................................             --                   --
     Common stock - par value $0.01 per share:  authorized - 125,000,000 shares;
       issued -108,503,243 shares..................................................           1,085                1,085
     Additional paid-in capital....................................................         233,615              220,897
     Unearned compensation.........................................................          (3,175)              (1,924)
     Retained earnings.............................................................         704,597              623,315
                                                                                      ----------------     ---------------
                                                                                            936,122              843,373
     Treasury stock - 31,105,048 shares in 2005 and 27,375,044 shares in 2004, at
       cost........................................................................        (457,389)            (346,646)
                                                                                      ----------------     ---------------
         Total stockholders' equity................................................         478,733              496,727
                                                                                      ----------------     ---------------
                                                                                        $   848,128          $   754,431
                                                                                      ================     ===============
</TABLE>


            See notes to condensed consolidated financial statements.

                                       3
<PAGE>
<TABLE>

                                            APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF EARNINGS
                                                              (Unaudited)
                                               (in thousands, except per share amounts)

<CAPTION>

                                                                   13 Weeks Ended                         39 Weeks Ended
                                                         -----------------------------------    -----------------------------------
                                                          September 25,      September 26,       September 25,       September 26,
                                                              2005               2004                2005                2004
                                                         ---------------    ----------------    ----------------    ---------------
                                                                             (as restated)                          (as restated)
<S>                                                       <C>                <C>                 <C>                <C>
Revenues:
     Company restaurant sales .......................      $   272,673        $    247,173        $   815,834         $ 738,502
     Franchise royalties and fees....................           31,589              30,048             97,090            91,485
     Other franchise income..........................            1,064               3,913              3,553            10,427
                                                          ---------------    ----------------    ---------------    ---------------
         Total operating revenues....................          305,326             281,134            916,477           840,414
                                                          ---------------    ----------------    ---------------    ---------------
Cost of company restaurant sales:
     Food and beverage...............................           71,555              65,115            215,755           195,277
     Labor...........................................           90,231              79,195            269,070           239,533
     Direct and occupancy............................           74,706              61,914            212,111           181,769
     Pre-opening expense.............................            1,089               1,020              3,524             2,012
                                                          ---------------    ----------------    ---------------    ---------------
         Total cost of company restaurant sales......          237,581             207,244            700,460           618,591
                                                          ---------------    ----------------    ---------------    ---------------
Cost of other franchise income.......................              790               3,521              2,838            11,493
General and administrative expenses..................           26,329              26,752             81,255            77,134
Amortization of intangible assets....................              204                 199                658               443
Impairment of long-lived assets......................            3,900                --                3,900               --
Loss on disposition of restaurants and equipment.....              480                 441              1,341             1,520
                                                         ---------------    ----------------    ----------------    ---------------
 Operating earnings..................................            36,042             42,977            126,025           131,233
                                                         ---------------    ----------------    ----------------    ---------------
 Other income (expense):
     Investment income...............................              568                 325                976               566
     Interest expense................................           (1,232)               (379)            (2,203)           (1,139)
     Other income....................................              593                 754              1,612             1,777
                                                          ---------------    ----------------    ----------------    ---------------
         Total other income (expense)................              (71)                700                385             1,204
                                                          ---------------    ----------------    ----------------    ---------------
Earnings before income taxes ........................           35,971              43,677            126,410           132,437
Income taxes.........................................           13,836              15,080             45,128            45,974
                                                          ---------------    ----------------    ----------------    ---------------
Net earnings.........................................      $    22,135        $     28,597        $    81,282         $  86,463
                                                          ===============    ================    ================    ===============

Basic net earnings per common share..................      $      0.28        $       0.35        $      1.02         $    1.06
                                                         ===============    ================    ================    ===============
Diluted net earnings per common share................      $      0.28        $       0.34        $      1.00         $    1.03
                                                         ===============    ================    ================    ===============

Basic weighted average shares outstanding............           78,485              81,511             79,692            81,759
                                                         ===============    ================    ================    ===============
Diluted weighted average shares outstanding..........           79,691              83,503             81,121            84,079
                                                         ===============    ================    ================    ===============

</TABLE>

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>

<TABLE>

                 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)
                                 (in thousands)

<CAPTION>
                                                       Common Stock    Additional                                         Total
                                                    ------------------   Paid-In    Unearned    Retained   Treasury   Stockholders'
                                                      Shares   Amount    Capital  Compensation  Earnings     Stock       Equity
                                                    --------- -------- ---------- ------------ ---------- ----------- -------------
<S>                                                <C>       <C>       <C>        <C>          <C>        <C>          <C>

Balance, December 26, 2004......................    108,503   $ 1,085   $220,897   $  (1,924)   $623,315   $(346,646)   $  496,727
   Net earnings.................................        --        --        --           --       81,282        --          81,282
   Purchases of treasury stock..................        --        --        --           --         --      (120,856)     (120,856)
   Stock options exercised and related
     tax benefit................................        --        --       8,429         --         --         8,058        16,487
   Shares issued under employee benefit plans...        --        --       2,095         --         --         1,333         3,428
   Restricted shares awarded under equity
      incentive plans, net of cancellations.....        --        --       2,194      (2,916)       --           722           --
   Amortization of unearned compensation
     relating to restricted shares..............        --        --         --        1,665        --           --          1,665
                                                  ----------- -------- ---------- ------------ ---------- ----------- -------------

Balance, September 25, 2005.....................    108,503   $ 1,085   $233,615   $  (3,175)   $704,597   $(457,389)   $  478,733
                                                  =========== ======== ========== ============ ========== =========== =============


</TABLE>

            See notes to condensed consolidated financial statements.


                                       5
<PAGE>
<TABLE>

                                            APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                              (Unaudited)
                                                            (in thousands)
<CAPTION>

                                                                                                39 Weeks Ended
                                                                                      ------------------------------------
                                                                                       September 25,       September 26,
                                                                                           2005                 2004
                                                                                      ----------------     ---------------
                                                                                                           (as restated)
<S>                                                                                    <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings....................................................................   $    81,282          $    86,463
     Adjustments to reconcile net earnings to net cash provided by operating
       activities:
         Depreciation and amortization...............................................        39,765               34,059
         Amortization of intangible assets...........................................           658                  443
         Amortization of unearned compensation.......................................         1,665                1,073
         Other amortization..........................................................           182                  242
         Inventory impairment........................................................          --                  2,100
         Deferred income tax provision (benefit).....................................        (3,270)              26,455
         Impairment of long-lived assets.............................................         3,900                  --
         Loss on disposition of restaurants and equipment............................         1,341                1,520
         Income tax benefit from exercise of stock options...........................         4,665                7,610
     Changes in assets and liabilities (exclusive of effects of acquisitions):
         Receivables.................................................................         2,981               (4,745)
         Receivables related to captive insurance subsidiary.........................          (682)              (2,657)
         Inventories.................................................................        14,627              (15,039)
         Other current assets related to captive insurance subsidiary................          --                   (193)
         Prepaid and other current assets............................................           908                 (470)
         Accounts payable............................................................         8,981                 (763)
         Accrued expenses and other current liabilities..............................       (13,024)             (17,081)
         Loss reserve and unearned premiums related to captive insurance subsidiary..         1,344                8,602
         Income taxes................................................................        12,352               (2,399)
         Other non-current liabilities...............................................         2,524                 --
         Other.......................................................................        (1,523)               1,048
                                                                                      ----------------     ---------------
         NET CASH PROVIDED BY OPERATING ACTIVITIES...................................       158,676              126,268
                                                                                      ----------------     ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment.............................................      (100,802)             (68,224)
     Restricted assets related to captive insurance subsidiary.......................        (2,800)              (7,548)
     Acquisitions of restaurants.....................................................       (46,848)             (13,817)
     Lease acquisition costs.........................................................          --                 (4,857)
     Purchases of short-term investments.............................................          --                   (253)
     Proceeds from the sale of restaurants and equipment.............................         1,205                 --
     Other investing activities......................................................          --                 (1,045)
                                                                                      ----------------     ---------------
         NET CASH USED BY INVESTING ACTIVITIES.......................................      (149,245)             (95,744)
                                                                                      ----------------     ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchases of treasury stock.....................................................      (120,856)             (88,224)
     Dividends paid..................................................................        (4,867)              (3,911)
     Issuance of common stock upon exercise of stock options.........................        11,822               13,371
     Shares issued under employee benefit plans......................................         3,428                4,934
     Net debt proceeds...............................................................       100,540               25,880
                                                                                      ----------------     ---------------
         NET CASH USED BY FINANCING ACTIVITIES.......................................        (9,933)             (47,950)
                                                                                      ----------------     ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................................          (502)             (17,426)
CASH AND CASH EQUIVALENTS, beginning of period.......................................        10,642               17,867
                                                                                      ----------------     ---------------
CASH AND CASH EQUIVALENTS, end of period.............................................   $    10,140          $       441
                                                                                      ================     ===============

</TABLE>



                                       6
<PAGE>


                 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>


                                                                                                 39 Weeks Ended
                                                                                      ------------------------------------
                                                                                       September 25,        September 26,
                                                                                            2005                 2004
                                                                                      ----------------     ---------------
<S>                                                                                  <C>                  <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the 39 week period for:
         Income taxes............................................................       $     31,381         $    13,561
                                                                                      ================     ===============
         Interest................................................................       $      1,438         $       544
                                                                                      ================     ===============
</TABLE>

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

We issued  restricted  common  stock,  net of  forfeitures,  of  $2,916,000  and
$1,772,000  for the 39 weeks ended  September  25, 2005 and  September 26, 2004,
respectively.

In 2002,  we entered  into a rabbi trust  agreement to protect the assets of the
nonqualified deferred compensation plan for certain of our associates.  The plan
investments  are  included  in other  assets and the  offsetting  obligation  is
included in other non-current liabilities in our consolidated balance sheets. We
had non-cash increases in these balances of $3,049,000 and $2,014,000 for the 39
weeks ended September 25, 2005 and September 26, 2004, respectively.

In the first quarter of fiscal 2004, we made matching contributions in shares of
our common stock to a profit  sharing plan and trust  established  in accordance
with Section 401(k) of the Internal Revenue Code of $1,308,000.

We  had  property  and  equipment  purchases  accrued  in  accounts  payable  of
approximately $11,200,000 as of September 25, 2005.


            See notes to condensed consolidated financial statements.

                                       7
<PAGE>


                 APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  Basis of Presentation

Our condensed  consolidated financial statements included in this Form 10-Q have
been prepared  without audit in accordance with the rules and regulations of the
Securities and Exchange  Commission.  Although certain  information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with accounting  principles  generally  accepted in the United States of America
have been condensed or omitted,  we believe that the disclosures are adequate to
make the  information  presented  not  misleading.  The  accompanying  condensed
consolidated financial statements should be read in conjunction with the audited
financial  statements  and notes  thereto  included in our Annual Report on Form
10-K for the fiscal year ended December 26, 2004.

We  believe  that  all   adjustments,   consisting  only  of  normal   recurring
adjustments,  necessary  for a fair  presentation  of the results of the interim
periods  presented  have been made.  The results of  operations  for the interim
periods  presented are not necessarily  indicative of the results to be expected
for the full year.

We have made certain  reclassifications to the condensed  consolidated financial
statements to conform to the fiscal 2005 presentation.

2.  Restatement of Financial Statements

Like many other companies in the  restaurant,  retail and other  industries,  we
reviewed  our  accounting  treatment  of  leases  and  depreciation  of  related
leasehold  improvements during the fourth fiscal quarter of 2004 and we restated
our  consolidated  financial  statements  for fiscal years 2003 and 2002 and the
first three fiscal quarters of fiscal 2004 in our Annual Report on Form 10-K for
the fiscal year ended December 26, 2004.

Historically,  when accounting for leases with renewal options,  we had recorded
rent  expense on a  straight-line  basis over the initial  non-cancelable  lease
term,  with the term  commencing when actual rent payments began and depreciated
leasehold  improvements  on those  properties  over a maximum period of 20 years
which, in certain cases,  included a portion of the renewal option  periods.  We
corrected  our lease term to include  option  periods where failure to recognize
such options would result in an economic  penalty such that the renewal  appears
reasonably assured.  The primary result of this correction was to accelerate the
recognition  of rent  expense  under  certain  leases  that  include  fixed-rent
escalations.  In addition,  the lease term is deemed to commence on the date the
company becomes  legally  obligated for rent payments.  Therefore,  we adopted a
policy to capitalize  the  straight-line  rent amounts  during the  construction
period of leased  properties,  which  resulted in an  increase  to  depreciation
expense in the restated consolidated statements of earnings.  Straight-line rent
subsequent to the  construction  period and prior to the  restaurant  opening is
recognized  as expense,  which  resulted in an increase to  previously  reported
pre-opening expenses in the restated consolidated statements of earnings.

In  connection  with the  restatement  for  lease  accounting  matters,  we also
corrected previously identified immaterial errors, primarily related to vacation
and workers' compensation expense.


                                       8
<PAGE>


The following table contains information regarding the impact of the restatement
adjustments on our  consolidated  statements of earnings for the 13 and 39 weeks
ended  September  26, 2004.  These  amounts,  except per share  amounts,  are in
thousands.

Consolidated Statements of Earnings
-----------------------------------
<TABLE>
<CAPTION>
                                                                                  13 Weeks Ended                    13 Weeks Ended
                                                                                September 26, 2004                   September 26,
                                                                                  (As previously     Restatement         2004
                                                                                     reported)         amounts      (As restated)
                                                                                ------------------   -----------  ------------------
<S>                                                                              <C>                  <C>          <C>
Revenues:
    Company restaurant sales................................................      $     247,173        $   --       $     247,173
    Franchise royalties and fees............................................             30,105            (57)            30,048
    Other franchise income..................................................              3,913            --               3,913
                                                                                ------------------   -----------  ------------------
         Total operating revenue............................................            281,191            (57)           281,134
                                                                                ------------------   -----------  ------------------
Cost of company restaurant sales:
    Food and beverage.......................................................             65,115            --              65,115
    Labor...................................................................             79,599           (404)            79,195
    Direct and occupancy....................................................             61,642            272             61,914
    Pre-opening expense.....................................................                998             22              1,020
                                                                                ------------------   -----------  ------------------
         Total cost of company restaurant sales.............................            207,354           (110)           207,244
                                                                                ------------------   -----------  ------------------
Cost of other franchise income..............................................              3,521            --               3,521
General and administrative expenses.........................................             26,669             83             26,752
Amortization of intangible assets...........................................                199            --                 199
Loss on disposition of restaurants and equipment............................                441            --                 441
                                                                                ------------------   -----------  ------------------
Operating earnings..........................................................             43,007            (30)            42,977
                                                                                ------------------   -----------  ------------------
Other income (expense):
    Investment income.......................................................                325            --                 325
    Interest expense........................................................               (379)           --               (379)
    Other income............................................................                568            186                754
                                                                                ------------------   -----------  ------------------
         Total other income.................................................                514            186                700
                                                                                ------------------   -----------  ------------------
Earnings before income taxes................................................             43,521            156             43,677
Income taxes................................................................             15,232           (152)            15,080
                                                                                ------------------   -----------  ------------------
Net earnings................................................................      $      28,289        $   308      $      28,597
                                                                                ==================   ===========  ==================

Basic net earnings per common share.........................................      $        0.35        $   --       $        0.35
                                                                                ==================   ===========  ==================
Diluted net earnings per common share.......................................      $        0.34        $   --       $        0.34
                                                                                ==================   ===========  ==================

Basic weighted average shares outstanding...................................             81,511                            81,511
                                                                                ==================                ==================
Diluted weighted shares outstanding.........................................             83,503                            83,503
                                                                                ==================                ==================
</TABLE>


                                       9
<PAGE>


<TABLE>
<CAPTION>

                                                                                  39 Weeks Ended                     39 Weeks Ended
                                                                                September 26, 2004                    September 26,
                                                                                  As previously      Restatement          2004
                                                                                     reported)         Amounts        (As restated)
                                                                                 ----------------    -----------    ----------------
<S>                                                                             <C>                 <C>            <C>
Revenues:
    Company restaurant sales...............................................        $   738,502         $   --         $   738,502
    Franchise royalties and fees...........................................             91,656            (171)            91,485
    Other franchise income.................................................             10,427             --              10,427
                                                                                 ----------------    -----------    ----------------
         Total operating revenue...........................................            840,585            (171)           840,414
                                                                                 ----------------    -----------    ----------------
Cost of company restaurant sales:
    Food and beverage......................................................            195,277             --             195,277
    Labor..................................................................            240,344            (811)           239,533
    Direct and occupancy...................................................            180,951             818            181,769
    Pre-opening expense....................................................              1,939              73              2,012
                                                                                 ----------------    -----------    ----------------
         Total cost of company restaurant sales............................            618,511              80            618,591
                                                                                 ----------------    -----------    ----------------
Cost of other franchise income.............................................             11,493             --              11,493
General and administrative expenses........................................             77,118              16             77,134
Amortization of intangible assets..........................................                443             --                 443
Loss on disposition of restaurants and equipment...........................              1,520             --               1,520
                                                                                 ----------------    -----------    ----------------
Operating earnings.........................................................            131,500            (267)           131,233
                                                                                 ----------------    -----------    ----------------
Other income (expense):
    Investment income......................................................                566             --                 566
    Interest expense.......................................................             (1,139)            --              (1,139)
    Other income...........................................................              1,410             367              1,777
                                                                                 ----------------    -----------    ----------------
         Total other income................................................                837             367              1,204
                                                                                 ----------------    -----------    ----------------
Earnings before income taxes...............................................            132,337             100            132,437
Income taxes...............................................................             46,318            (344)            45,974
                                                                                 ----------------    -----------    ----------------
Net earnings...............................................................        $    86,019         $   444        $    86,463
                                                                                 ================    ===========    ================

Basic net earnings per common share........................................        $      1.05         $  0.01        $      1.06
                                                                                 ================    ===========    ================
Diluted net earnings per common share......................................        $      1.02         $  0.01        $      1.03
                                                                                 ================    ===========    ================

Basic weighted average shares outstanding..................................             81,759                             81,759
                                                                                 ================                   ================
Diluted weighted shares outstanding........................................             84,079                             84,079
                                                                                 ================                   ================
</TABLE>


3.  Stock-Based Compensation

We have adopted the disclosure  provisions of Statement of Financial  Accounting
Standards  ("SFAS")  No.  148,   "Accounting  for  Stock-Based   Compensation  -
Transition  and  Disclosure,  an  amendment  of FASB  Statement  No.  123."  The
Statement  requires  prominent  disclosures in both annual and interim financial
statements   regarding  the  method  of  accounting  for  stock-based   employee
compensation and the effect of the method used on reported  results.  We account
for  stock-based  compensation  awards under the intrinsic  method of Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees."
Opinion No. 25 requires  compensation cost to be recognized based on the excess,
if any,  between the quoted  market  price of the stock at the date of grant and
the amount an employee must pay to acquire the stock.  All options awarded under
all of our plans are  granted  with an  exercise  price equal to the fair market
value on the date of the grant.  The following  table presents the effect on our
net  earnings and net earnings per share had we adopted the fair value method of
accounting for  stock-based  compensation  under SFAS No. 123,  "Accounting  for
Stock-Based Compensation" (in thousands, except for per share amounts).


                                       10
<PAGE>


<TABLE>
<CAPTION>
                                                                      13 Weeks Ended                      39 Weeks Ended
                                                            -----------------------------------   ----------------------------------
                                                             September 25,       September 26,     September 25,      September 26,
                                                                 2005                2004              2005               2004
                                                            ---------------     ---------------   ---------------    ---------------
                                                                                 (as restated)                        (as restated)
<S>                                                        <C>                 <C>               <C>                <C>
Net earnings, as reported............................         $     22,135        $    28,597       $    81,282        $    86,463
Add: Stock-based employee compensation
    expense included in net earnings,
    net of related taxes.............................                  385                327             1,071                616
Less: Total stock-based employee
    compensation expense determined under
    fair value based methods for all awards,
    net of related taxes.............................                2,049              2,220             5,416              6,719
                                                            ---------------     ---------------   ---------------    ---------------
Pro forma net earnings...............................         $     20,471        $    26,704       $    76,937        $    80,360
                                                            ===============     ===============   ===============    ===============
Basic net earnings per common share,
    as reported......................................         $       0.28        $      0.35       $      1.02        $      1.06
                                                            ===============     ===============   ===============    ===============
Basic net earnings per common share,
    pro forma........................................         $       0.26        $      0.33       $      0.96        $      0.98
                                                            ===============     ===============   ===============    ===============
Diluted net earnings per common share,
    as reported......................................         $       0.28        $      0.34       $      1.00        $      1.03
                                                            ===============     ===============   ===============    ===============
Diluted net earnings per common share,
    pro forma........................................         $       0.26        $      0.32       $      0.95        $      0.96
                                                            ===============     ===============   ===============    ===============
</TABLE>

4.  Commitments and Contingencies

Litigation,  claims and disputes: We are involved in various legal actions which
include,  without  limitation,  employment law and wage and hourly labor related
matters,  dram shop claims,  personal  injury  claims and other such  restaurant
operational  matters.  In each  instance,  we believe  that we have  meritorious
defenses to the allegations made and we are vigorously defending these claims.

We believe that the ultimate disposition of these matters will not, individually
or in the  aggregate,  have a  material  adverse  effect  upon our  business  or
consolidated financial position.

Lease guarantees and  contingencies:  In connection with the sale of restaurants
to  franchisees  and  other  parties,  we  have,  in  certain  cases,   remained
contingently liable for the remaining lease payments.  As of September 25, 2005,
we have outstanding lease guarantees of approximately $17,700,000.  These leases
expire at various  times with the final lease  agreement  expiring  in 2025.  In
addition, we or our subsidiaries are contingently liable for various leases that
we have assigned in connection  with the sale of restaurants to franchisees  and
other parties,  in the potential  amount of $14,600,000.  We have not recorded a
liability as of September 25, 2005 or December 26, 2004.

Franchisee guarantees: In November 2003, we arranged for a third-party financing
company to provide up to  $75,000,000  to qualified  franchisees  for short-term
loans to fund remodel investments,  subject to our approval.  Under the terms of
this financing  program,  we will provide a limited guarantee pool for the loans
advanced during the three-year  period ending December 2006. As of September 25,
2005, there were loans outstanding to four franchisees aggregating approximately
$1,300,000 under this program.


                                       11
<PAGE>


In May 2004,  we arranged for a third-party  financing  company to provide up to
$250,000,000  to  qualified  franchisees  for loans to fund  development  of new
restaurants  through  October 2007,  subject to our approval.  We will provide a
limited guarantee of certain loans advanced under this program.  As of September
25,  2005,  there  were  loans   outstanding  to  six  franchisees   aggregating
approximately  $41,800,000  under this program.  The fair value of our guarantee
under these two  financing  programs  was less than  $100,000 and is recorded in
other non-current liabilities and other assets in our consolidated balance sheet
as of September 25, 2005.

Severance  agreements:  We have severance and employment agreements with certain
officers  providing for severance  payments to be made in the event the employee
resigns or is terminated  related to a change in control.  The agreements define
the  circumstances  which will constitute a change in control.  If the severance
payments had been due as of September  25, 2005,  we would have been required to
make payments totaling approximately $13,300,000. In addition, we have severance
and  employment   agreements  with  certain  officers  which  contain  severance
provisions  not  related to a change in  control.  Those  provisions  would have
required  aggregate  payments of  approximately  $6,200,000 if such officers had
been terminated as of September 25, 2005.

5.  Net Earnings Per Share

We compute basic net earnings per common share by dividing  income  available to
common  shareholders by the weighted average number of common shares outstanding
for the  reporting  period.  Diluted net earnings per common share  reflects the
potential  dilution that could occur if holders of options or other contracts to
issue common stock  exercised or converted  their  holdings  into common  stock.
Outstanding  stock  options and  equity-based  compensation  represent  the only
dilutive  effects  on  weighted  average  shares.  The chart  below  presents  a
reconciliation between basic and diluted weighted average shares outstanding and
the related net earnings per share.  All amounts in the chart,  except per share
amounts, are expressed in thousands.

<TABLE>
<CAPTION>

                                                                       13 Weeks Ended                       39 Weeks Ended
                                                             ----------------------------------    ---------------------------------
                                                              September 25,      September 26,      September 25,     September 26,
                                                                  2005               2004               2005              2004
                                                             ---------------    ---------------    ---------------   ---------------
                                                                                 (as restated)                        (as restated)
<S>                                                         <C>                <C>                <C>               <C>

Net earnings.........................................          $    22,135        $    28,597        $    81,282       $    86,463
                                                             ===============    ===============    ===============   ===============

Basic weighted average shares outstanding............               78,485             81,511             79,692            81,759
Dilutive effect of stock options and
  equity-based compensation..........................                1,206              1,992              1,429             2,320
                                                             ---------------    ---------------    ---------------   ---------------
Diluted weighted average shares outstanding..........               79,691             83,503             81,121            84,079
                                                             ===============    ===============    ===============   ===============

Basic net earnings per common share..................          $      0.28        $      0.35        $      1.02       $      1.06
                                                             ===============    ===============    ===============   ===============
Diluted net earnings per common share................          $      0.28        $      0.34        $      1.00       $      1.03
                                                             ===============    ===============    ===============   ===============
</TABLE>

We excluded  stock options with exercise  prices greater than the average market
price of our common stock for the  applicable  periods from the  computation  of
diluted   weighted   average   shares   outstanding   as  the  effect  would  be
anti-dilutive.  We have excluded approximately  3,410,000 and 1,520,000 of these
options  for the 13 weeks  ended  September  25, 2005 and  September  26,  2004,
respectively,  and 910,000 and 1,400,000 of these options for the 39 weeks ended
September  25,  2005 and  September  26,  2004,  respectively,  from our diluted
weighted average share computation.


                                       12
<PAGE>


6.  Acquisitions

All of our acquisitions  below have been accounted for using the purchase method
of accounting and,  accordingly,  our consolidated  financial statements reflect
the  results  of  operations  for  each  acquisition  subsequent  to the date of
acquisition.  The assets  acquired  and  liabilities  assumed  are  recorded  at
estimates of fair values as  determined  by  management  based upon  information
available.  We finalize the  allocation  of purchase  price to the fair value of
assets acquired and liabilities assumed when we obtain information sufficient to
complete  the  allocation,  but in each case,  no longer than one year after the
acquisition date.

In May 2005, we completed the  acquisition of 12 Applebee's  restaurants,  which
included one restaurant under construction, in Missouri, Kansas and Arkansas for
approximately  $39,500,000.  Through September 2005, we have paid  approximately
$39,000,000,  which  has been  allocated  to the  fair  value  of  property  and
equipment  of  $16,900,000,  goodwill  of  $21,900,000  and other net  assets of
approximately $200,000. Emerging Issues Task Force Issue No. 04-1 ("EITF 04-1"),
"Accounting  for  Preexisting  Relationships  between  the Parties to a Business
Combination"  requires certain  reacquired  rights  (including the rights to the
acquirer's  trade  name  under  a  franchise  agreement)  to  be  recognized  as
intangible assets apart from goodwill. We are currently evaluating the impact of
EITF 04-1 on the allocation of the purchase price of these 12 restaurants.

The  following  table is comprised of actual  company  restaurant  sales for the
restaurant  acquisition above, which are included in our condensed  consolidated
financial  statements for each period presented and pro forma company restaurant
sales  assuming  the  acquisition  above  occurred  at  the  beginning  of  each
respective period (in thousands):

<TABLE>
<CAPTION>

                                                        13 Weeks Ended                       39 Weeks Ended
                                             ------------------------------------- -------------------------------------
                                                September 25,      September 26,      September 25,      September 26,
                                                    2005               2004               2005               2004
                                             ------------------ ------------------ ------------------ ------------------
<S>                                            <C>                <C>                <C>                <C>

Actual acquired company
  restaurant sales........................      $      7,500       $       --         $     10,300       $       --
                                             ================== ================== ================== ==================

Pro forma acquired company
  restaurant sales........................      $      7,500       $      6,600       $     21,900       $     20,000
                                             ================== ================== ================== ==================
</TABLE>

In April 2005, we finalized the acquisition of eight  Applebee's  restaurants in
the Memphis  market that were closed in fiscal 2004 by a former  franchisee  for
approximately  $8,800,000  payable in cash. In connection with this acquisition,
we paid  approximately  $800,000 in cash in the fourth  quarter of fiscal  2004,
approximately  $5,700,000  in cash in the  first  quarter  of  fiscal  2005  and
approximately  $2,300,000  in cash in the  second  quarter of fiscal  2005.  The
purchase  price of $8,800,000  has been  allocated to the fair value of property
and  equipment  of  approximately   $8,200,000  and  goodwill  of  approximately
$600,000.  As of  September  25,  2005,  we  have  remodeled  and  opened  seven
restaurants and the remaining restaurant was sold to a third party.

In April 2004, we completed our  acquisition of the operations and assets of ten
Applebee's   restaurants   located  in  Southern  California  for  approximately
$13,800,000  in cash.  The  purchase  price was  allocated  to the fair value of
property and  equipment of  $2,500,000,  goodwill of  $10,800,000  and other net
assets of approximately $500,000. Company restaurant sales for these restaurants
were  $6,500,000  and  $11,200,000  for the 13 weeks  ended  and 39 weeks  ended
September 26, 2004,  respectively.  Proforma company  restaurant sales for these
restaurants would have been approximately  $6,500,000 and $20,000,000 for the 13
weeks and 39 weeks ended September 26, 2004 had this  acquisition been completed
at the beginning of fiscal 2004.


                                       13
<PAGE>


7.  Inventory Impairment

In the  second  quarter  of  fiscal  2004,  we  determined  that  we had  excess
inventories of riblets that no longer met our quality standards. Accordingly, we
recorded an inventory impairment of $2,100,000  (approximately $1,400,000 net of
income taxes) in our condensed  consolidated  financial statements during the 39
weeks ended September 26, 2004. The portion of the riblet  inventory  impairment
related to the company's historical usage of approximately $500,000 was recorded
in food and beverage cost and the portion related to the franchisees' historical
usage of approximately $1,600,000 was recorded in cost of other franchise income
in the consolidated statement of earnings. In the fourth quarter of fiscal 2004,
we recovered a portion of the  inventory  impairment  as a result of higher than
anticipated sales of these inventories.

8.  Impairment of Long-lived Assets

In connection with the review of long-lived assets during our preparation of the
third quarter of fiscal 2005 condensed  consolidated  financial  statements,  we
recorded an asset  impairment  charge of  $3,900,000  consisting of a $2,600,000
write-down  of the  carrying  value  of the  property  and  equipment  of  three
restaurants  that are not performing as expected and one restaurant that will be
closed and relocated and a $1,300,000  write-down of one other long-lived asset.
This  impairment  charge  has  been  included  in  our  condensed   consolidated
statements of earnings for the 13 and 39 weeks ended  September 25, 2005. We use
current and  historical  operating  results to  estimate  future cash flows on a
restaurant by restaurant  basis. The asset  impairment  charge was calculated by
comparing  the carrying  value of the assets to the  estimated  future cash flow
projections. We continue to operate the restaurants,  although we may close some
or all of the underperforming restaurants in the future.

9.  Goodwill and Other Intangible Assets

Changes in goodwill are summarized below (in thousands):

<TABLE>
<CAPTION>
                                                               39 Weeks Ended          52 Weeks Ended
                                                               September 25,            December 26,
                                                                   2005                     2004
                                                           ----------------------  ----------------------
<S>                                                       <C>                     <C>
Carrying amount, beginning of the year..................       $      116,344          $      105,326
Goodwill acquired during the period.....................               22,444                  11,018
                                                           ----------------------  ----------------------
Goodwill amount, end of the period......................       $      138,788          $      116,344
                                                           ======================  ======================
</TABLE>



                                       14
<PAGE>



Intangible  assets subject to amortization  pursuant to SFAS No. 142,  "Goodwill
and Other Intangible Assets," are summarized below (in thousands):

<TABLE>
<CAPTION>

                                                                 September 25, 2005
                                             -----------------------------------------------------------
                                               Gross Carrying         Accumulated          Net Book
                                                   Amount            Amortization            Value
                                             ------------------   ------------------  ------------------
<S>                                         <C>                  <C>                 <C>
Amortized intangible assets:
    Franchise interest and rights.......       $        6,371       $        5,813      $          558
    Lease acquisition costs.............                4,940                  631               4,309
    Noncompete agreement................                  350                   87                 263
                                             ------------------   ------------------  ------------------

Total...................................       $       11,661       $        6,531      $        5,130
                                             ==================   ==================  ==================


                                                                 December 26, 2004
                                             -----------------------------------------------------------
                                              Gross Carrying         Accumulated           Net Book
                                                  Amount            Amortization            Value
                                             ------------------   ------------------  ------------------
Amortized intangible assets:
    Franchise interest and rights.......       $        6,371       $        5,565      $          806
    Lease acquisition costs.............                4,875                  294               4,581
    Noncompete agreement................                  350                   22                 328
                                             ------------------   ------------------  ------------------

Total...................................       $       11,596       $        5,881      $        5,715
                                             ==================   ==================  ==================
</TABLE>


In the fourth quarter of fiscal 2004, we acquired the exclusive right to operate
Applebee's restaurants in the Memphis, Tennessee market from a former franchisee
group for  approximately  $2,800,000.  This  intangible  asset has an indefinite
life, and accordingly,  will not be amortized but tested for impairment at least
annually.  In  connection  with this  acquisition,  we entered  into an expanded
4-year noncompete  agreement with the former franchise principals which is being
amortized over the life of the agreement.

In the second  quarter of fiscal 2004, we acquired six  restaurant  leases which
were formerly operated as Ground Round restaurants for approximately  $4,900,000
in cash.

Franchise  interest  and  rights are being  amortized  over the next two to four
years,  the lease  acquisition  costs are being  amortized over the next 8 to 20
years and the noncompete agreement is being amortized over the next four years.

We expect annual  amortization  expense for all  intangible  assets for the next
five fiscal years to range from approximately $400,000 to $900,000.

10. Captive Insurance Subsidiary

In 2002, we formed  Neighborhood  Insurance,  Inc., a Vermont  corporation and a
wholly-owned captive insurance  subsidiary to provide Applebee's  International,
Inc. and qualified  franchisees with workers' compensation and general liability
insurance.  Applebee's International,  Inc. and covered franchisees make premium
payments to the captive  insurance  company which pays  administrative  fees and
insurance claims, subject to individual and aggregate maximum claim limits under


                                       15
<PAGE>


the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive  insurance  company are established based upon third-party
actuarial  estimates of settlement costs for incurred claims and  administrative
fees. The  franchisee  premiums are included in other  franchise  income ratably
over the policy year.  The related  offsetting  expenses are included in cost of
other franchise income.  Accordingly,  we do not expect franchisee participation
in the captive  insurance company to have a material impact on our net earnings.
In fiscal 2005, we reduced the types of insurance  coverage plans which resulted
in  fewer  franchisee   participants  in  our  captive  insurance  program.  Our
consolidated  balance  sheets  include  the  following  balances  related to the
captive insurance subsidiary:

    o    Franchise   premium   receivables  of   approximately   $2,500,000  and
         $1,900,000   as  of   September   25,  2005  and   December  26,  2004,
         respectively,  included  in  receivables  related to captive  insurance
         subsidiary.

    o    Cash  equivalent  and other  long-term  investments  restricted for the
         payment of claims of  approximately  $19,500,000  and $16,700,000 as of
         September  25, 2005 and December 26,  2004,  respectively,  included in
         restricted assets related to captive insurance subsidiary.

    o    Loss  reserve  and  unearned  premiums  related  to  captive  insurance
         subsidiary of approximately $20,900,000 and $19,600,000 as of September
         25, 2005 and December 26, 2004, respectively.  Approximately $7,400,000
         and  $7,500,000  as of  September  25,  2005  and  December  26,  2004,
         respectively, is included in other non-current liabilities.

    o    Other  miscellaneous  items,  net,  of  approximately   $1,100,000  and
         $1,000,000   as  of   September   25,  2005  and   December  26,  2004,
         respectively,  included  in  several  line  items  in the  consolidated
         balance sheets.

11. Treasury Shares

As of  September  25,  2005,  we had  approximately  31,105,000  shares  held in
treasury.  A  reconciliation  of our  treasury  shares  for the 39  weeks  ended
September 25, 2005 is provided below (shares in thousands):

                                                                  Treasury
                                                                   Shares
                                                               ---------------

    Balance as of December 26, 2004........................         27,375
    Purchases of treasury stock............................          4,918
    Stock options exercised................................           (930)
    Shares issued under employee benefit plans.............           (154)
    Restricted shares awarded under equity incentive
         plans.............................................           (104)
                                                               ---------------
    Balance as of September 25, 2005.......................         31,105
                                                               ===============

12. New Accounting Pronouncements

In October 2005, the Financial  Accounting  Standards Board ("FASB") issued FASB
Staff Position  ("FSP") 13-1,  "Accounting  for Rental Costs  Incurred  during a
Construction  Period." The guidance  requires  the rental costs  recognized  for
ground or building operating leases during the construction period be recognized
as rental  expense.  The guidance  permits  either  retroactive  or  prospective
treatment for periods  beginning after December 15, 2005. We will  prospectively
change our policy from capitalization to expensing beginning in fiscal 2006. The
adoption  of this FSP will  result  in an  expected  increase  of  approximately
$25,000 in preopening  expenses  recognized for every new restaurant  opened but
will not have a material effect on our consolidated financial statements.


                                       16
<PAGE>


In  June  2005,  the  FASB's  EITF  reached  a  consensus  on  Issue  No.  05-6,
"Determining the Amortization Period for Leasehold  Improvements" ("EITF 05-6").
The  guidance  requires  that  leasehold  improvements  acquired  in a  business
combination  or purchased  subsequent  to the  inception of a lease be amortized
over the  lesser  of the  useful  life of the  assets  or a term  that  includes
renewals that are reasonably assured at the date of the business  combination or
purchase.  The guidance is effective for periods  beginning after June 29, 2005.
The adoption of EITF 05-6 did not have an impact on our  consolidated  financial
statements.

In May 2005,  the FASB issued  Statement of Financial  Accounting  Standards No.
154, "Accounting Changes and Error Corrections--A Replacement of APB Opinion No.
20 and FASB Statement No. 3." SFAS No. 154 requires retrospective application to
prior periods' financial statements for changes in accounting principle,  unless
it is  impracticable  to  determine  either the  period-specific  effects or the
cumulative  effect of the  change.  SFAS No.  154 is  effective  for  accounting
changes and  corrections of errors made in fiscal years beginning after December
15, 2005.

In March 2005,  the FASB  issued FASB  Interpretation  No. 47,  "Accounting  for
Conditional Asset Retirement Obligations," ("FIN 47"). FIN 47 clarifies the term
"conditional"  as  used  in SFAS  No.  143,  "Accounting  for  Asset  Retirement
Obligations."  This  Interpretation  refers to a legal  obligation to perform an
asset retirement activity even if the timing and/or settlement is conditional on
a  future  event  that  may or may  not be  within  the  control  of an  entity.
Accordingly,  the entity  must  record a  liability  for the  conditional  asset
retirement  obligation  if the fair value of the  obligation  can be  reasonably
estimated.  FIN 47 is effective for fiscal years ending after December 15, 2005.
We  are  evaluating  the  impact  the  adoption  of  FIN  47  will  have  on our
consolidated financial statements.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-based
Payment,"   which   replaces   SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation,"  and supersedes  Accounting  Principles Board ("APB") Opinion No.
25,  "Accounting  for Stock Issued to  Employees."  SFAS No. 123 (revised  2004)
requires  compensation costs related to share-based  payment  transactions to be
recognized in the financial statements.  With limited exceptions,  the amount of
compensation  cost will be measured based on the fair value on the grant date of
the equity or liability instruments issued. Compensation cost will be recognized
over the period that an employee provides service for that award, resulting in a
decrease in our net earnings. We will adopt the provisions of this Statement, as
amended,  using the modified  prospective  method  beginning in fiscal 2006.  We
expect that the adoption of this Standard  will be material to our  consolidated
financial  statements;  however,  we are still in the process of evaluating  its
impact.

13. Subsequent Events

In October 2005, the Board of Directors declared an annual dividend of $0.20 per
share to be payable on January  23, 2006 to  shareholders  of record on December
23,  2005.  In  addition,   the  Board  of  Directors   approved  an  additional
$175,000,000  authorization  to repurchase  our common stock,  subject to market
conditions.

In October  2005,  we entered  into an amendment  to our credit  facility  which
increased  the  revolving  credit  commitment  available  from  $200,000,000  to
$250,000,000 and provided for an additional $75,000,000 of revolving credit upon
satisfaction of the conditions set forth in the credit facility.


                                       17
<PAGE>


Item 2.  Management's  Discussion  and Analysis of Financial  Condition  and
         Results of Operations

Restatement of Financial Statements

The  accompanying  Management's  Discussion  and  Analysis  gives  effect to the
restatement of our condensed consolidated financial statements for quarterly and
year-to-date information in 2004 to correct our accounting treatment for leases,
depreciation of related  leasehold  improvements  and for previously  identified
immaterial errors,  primarily related to vacation and workers' compensation,  as
described in Note 2 to the condensed consolidated financial statements.

General

We operate on a 52 or 53 week fiscal year ending on the last Sunday in December.
Our fiscal years and fiscal periods are as follows:
                                                                     Number
      Fiscal Year                  Fiscal Year End                  of Weeks
------------------------     --------------------------         ----------------
         2004                     December 26, 2004                    52
         2005                     December 25, 2005                    52
         2006                     December 31, 2006                    53

                                                                     Number
     Fiscal Period                Fiscal Period End                 of Weeks
------------------------     --------------------------         ----------------
     2004 Quarter                September 26, 2004                    13
     2005 Quarter                September 25, 2005                    13
2004 Year-to-date period         September 26, 2004                    39
2005 Year-to-date period         September 25, 2005                    39

Our revenues are generated from three primary sources:

o   Company restaurant sales (food and beverage sales)
o   Franchise royalties and fees
o   Other franchise income

Beverage  sales  consist of sales of alcoholic  beverages,  while  non-alcoholic
beverages  are included in food sales.  Franchise  royalties are generally 4% of
each franchise  restaurant's monthly gross sales. Franchise fees typically range
from  $30,000 to $35,000 for each  restaurant  opened.  Other  franchise  income
includes  insurance  premiums for the current year and premium audit adjustments
for prior years from franchisee  participation in our captive  insurance program
and revenue  from  information  technology  products  and  services  provided to
certain  franchisees.  In fiscal 2005, we have fewer franchisee  participants in
the captive  insurance  program due to the  termination  of one of our insurance
programs, which will result in a total decrease in franchise premiums recognized
throughout  the 2005  fiscal  year in other  franchise  income of  approximately
$9,200,000.


                                       18
<PAGE>


Certain expenses relate only to company operated restaurants. These include:

o   Food and beverage costs
o   Labor costs
o   Direct and occupancy costs
o   Pre-opening expenses

Cost of  other  franchise  income  includes  the  costs  related  to  franchisee
participation in our captive  insurance program and costs related to information
technology  products and  services  provided to certain  franchisees.  In fiscal
2005, we have fewer franchisee participants in the captive insurance program due
to the  termination  of one of our  insurance  programs,  which will result in a
total decrease in franchise  premiums expense throughout the 2005 fiscal year in
the cost of other franchise income of approximately $9,200,000.

Other expenses,  such as general and administrative  and amortization  expenses,
relate to both company operated restaurants and franchise operations.

Overview

Applebee's  International,  Inc. and our  subsidiaries  develop,  franchise  and
operate casual dining restaurants under the name "Applebee's  Neighborhood Grill
& Bar," which is the largest  casual dining concept in the world with over 1,700
system-wide restaurants open as of September 25, 2005. The casual dining segment
of the restaurant industry is highly competitive and there are many factors that
affect our  profitability.  Our industry is  susceptible  to changes in economic
conditions,  trends in lifestyles,  fluctuating  costs,  government  regulation,
availability  of  resources  and  consumer  perceptions.   When  evaluating  and
assessing our business, we believe there are five key factors:

o   Development  - the number of new company and  franchise  restaurants  opened
    during  the  period.  As the  largest  casual  dining  concept in the world,
    Applebee's has a unique  opportunity to leverage our brand,  system size and
    scale to optimize  our future  growth.  Our  expansion  strategy has been to
    cluster  restaurants  in  targeted  markets,   thereby  increasing  consumer
    awareness and convenience, and enabling us to take advantage of operational,
    distribution  and  advertising  efficiencies.  We currently  expect that the
    Applebee's  system will  encompass at least 3,000  restaurants in the United
    States,   as  well  as  the  potential   for  at  least  1,000   restaurants
    internationally.  In the 2005 quarter and the 2005  year-to-date  period, we
    and our franchisees opened 35 and 91 restaurants, respectively. Together, we
    have opened at least 100 restaurants  system-wide  each year for the past 12
    fiscal  years.  In fiscal  2005,  we  currently  expect to open at least 135
    restaurants   system-wide,   comprised   of  50  company  and  85  franchise
    restaurants.  Construction costs have increased  approximately 10% in fiscal
    2005 as compared to fiscal 2004.  Further increases are expected as a result
    of  increased  demand  for  material  and labor  due to recent  catastrophic
    hurricanes. We are evaluating the impact of rising construction costs on the
    near-term pipeline of future openings.

o   Comparable  restaurant  sales - a  year-over-year  comparison  of sales  for
    restaurants  open at least 18 months.  Our revenues are generated  primarily
    from  company  restaurant  sales,  franchise  royalties  and fees and  other
    franchise income.  Increases in company and franchise comparable  restaurant
    sales will result in increases  in company  restaurant  sales and  franchise
    fees and royalties. In the 2005 quarter,  company comparable sales decreased
    1.6% while franchise and system-wide comparable sales were up 1.8% and 0.9%,


                                       19
<PAGE>


    respectively.  For the 2005 year-to-date  period,  company  comparable sales
    were down 0.8% while franchise and system-wide comparable sales were up 3.1%
    and 2.1%,  respectively.  We have had 29  consecutive  quarters  of positive
    system-wide  comparable sales growth.  We currently expect  comparable sales
    for the remainder of the year to be in a range from down 3.0% to up 1.0% for
    company  restaurants  and from  flat to up 3.0% for  franchise  restaurants.
    Comparable restaurant sales increases are driven by increases in the average
    guest check and/or increases in guest traffic. Average guest check increases
    result from menu price  increases  and/or a change in menu mix.  Although we
    may have  increases  in our average  guest check from period to period,  our
    main focus has been increasing guest traffic as we view this component to be
    more  indicative of the long-term  health of the  Applebee's  brand.  We are
    constantly  seeking to increase  guest traffic by focusing on operations and
    improving our menu with new menu rollouts and implementation of new programs
    such as Carside  to  Go(TM)and  Weight  Watchers(TM).  Carside  To  Go(TM)is
    expected to be a driver of company,  franchise  and  system-wide  comparable
    sales growth in fiscal 2005.

o   Company restaurant margin - company restaurant sales less food and beverage,
    labor,  direct  and  occupancy  restaurant  costs and  pre-opening  expenses
    expressed as a percentage of company  restaurant sales.  Company  restaurant
    margins  were  12.9% and  14.1% in the 2005  quarter  and 2005  year-to-date
    period, respectively, as compared to 16.2% in both the 2004 quarter and 2004
    year-to-date  period.  We  currently  expect full year  fiscal 2005  company
    restaurant margins to be less than full year fiscal 2004 results and will be
    dependent on comparable sales  performance at company  restaurants.  Company
    restaurant margins are susceptible to fluctuations in commodity costs, labor
    costs and other operating  costs such as utilities.  We attempt to negotiate
    contracts  for the  majority of our food  products in order to mitigate  the
    impact of rising  commodity  costs. We currently  expect commodity costs for
    beef, poultry and other proteins to increase by approximately 1.5% in fiscal
    2005. We expect labor costs to continue to be negatively  impacted by health
    insurance costs and the impact of wage rate  increases.  Higher energy costs
    will have a negative impact on margins in the fourth quarter of fiscal 2005,
    including higher utilities, fuel surcharges and packaging costs.

o   General and  administrative  expenses - general and  administrative  expense
    expressed  as  a  percentage  of  total  operating  revenues.   General  and
    administrative  expense  leverage is a key focus for us. We currently expect
    that revenues will grow faster than general and administrative  expenses. In
    fiscal  2005,  general  and  administrative  expenses  as a percent of total
    revenues are currently expected to be approximately 9%.

o   Return  on  equity  -  net  earnings  expressed  as  a  percent  of  average
    stockholders' equity. We believe this is an important indicator as it allows
    us to evaluate  our ability to create  value for our  shareholders.  We have
    exceeded  our stated  goal of at least 20% return on equity for the past six
    years and we are a leader in the casual dining industry in this category.

The  above  overview  contains  forward-looking  statements.   Please  refer  to
"Forward-Looking Statements" later in this section.

Application of Critical Accounting Estimates

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations is based upon our condensed consolidated financial statements,  which
were prepared in accordance with accounting principles generally accepted in the
United  States of America.  These  principles  require us to make  estimates and
assumptions  that  affect the  reported  amounts in the  condensed  consolidated
financial  statements  and notes  thereto.  Actual results may differ from these
estimates,  and such  differences may be material to our condensed  consolidated
financial  statements.  We believe  that the  following  significant  accounting
policies involve a significant degree of judgment or complexity.


                                       20
<PAGE>


Inventory  valuation:  We state  inventories  at the  lower of cost,  using  the
first-in,  first-out  method,  or market.  Market is  determined  based upon our
estimates of the net realizable value.

We purchase and maintain  inventories  of certain  specialty  products to ensure
sufficient  supplies to the system and to control food costs. We review and make
quality control  inspections of our inventories to determine  obsolescence on an
ongoing basis.  These reviews require  management to make certain  estimates and
judgments  regarding  projected  usage  which may  change in the  future and may
require us to record an inventory impairment.

Property and equipment: We report property and equipment at historical cost less
accumulated  depreciation.  Depreciation is provided on a  straight-line  method
over the  estimated  useful  lives of the  assets.  Leasehold  improvements  are
amortized over the lesser of the lease term or the estimated  useful life of the
related  asset.  The useful  lives of the  assets  are based  upon  management's
expectations.  We  periodically  review the assets for changes in  circumstances
which may impact their useful lives. If there are changes in circumstances  that
revise  an  asset's  useful  life,  we  will  adjust  the  depreciation  expense
accordingly for that asset in future periods.

Impairment of long-lived assets: We periodically  review restaurant property and
equipment  for  impairment  on a restaurant  by  restaurant  basis using certain
market and restaurant  operating  indicators  including historical cash flows as
well as current  estimates  of future cash flows  and/or  appraisals.  We review
other  long-lived  assets at least  annually  and when  events or  circumstances
indicate  that the  carrying  value of the  asset  may not be  recoverable.  The
recoverability  is assessed in most instances by comparing the carrying value to
its  undiscounted  cash  flows.  This  assessment  process  requires  the use of
estimates and assumptions regarding future cash flows and estimated useful lives
which are subject to a  significant  degree of  judgment.  If these  assumptions
change in the future, we may be required to record impairment  charges for these
assets.

Income taxes: We record  valuation  allowances  against our deferred tax assets,
when necessary,  in accordance with Statement of Financial  Accounting Standards
("SFAS") No. 109,  "Accounting  for Income  Taxes."  Realization of deferred tax
assets is dependent on future taxable  earnings and is therefore  uncertain.  We
assess the likelihood that our deferred tax assets in each of the  jurisdictions
in which we operate will be recovered from future taxable  income.  Deferred tax
assets  do not  include  future  tax  benefits  that  we deem  likely  not to be
realized.

We are  periodically  audited by foreign and domestic tax  authorities  for both
income and sales and use  taxes.  We record  accruals  when we  determine  it is
probable that we have an exposure in a matter relating to an audit. The accruals
may change in the future due to new developments in each matter.

Legal and  insurance  reserves:  We are  periodically  involved in various legal
actions.  We are required to assess the probability of any adverse  judgments as
well as the potential range of loss. We determine the required  accruals after a
review of the facts of each legal action.

We use estimates in the determination of the appropriate liabilities for general
liability,  workers' compensation and health insurance.  The estimated liability
is  established  based upon  historical  claims data and  third-party  actuarial
estimates of  settlement  costs for incurred  claims.  Unanticipated  changes in
these factors may require us to revise our estimates.

We periodically reassess our assumptions and judgments and make adjustments when
significant  facts  and  circumstances  dictate.  A change  in any of the  above
estimates could impact our  consolidated  statements of earnings and the related


                                       21
<PAGE>

asset or liability recorded in our consolidated balance sheets would be adjusted
accordingly.  Historically,  actual results have not been  materially  different
than the estimates that are described above.

Acquisitions

All of our acquisitions  below have been accounted for using the purchase method
of accounting and,  accordingly,  our consolidated  financial statements reflect
the  results  of  operations  for  each  acquisition  subsequent  to the date of
acquisition.  The assets  acquired  and  liabilities  assumed  are  recorded  at
estimates of fair values as  determined  by  management  based upon  information
available.  We finalize the  allocation  of purchase  price to the fair value of
assets acquired and liabilities assumed when we obtain information sufficient to
complete  the  allocation,  but in each case,  no longer than one year after the
acquisition date.

In May 2005, we completed the  acquisition of 12 Applebee's  restaurants,  which
included one restaurant under construction, in Missouri, Kansas and Arkansas for
approximately  $39,500,000.  Through September 2005, we have paid  approximately
$39,000,000,  which  has been  allocated  to the  fair  value  of  property  and
equipment  of  $16,900,000,  goodwill  of  $21,900,000  and other net  assets of
approximately $200,000. Emerging Issues Task Force Issue No. 04-1 ("EITF 04-1"),
"Accounting  for  Preexisting  Relationships  between  the Parties to a Business
Combination"  requires certain  reacquired  rights  (including the rights to the
acquirer's  trade  name  under  a  franchise  agreement)  to  be  recognized  as
intangible assets apart from goodwill. We are currently evaluating the impact of
EITF 04-1 on the allocation of the purchase price of these 12 restaurants.

The  following  table is comprised of actual  company  restaurant  sales for the
restaurant  acquisition above, which are included in our condensed  consolidated
financial  statements for each period presented and pro forma company restaurant
sales  assuming  the  acquisition  above  occurred  at  the  beginning  of  each
respective period (in thousands):

<TABLE>
<CAPTION>

                                                        13 Weeks Ended                         39 Weeks Ended
                                             ------------------------------------- --------------------------------------
                                               September 25,      September 26,      September 25,       September 26,
                                                   2005               2004               2005                2004
                                             ------------------ ------------------ ------------------ -------------------
<S>                                           <C>                <C>                <C>                 <C>
Actual acquired company
  restaurant sales.......................       $      7,500       $       --         $     10,300       $        --
                                             ================== ================== ================== ===================

Pro forma acquired company
  restaurant sales.......................       $      7,500       $      6,600       $     21,900       $      20,000
                                             ================== ================== ================== ===================
</TABLE>

In April 2005, we finalized the acquisition of eight  Applebee's  restaurants in
the Memphis  market that were closed in fiscal 2004 by a former  franchisee  for
approximately  $8,800,000  payable in cash. In connection with this acquisition,
we paid  approximately  $800,000 in cash in the fourth  quarter of fiscal  2004,
approximately  $5,700,000  in cash in the  first  quarter  of  fiscal  2005  and
approximately  $2,300,000  in cash in the  second  quarter of fiscal  2005.  The
purchase  price of $8,800,000  has been  allocated to the fair value of property
and  equipment  of  approximately   $8,200,000  and  goodwill  of  approximately
$600,000.  As of  September  25,  2005,  we  have  remodeled  and  opened  seven
restaurants and the remaining restaurant was sold to a third party.

In April 2004, we completed our  acquisition of the operations and assets of ten
Applebee's   restaurants   located  in  Southern  California  for  approximately
$13,800,000  in cash.  The  purchase  price was  allocated  to the fair value of


                                       22
<PAGE>


property and  equipment of  $2,500,000,  goodwill of  $10,800,000  and other net
assets of approximately $500,000. Company restaurant sales for these restaurants
were  $6,500,000  and  $11,200,000  for the 13 weeks  ended  and 39 weeks  ended
September 26, 2004,  respectively.  Proforma company  restaurant sales for these
restaurants would have been approximately  $6,500,000 and $20,000,000 for the 13
weeks and 39 weeks ended September 26, 2004 had this  acquisition been completed
at the beginning of fiscal 2004.

Captive Insurance Subsidiary

In 2002, we formed  Neighborhood  Insurance,  Inc., a Vermont  corporation and a
wholly-owned captive insurance  subsidiary to provide Applebee's  International,
Inc. and qualified  franchisees with workers' compensation and general liability
insurance.  Applebee's International,  Inc. and covered franchisees make premium
payments to the captive  insurance  company which pays  administrative  fees and
insurance claims, subject to individual and aggregate maximum claim limits under
the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive  insurance  company are established based upon third-party
actuarial  estimates of settlement costs for incurred claims and  administrative
fees. The  franchisee  premiums are included in other  franchise  income ratably
over the policy year.  The related  offsetting  expenses are included in cost of
other franchise income.  Accordingly,  we do not expect franchisee participation
in the captive  insurance company to have a material impact on our net earnings.
In fiscal 2005, we reduced the types of insurance  coverage plans which resulted
in  fewer  franchisee   participants  in  our  captive  insurance  program.  Our
consolidated  balance  sheets  include  the  following  balances  related to the
captive insurance subsidiary:

    o    Franchise   premium   receivables  of   approximately   $2,500,000  and
         $1,900,000   as  of   September   25,  2005  and   December  26,  2004,
         respectively,  included  in  receivables  related to captive  insurance
         subsidiary.

    o    Cash  equivalent  and other  long-term  investments  restricted for the
         payment of claims of  approximately  $19,500,000  and $16,700,000 as of
         September  25, 2005 and December 26,  2004,  respectively,  included in
         restricted assets related to captive insurance subsidiary.

    o    Loss  reserve  and  unearned  premiums  related  to  captive  insurance
         subsidiary of approximately $20,900,000 and $19,600,000 as of September
         25, 2005 and December 26, 2004, respectively.  Approximately $7,400,000
         and  $7,500,000  as of  September  25,  2005  and  December  26,  2004,
         respectively, is included in other non-current liabilities.

    o    Other  miscellaneous  items,  net,  of  approximately   $1,100,000  and
         $1,000,000   as  of   September   25,  2005  and   December  26,  2004,
         respectively,  included  in  several  line  items  in the  consolidated
         balance sheets.


                                       23
<PAGE>



Results of Operations

The following table contains unaudited  financial  information  derived from our
consolidated statements of earnings expressed as a percentage of total operating
revenues, except where otherwise noted. Percentages may not add due to rounding.

<TABLE>
<CAPTION>
                                                                     13 Weeks Ended                    39 Weeks Ended
                                                             -------------------------------- --------------------------------
                                                              September 25,   September 26,   September 25,     September 26,
                                                                  2005             2004            2005             2004
                                                             ---------------- --------------- ---------------  ----------------
                                                                               (as restated)                     (as restated)
<S>                                                                <C>             <C>             <C>               <C>
Revenues:
    Company restaurant sales................................         89.3%           87.9%           89.0%             87.9%
    Franchise royalties and fees............................         10.3            10.7            10.6              10.9
    Other franchise income..................................          0.3             1.4             0.4               1.2
                                                             ---------------- --------------- ---------------  ----------------
         Total operating revenues...........................        100.0%          100.0%          100.0%            100.0%
                                                             ================ =============== ===============  ================
Cost of sales (as a percentage of company restaurant sales):
    Food and beverage.......................................         26.2%           26.3%           26.4%             26.4%
    Labor...................................................         33.1            32.0            33.0              32.4
    Direct and occupancy....................................         27.4            25.0            26.0              24.6
    Pre-opening expense.....................................          0.4             0.4             0.4               0.3
                                                             ---------------- --------------- ---------------  ----------------
         Total cost of sales................................         87.1%           83.8%           85.9%             83.8%
                                                             ================ =============== ===============  ================

Cost of other franchise income (as a percentage of other
    franchise income).......................................         74.2%           90.0%           79.9%            110.2%
General and administrative expenses.........................          8.6             9.5             8.9               9.2
Amortization of intangible assets...........................          0.1             0.1             0.1               0.1
Impairment of long-lived assets.............................          1.3             --              0.4               --
Loss on disposition of restaurants and equipment............          0.2             0.2             0.1               0.2
                                                             ---------------- --------------- ---------------  ----------------
Operating earnings..........................................         11.8            15.3            13.8              15.6
                                                             ---------------- --------------- ---------------  ----------------
Other income (expense):
    Investment income.......................................          0.2             0.1             0.1               0.1
    Interest expense........................................         (0.4)           (0.1)           (0.2)             (0.1)
    Other income............................................          0.2             0.3             0.2               0.2
                                                             ---------------- --------------- ---------------  ----------------
         Total other income.................................          --              0.2             --                0.1
                                                             ---------------- --------------- ---------------  ----------------
Earnings before income taxes................................         11.8            15.5            13.8              15.8
Income taxes................................................          4.5             5.4             4.9               5.5
                                                             ---------------- --------------- ---------------  ----------------
Net earnings................................................          7.2%           10.2%            8.9%             10.3%
                                                             ================ =============== ===============  ================
</TABLE>


                                       24
<PAGE>


The following table sets forth certain unaudited financial information and other
restaurant data relating to company and franchise restaurants, as reported to us
by franchisees:

<TABLE>
<CAPTION>

                                                               13 Weeks Ended                     39 Weeks Ended
                                                       -------------------------------    -------------------------------
                                                       September 25,     September 26,    September 25,     September 26,
                                                           2005              2004             2005              2004
                                                       -------------     -------------    -------------     -------------
<S>                                                   <C>               <C>              <C>               <C>
Number of restaurants:
    Company:
         Beginning of period.......................           462                405              424               383
         Restaurant openings.......................            12                  9               39                21
         Restaurant closings.......................            (1)                (1)              (1)               (1)
         Restaurants acquired from franchisees.....            --                 --               11                10
                                                       -------------     -------------    -------------     -------------
         End of period.............................           473                413              473               413
                                                       -------------     -------------    -------------     -------------
    Franchise:
         Beginning of period.......................         1,260              1,207            1,247             1,202
         Restaurant openings.......................            23                 21               52                40
         Restaurants closed........................            (1)                (4)              (6)               (8)
         Restaurants acquired from franchisees.....           --                --                (11)              (10)
                                                       -------------     -------------    -------------     -------------
         End of period.............................         1,282              1,224            1,282             1,224
                                                       -------------     -------------    -------------     -------------
    Total:
         Beginning of period.......................         1,722              1,612            1,671             1,585
         Restaurant openings.......................            35                 30               91                61
         Restaurants closed........................            (2)                (5)              (7)               (9)
                                                       -------------     -------------    -------------     -------------
         End of period.............................         1,755              1,637            1,755             1,637
                                                       =============     =============    =============     =============

Weighted average weekly sales per restaurant:
    Company........................................     $  44,825         $   46,365       $   46,561        $   47,489
    Franchise......................................     $  48,036         $   47,253       $   49,809        $   48,258
    Total..........................................     $  47,170         $   47,027       $   48,954        $   48,067

Change in comparable restaurant sales:(1)
    Company........................................          (1.6)%              1.1%            (0.8)%             5.0%
    Franchise......................................           1.8 %              3.1%             3.1 %             5.9%
    Total..........................................           0.9 %              2.7%             2.1 %             5.6%

Total operating revenues (in thousands):
    Company restaurant sales.......................     $ 272,673         $  247,173       $  815,834        $  738,502
    Franchise royalties and fees(2)................        31,589             30,048           97,090            91,485
    Other franchise income(3)......................         1,064              3,913            3,553            10,427
                                                       -------------     -------------    -------------     -------------
    Total..........................................     $ 305,326         $  281,134       $  916,477        $  840,414
                                                       =============     =============    =============     =============
<FN>

(1) When computing comparable restaurant sales, restaurants open for at least 18
    months are compared from period to period.
(2) Franchise royalties are generally 4% of each franchise restaurant's reported
    monthly gross sales.  Reported franchise sales, in thousands,  were $790,949
    and $746,239 in the 2005  quarter and the 2004  quarter,  respectively,  and
    $2,444,429 and  $2,274,777 in the 2005  year-to-date  and 2004  year-to-date
    period, respectively. Franchise fees typically range from $30,000 to $35,000
    for each restaurant opened.
(3) Other  franchise   income  includes   insurance   premiums  from  franchisee
    participation in our captive  insurance program and revenue from information
    technology products and services provided to certain franchisees.
</FN>
</TABLE>


                                       25
<PAGE>


2005 Quarter  Compared With 2004 Quarter and 2005  Year-to-Date  Period Compared
With 2004 Year-to-Date Period

Company Restaurant Sales.  Total company restaurant sales increased  $25,500,000
(10.3%)  from  $247,173,000  in the 2004  quarter  to  $272,673,000  in the 2005
quarter  and  increased  $77,332,000  (10.5%)  from  $738,502,000  in  the  2004
year-to-date  period  to  $815,834,000  in the  2005  year-to-date  period.  The
percentage  increase in total company  restaurant sales for the 2005 quarter was
due to an increase in the number of restaurant weeks open of  approximately  14%
which was partially offset by a decline in average weekly sales of 3.3%, and the
increase in the 2005 year-to-date period was due to an increase in the number of
restaurant  weeks  open of  approximately  13% which was  partially  offset by a
decline in average weekly sales of 2.0%.

Comparable restaurant sales at company restaurants decreased by 1.6% and 0.8% in
the  2005  quarter  and the 2005  year-to-date  period,  respectively.  Weighted
average weekly sales at company  restaurants  decreased 3.3% from $46,365 in the
2004 quarter to $44,825 in the 2005 quarter and  decreased  2.0% from $47,489 in
the 2004 year-to-date period to $46,561 in the 2005 year-to-date  period.  These
decreases  were a result of a  reduction  in guest  traffic  in  fiscal  2005 as
compared to fiscal 2004 due  primarily to the launch of our Weight  Watchers(TM)
menu system-wide in May 2004. In addition,  we have experienced more significant
guest count declines in Kansas City,  Michigan,  Minnesota,  New England and St.
Louis  where more than 60% of our  company  restaurants  are  located,  which is
consistent with industry trends in these markets.  Weighted average weekly sales
declined more than comparable sales due to weaker new restaurant opening volumes
in Kansas City,  Minnesota,  New England and St.  Louis.  These  decreases  were
partially  offset by increases in the average  guest check  resulting  from menu
price increases of approximately  1.0% in November 2004 and 1.5% in May 2005 and
our Carside To Go(TM)  initiative.  Carside To Go(TM) sales mix  increased  from
8.9% of  company  restaurant  sales  in the  2004  quarter  to  9.8% of  company
restaurant sales in the 2005 quarter.

Franchise Royalties and Fees.  Franchise royalties and fees increased $1,541,000
(5%) from $30,048,000 in the 2004 quarter to $31,589,000 in the 2005 quarter and
increased  $5,605,000 (6%) from $91,485,000 in the 2004  year-to-date  period to
$97,090,000 in the 2005 year-to-date  period. These increases were due primarily
to the  increased  number of  franchise  restaurants  operating  during the 2005
quarter and 2005 year-to-date period as compared to the same periods in 2004 and
increases in  comparable  restaurant  sales.  Weighted  average  weekly sales at
franchise  restaurants  increased  1.7% and 3.2% in the  2005  quarter  and 2005
year-to-date period,  respectively,  and franchise  comparable  restaurant sales
increased  1.8% and  3.1% in the 2005  quarter  and  2005  year-to-date  period,
respectively.  These  increases  were due in part to the  implementation  of the
Carside To Go(TM) program in most franchise restaurants during fiscal 2005 which
were  partially  offset by sales  increases  in 2004 as  compared  to 2005 which
resulted  from the launch of our Weight  Watchers(TM)  menu  system-wide  in May
2004.

Other Franchise Income.  Other franchise income decreased  $2,849,000 (73%) from
$3,913,000  in the 2004 quarter to  $1,064,000 in the 2005 quarter and decreased
$6,874,000 (66%) from $10,427,000 in the 2004 year-to-date  period to $3,553,000
in the 2005 year-to-date  period due primarily to fewer franchisee  participants
in our captive  insurance  program  resulting from the reduction of the types of
insurance  coverage  plans  offered.  Franchise  premiums  are included in other
franchise income ratably over the policy year.

Cost of Company  Restaurant  Sales.  Food and beverage costs decreased  slightly
from 26.3% in the 2004  quarter to 26.2% in the 2005  quarter  and were 26.4% in
both the 2004 year-to-date period and the 2005 year-to-date period. Both periods


                                       26
<PAGE>


were  favorably  impacted by menu price  increases of 1.0% in November  2004 and
1.5% in May 2005,  which were offset by higher  commodity  costs and lower order
incidences of both alcoholic and non-alcoholic beverages which have a lower cost
of  sales.  The 2004  quarter  and 2004  year-to-date  period  were  unfavorably
impacted by the company  portion of the June 2004  impairment  of  approximately
$500,000  for  excess  riblet  inventories  which  no  longer  met  our  quality
standards.

Labor  costs  increased  from  32.0%  in the 2004  quarter  to 33.1% in the 2005
quarter and increased from 32.4% in the 2004 year-to-date period to 33.0% in the
2005  year-to-date  period.  The increases in both periods were due primarily to
higher management and hourly costs due to lower sales volumes, higher wage rates
and higher group insurance costs which were partially offset by lower management
incentive compensation and workers' compensation expense.

Direct and occupancy costs increased from 25.0% in the 2004 quarter and 24.6% in
the 2004 year-to-date  period to 27.4% in the 2005 quarter and 26.0% in the 2005
year-to-date  period due primarily to lower sales volumes at company restaurants
which resulted in unfavorable year over year  comparisons of depreciation,  rent
and  property tax expenses as a  percentage  of sales,  due to their  relatively
fixed nature, as well as higher utilities, packaging and advertising costs, as a
percentage  of sales.  The  increase in the 2005  quarter was also due to higher
repairs and maintenance costs.

Cost of  Other  Franchise  Income.  Cost of  other  franchise  income  decreased
$2,731,000  (78%) from  $3,521,000  in the 2004  quarter to $790,000 in the 2005
quarter and decreased $8,655,000 (75%) from $11,493,000 in the 2004 year-to-date
period to $2,838,000  in the 2005  year-to-date  period due to fewer  franchisee
participants in our captive  insurance  program  resulting from the reduction of
the types of insurance  coverage plans offered and the franchisee portion of the
June 2004 impairment of approximately  $1,600,000 for excess riblet  inventories
which no longer met our quality standards.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased  from  9.5%  in the  2004  quarter  to 8.6% in the  2005  quarter  and
decreased  from  9.2% in the  2004  year-to-date  period  to  8.9%  in the  2005
year-to-date period. General and administrative expenses were favorably impacted
in both periods by lower  incentive  compensation  expense and the absorption of
general and  administrative  expenses over a larger  revenue  base.  General and
administrative  expenses  were  unfavorably  impacted in both  periods by higher
compensation expense due to staffing levels and higher management training costs
due to the increased number of company restaurant openings as compared to 2004.

Impairment  of Long-lived  Assets.  In the third quarter of 2005, we recorded an
asset impairment charge of $3,900,000  consisting of a $2,600,000  write-down of
the carrying value of the property and equipment of three  restaurants  that are
not performing as expected and one restaurant  that will be closed and relocated
and a $1,300,000 write-down of one other long-lived asset.

Interest  Expense.  Interest expense increased from $379,000 in the 2004 quarter
to $1,232,000 in the 2005 quarter and from  $1,139,000 in the 2004  year-to-date
period to $2,203,000 in the 2005 year-to-date  period due primarily to increased
borrowings  under our credit facility used to acquire 12 restaurants in May 2005
and to fund repurchases of our common stock.

Income Taxes.  The effective income tax rate, as a percentage of earnings before
income  taxes,  increased  from  34.5% in the 2004  quarter to 38.5% in the 2005
quarter and increased from 34.7% in the 2004 year-to-date period to 35.7% in the
2005  year-to-date  period.  We increased  the rate in the 2005 quarter and 2005
year-to-date  period  due to higher  state tax rates  discovered  following  the
recent completion of our 2004 tax returns.


                                       27
<PAGE>


Liquidity and Capital Resources

Our primary  sources of liquidity are cash provided by operations and borrowings
under our credit  facility.  Our need for  capital  resources  historically  has
resulted from the construction and acquisition of restaurants, the repurchase of
our common stock and investment in information  technology systems. In the past,
we have obtained capital through our ongoing operations,  public stock offerings
and debt financing.  Cash flows from our ongoing  operations  primarily  include
cash generated from company and franchise operations,  management of credit from
trade  suppliers and decisions to enter into  restaurant  operating  leases.  In
addition,  we have  assumed debt or issued new debt in  connection  with certain
mergers and  acquisitions.  The following  table  presents a summary of our cash
flows for the 2005 and 2004 year-to-date period (in thousands):
<TABLE>
<CAPTION>

                                                            2005                 2004
                                                        Year-to-Date         Year-to-Date
                                                           Period               Period
                                                     -------------------  -------------------
                                                                             (as restated)
<S>                                                  <C>                  <C>
Net cash provided by operating activities..........    $     158,676        $     126,268

Net cash used by investing activities..............         (149,245)             (95,744)

Net cash used by financing activities..............           (9,933)             (47,950)
                                                     -------------------  -------------------

Net decrease in cash and cash equivalents..........    $        (502)       $     (17,426)
                                                     ===================  ===================
</TABLE>

Capital  expenditures,  excluding  acquisitions,  were  $68,224,000  in the 2004
year-to-date period and $100,802,000 in the 2005 year-to-date  period. In fiscal
2005, we currently expect to open at least 50 company  restaurants,  and capital
expenditures are expected to be between $150,000,000 and $160,000,000, including
the costs to re-open seven company  restaurants  that were closed in fiscal 2004
by a former franchisee in Memphis, Tennessee, but excluding the costs to acquire
the assets of 12 Applebee's restaurants in Missouri, Kansas and Arkansas.

Future  capital  expenditures  will  primarily  be for  the  development  of new
restaurants,  refurbishment and capital replacement for existing restaurants and
the enhancement of information  systems.  In addition,  we expect to incur costs
associated with the purchase of land for a new corporate  headquarters in fiscal
2006.  Because we expect to  continue  to  purchase a portion of our sites,  the
amount of actual  capital  expenditures  will be  dependent  upon,  among  other
things,  the proportion of leased versus owned  properties.  In addition,  if we
construct  more or fewer  restaurants  than we currently  anticipate  or acquire
additional  restaurants,  our  capital  requirements  will  increase or decrease
accordingly.

In May 2005, we completed the  acquisition of 12 Applebee's  restaurants,  which
included one restaurant under construction, in Missouri, Kansas and Arkansas for
approximately  $39,500,000.  Through September 2005, we have paid  approximately
$39,000,000,  which  has been  allocated  to the  fair  value  of  property  and
equipment  of  $16,900,000,  goodwill  of  $21,900,000  and other net  assets of
approximately $200,000.

In April 2005, we finalized the acquisition of eight  Applebee's  restaurants in
the Memphis  market that were closed in fiscal 2004 by a former  franchisee  for
approximately  $8,800,000  payable in cash. In connection with this acquisition,
we paid  approximately  $800,000 in cash in the fourth  quarter of fiscal  2004,
approximately  $5,700,000  in cash in the  first  quarter  of  fiscal  2005  and
approximately $2,300,000 in cash in the second quarter of fiscal 2005.


                                       28
<PAGE>


In April 2004, we completed our  acquisition of the operations and assets of ten
Applebee's   restaurants   located  in  Southern  California  for  approximately
$13,800,000 in cash.

In December  2004, we completed the  refinancing of our  $150,000,000  unsecured
revolving  credit  facility.  The  new  bank  credit  agreement  provided  for a
$150,000,000 five-year unsecured revolving credit facility, of which $40,000,000
may be used for the  issuance of letters of credit.  The  facility is subject to
various  covenants  and  restrictions  which,  among other  things,  require the
maintenance  of  stipulated   fixed  charge,   leverage  and   indebtedness   to
capitalization  ratios, as defined. There is no limit on cash dividends provided
that the  declaration  and payment of such  dividend does not cause a default of
any other covenant contained in the agreement.  The facility is subject to other
standard terms,  conditions,  covenants, and fees. In September 2005, we entered
into an amendment to our credit  facility which  increased the revolving  credit
commitment  available from  $150,000,000  to  $200,000,000.  As of September 25,
2005, we are in compliance with the covenants contained in our credit agreement.
As of September 25, 2005, we had borrowings of $130,700,000,  standby letters of
credit of $9,400,000  outstanding and approximately  $59,900,000 available under
our  revolving  credit  facility.  In October  2005,  we  entered  into a second
amendment to our credit facility which increased the revolving credit commitment
available  from  $200,000,000  to  $250,000,000  and provided for an  additional
$75,000,000 of revolving credit upon satisfaction of the conditions set forth in
the credit facility.  During fiscal 2005, we expect to fund operations,  capital
expansion,  any  repurchases  of common stock and the payment of dividends  from
operating cash flows and borrowings under our revolving credit facility.

In October 2004, our Board of Directors authorized additional repurchases of our
common  stock of up to  $150,000,000  beginning  in fiscal  2005 and  approved a
written plan for repurchases of our common stock in the open market.  During the
2005 year-to-date period, we repurchased 4,917,600 shares of our common stock at
an  average  price  of  $24.58  for an  aggregate  cost of  $120,856,000.  As of
September  25,  2005,  we  had   $29,177,000   remaining  under  our  repurchase
authorization.  In October 2005,  our Board of Directors  approved an additional
$175,000,000  authorization  to repurchase  our common stock,  subject to market
conditions.

In October 2005, the Board of Directors declared an annual dividend of $0.20 per
share to be payable on January  23, 2006 to  shareholders  of record on December
23, 2005.

As of September 25, 2005,  our liquid assets totaled  $10,424,000.  These assets
consisted  of cash  and  cash  equivalents  in the  amount  of  $10,140,000  and
short-term  investments in the amount of $284,000.  The working  capital deficit
increased  from  $51,041,000  as of  December  26,  2004  to  $84,037,000  as of
September  25, 2005.  This  increase  was due  primarily to increases in accrued
income taxes and notes  payable and decreases in  inventories  and cash and cash
equivalents  due to repurchases of our common stock,  acquisition of restaurants
and  capital  expenditures  in the 2005  year-to-date  period and was  partially
offset by the redemption of gift cards in the 2005  year-to-date  period sold in
fiscal 2004.

We believe that our liquid assets and cash generated from  operations,  combined
with borrowings  available under our credit  facility,  will provide  sufficient
funds for capital expenditures,  repurchases of our common stock, the payment of
dividends and other such operating activities for the foreseeable future.


                                       29
<PAGE>


The following table shows our debt amortization  schedule,  future capital lease
commitments (including principal and interest payments),  future operating lease
commitments  and  future  purchase  obligations  as of  September  25,  2005 (in
thousands):
<TABLE>
<CAPTION>

                                                                           Payments due by period
                                                   ----------------------------------------------------------------------
                     Certain                                       Less than 1       1-3           3-5      More than 5
             Contractual Obligations                   Total           year         Years         years        years
-------------------------------------------------  -------------  ------------- ------------- ------------ -------------
<S>                                                <C>             <C>            <C>         <C>           <C>
Long-term Debt (excluding capital
    lease obligations) (1)......................    $   132,153     $    9,828     $     141   $  121,097    $    1,087
Capital Lease Obligations.......................          8,526            787         1,658        1,776         4,305
Operating Leases (2)............................        374,820         26,026        52,433       52,347       244,014
Purchase Obligations - Company(3)...............        211,151        185,248        16,713        9,190          --
 Purchase Obligations - Franchise(4)............        420,445        370,905        27,342       22,198          --
</TABLE>


(1) The amounts for long-term debt are primarily  borrowings under our revolving
credit facility and exclude interest payments which are variable in nature.

(2) The amounts for operating  leases  include  option  periods where failure to
exercise such options would result in an economic  penalty such that the renewal
appears reasonably assured.

(3) The amounts for company purchase  obligations  include  commitments for land
for a new corporate headquarters,  food items, energy,  supplies,  severance and
employment agreements, and other miscellaneous commitments.

(4) The amounts for franchise purchase  obligations include commitments for food
items and supplies made by Applebee's  International,  Inc. for our franchisees.
Applebee's  International,  Inc.  contracts  with  certain  suppliers  to ensure
competitive   pricing.   These  amounts  will  only  be  payable  by  Applebee's
International,  Inc. if our franchisees do not meet certain minimum  contractual
requirements.

Other Contractual Obligations

In connection with the sale of restaurants to franchisees and other parties,  we
have, in certain cases,  remained  contingently  liable for the remaining  lease
payments.  As of September 25, 2005,  we have  outstanding  lease  guarantees of
approximately  $17,700,000.  These leases expire at various times with the final
lease  agreement  expiring in 2025.  In  addition,  we or our  subsidiaries  are
contingently  liable for various leases that we have assigned in connection with
the sale of  restaurants  to  franchisees  and other  parties,  in the potential
amount of $14,600,000. We have not recorded a liability as of September 25, 2005
or December 26, 2004.

We have severance and employment  agreements with certain officers providing for
severance  payments  to be  made  in  the  event  the  associate  resigns  or is
terminated   related  to  a  change  in  control.   The  agreements  define  the
circumstances  which  will  constitute  a change in  control.  If the  severance
payments had been due as of September  25, 2005,  we would have been required to
make payments totaling approximately $13,300,000. In addition, we have severance
and  employment   agreements  with  certain  officers  which  contain  severance
provisions  not  related to a change in  control.  Those  provisions  would have
required  aggregate  payments of  approximately  $6,200,000 if such officers had
been terminated as of September 25, 2005.

In November 2003, we arranged for a third-party  financing company to provide up
to $75,000,000  to qualified  franchisees  for short-term  loans to fund remodel
investments, subject to our approval. Under the terms of this financing program,
we will  provide a limited  guarantee  pool for the loans  advanced  during  the
three-year  period ending  December  2006. As of September 25, 2005,  there were
loans  outstanding to four franchisees for  approximately  $1,300,000 under this
program.


                                       30
<PAGE>


In May 2004,  we arranged for a third-party  financing  company to provide up to
$250,000,000  to  qualified  franchisees  for loans to fund  development  of new
restaurants  through  October 2007,  subject to our approval.  We will provide a
limited guarantee of certain loans advanced under this program.  As of September
25,  2005,  there  were  loans   outstanding  to  six  franchisees   aggregating
approximately  $41,800,000 under this program.  The fair value of our guarantees
under these two  financing  programs  was less than  $100,000 and is recorded in
other non-current liabilities and other assets in our consolidated balance sheet
as of September 25, 2005.

New Accounting Pronouncements

In October 2005, the Financial  Accounting  Standards Board ("FASB") issued FASB
Staff Position  ("FSP") 13-1,  "Accounting  for Rental Costs  Incurred  during a
Construction  Period." The guidance  requires  the rental costs  recognized  for
ground or building operating leases during the construction period be recognized
as rental  expense.  The guidance  permits  either  retroactive  or  prospective
treatment for periods  beginning after December 15, 2005. We will  prospectively
change our policy from capitalization to expensing beginning in fiscal 2006. The
adoption  of this FSP will  result  in an  expected  increase  of  approximately
$25,000 in preopening  expenses  recognized for every new restaurant  opened but
will not have a material effect on our consolidated financial statements.

In  June  2005,  the  FASB's  EITF  reached  a  consensus  on  Issue  No.  05-6,
"Determining the Amortization Period for Leasehold  Improvements" ("EITF 05-6").
The  guidance  requires  that  leasehold  improvements  acquired  in a  business
combination  or purchased  subsequent  to the  inception of a lease be amortized
over the  lesser  of the  useful  life of the  assets  or a term  that  includes
renewals that are reasonably assured at the date of the business  combination or
purchase.  The guidance is effective for periods  beginning after June 29, 2005.
The adoption of EITF 05-6 did not have an impact on our  consolidated  financial
statements.

In May 2005,  the FASB issued  Statement of Financial  Accounting  Standards No.
154, "Accounting Changes and Error Corrections--A Replacement of APB Opinion No.
20 and FASB Statement No. 3." SFAS No. 154 requires retrospective application to
prior periods' financial statements for changes in accounting principle,  unless
it is  impracticable  to  determine  either the  period-specific  effects or the
cumulative  effect of the  change.  SFAS No.  154 is  effective  for  accounting
changes and  corrections of errors made in fiscal years beginning after December
15, 2005.

In March 2005,  the FASB  issued FASB  Interpretation  No. 47,  "Accounting  for
Conditional Asset Retirement Obligations," ("FIN 47"). FIN 47 clarifies the term
"conditional"  as  used  in SFAS  No.  143,  "Accounting  for  Asset  Retirement
Obligations."  This  Interpretation  refers to a legal  obligation to perform an
asset retirement activity even if the timing and/or settlement is conditional on
a  future  event  that  may or may  not be  within  the  control  of an  entity.
Accordingly,  the entity  must  record a  liability  for the  conditional  asset
retirement  obligation  if the fair value of the  obligation  can be  reasonably
estimated.  FIN 47 is effective for fiscal years ending after December 15, 2005.
We  are  evaluating  the  impact  the  adoption  of  FIN  47  will  have  on our
consolidated financial statements.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-based
Payment,"   which   replaces   SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation,"  and supersedes  Accounting  Principles Board ("APB") Opinion No.
25,  "Accounting  for Stock Issued to  Employees."  SFAS No. 123 (revised  2004)
requires  compensation costs related to share-based  payment  transactions to be
recognized in the financial statements.  With limited exceptions,  the amount of
compensation  cost will be measured based on the fair value on the grant date of


                                       31
<PAGE>


the equity or liability instruments issued. Compensation cost will be recognized
over the period that an employee provides service for that award, resulting in a
decrease in our net earnings. We will adopt the provisions of this Statement, as
amended,  using the modified  prospective  method  beginning in fiscal 2006.  We
expect that the adoption of this Standard  will be material to our  consolidated
financial  statements;  however,  we are still in the process of evaluating  its
impact.

Forward-Looking Statements

The  statements  contained  in the  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations"  section  regarding  restaurant
development,  comparable sales,  Carside To Go(TM),  revenue growth,  restaurant
margin,   commodity  costs,   general  and  administrative   expenses,   capital
expenditures, return on equity and financial commitments are forward-looking and
based on current  expectations.  There are several risks and uncertainties  that
could cause actual  results to differ  materially  from those  described.  These
risks  include  but are not  limited  to our  ability  and  the  ability  of our
franchisees to open and operate additional restaurants  profitably,  the ability
of our franchisees to obtain financing, the continued growth of our franchisees,
our ability to attract and retain qualified  franchisees,  the impact of intense
competition in the casual dining segment of the restaurant industry,  the impact
of economic factors on consumer spending,  and our ability to control restaurant
operating  costs which are  impacted by market  changes,  minimum wage and other
employment laws, food costs and inflation. For a more detailed discussion of the
principal  factors that could cause actual  results to be materially  different,
you  should  read  our  current  report  on Form 8-K  which  we  filed  with the
Securities  and  Exchange  Commission  on  February  9, 2005.  We  disclaim  any
obligation to update forward-looking statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from fluctuations in interest rates and changes in
commodity  prices.  Our revolving  credit  facility bears interest at either the
bank's prime rate or LIBOR plus 0.625%, at our option. As of September 25, 2005,
the total amount of debt subject to interest rate  fluctuations was $130,700,000
which was outstanding on our revolving credit facility.  A 1% change in interest
rates would result in an increase or decrease in interest  expense of $1,307,000
per year. We may from time to time enter into  interest rate swap  agreements to
manage the  impact of  interest  rate  changes on our  earnings.  A  substantial
portion of the food  products  and  utilities  we purchase  are subject to price
volatility  due to factors  that are  outside of our  control  such as  weather,
seasonality and fuel costs. As part of our strategy to moderate this volatility,
we have entered into fixed price purchase commitments.

Item 4.  Controls and Procedures

As of September 25, 2005, we have evaluated the  effectiveness of the design and
operation of our disclosure  controls and procedures  under the  supervision and
with  the  participation  of the  Chief  Executive  Officer  ("CEO")  and  Chief
Financial Officer ("CFO"). Based on this evaluation,  our management,  including
the CEO and CFO,  concluded  that our disclosure  controls and  procedures  were
effective.  During our most recent fiscal quarter, there have been no changes in
our internal control over financial reporting that occurred that have materially
affected or are reasonably likely to materially affect our internal control over
financial reporting.


                                       32
<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

We are involved in various  legal  actions which  include,  without  limitation,
employment  law and wage and hourly  labor  related  matters,  dram shop claims,
personal injury claims and other such restaurant  operational  matters.  In each
instance,  we believe that we have meritorious  defenses to the allegations made
and we are vigorously defending these claims.

We believe that the ultimate disposition of these matters will not, individually
or in the  aggregate,  have a  material  adverse  effect  upon our  business  or
consolidated financial position.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                      Purchases of Equity Securities(1)
------------------------------------------------------------------------------------------------------------------

------------------------------ ------------------ ----------- ------------------------- --------------------------
                                                                                            Approximate Dollar
                                                                                           Value of Shares that
                                                    Average     Total Number of Shares          May Yet Be
                                  Total Number       Price       Purchased as Part of      Purchased Under the
                                   of Shares        Paid Per     Publicly Announced         Plans or Programs
            Period                  Purchased         Share        Plans or Programs           (in thousands)
------------------------------ ------------------ ----------- ------------------------- --------------------------
<S>                           <C>                <C>         <C>                       <C>
June 27, 2005 through July
24, 2005                             463,700        $ 25.87                463,700                  69,797
------------------------------ ------------------ ----------- ------------------------- --------------------------
July 25, 2005 through August
21, 2005                             365,227(2)     $ 24.66                361,300                  60,891
------------------------------ ------------------ ----------- ------------------------- --------------------------
August 22, 2005 through
September 25, 2005                 1,432,600        $ 22.14              1,432,600                  29,177(3)
------------------------------ ------------------ ----------- ------------------------- --------------------------
            Total                  2,261,527                             2,257,600
============================== ================== =========== ========================= ==========================

<FN>


(1) In October 2004, our Board of Directors authorized additional repurchases of
    our common stock of up to $150,000,000 beginning in fiscal 2005.

(2) Includes  3,927 shares  received as partial  payment for shares issued under
    stock option plans.

(3) In October 2005, our Board of Directors approved an additional  $175,000,000
    authorization to repurchase our common stock, subject to market conditions.
</FN>
</TABLE>


Item 6.  Exhibits

The Exhibits listed on the accompanying  Exhibit Index are filed as part of this
report.



                                       33
<PAGE>



                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       APPLEBEE'S INTERNATIONAL, INC.
                                       (Registrant)



Date: October 31, 2005                 By: /s/  Lloyd L. Hill
      ------------------------------      --------------------------------------
                                          Lloyd L. Hill
                                          Director, Chairman of the Board and
                                          Chief Executive Officer
                                          (principal executive officer)

Date: October 31, 2005                 By: /s/  Steven K. Lumpkin
      ------------------------------      --------------------------------------
                                          Steven K. Lumpkin
                                          Director, Executive Vice President,
                                          Chief Financial Officer and Treasurer
                                          (principal financial officer)

Date: October 31, 2005                 By: /s/ Beverly O. Elving
      ------------------------------      --------------------------------------
                                          Beverly O. Elving
                                          Vice President and Controller
                                          (principal accounting officer)



                                       34
<PAGE>


                 APPLEBEE'S INTERNATIONAL, INC AND SUBSIDIARIES
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

  Exhibit
   Number                                         Description of Exhibit
------------- ------------------------------------------------------------------------------------------------
<S>          <C>

    10.1      Amendment  No.  1  to  the  5-year  Revolving  Credit  Agreement  dated  September  14,  2005
              (incorporated by reference to Form 8-K filed on September 15, 2005)

    10.2      Amendment  No.  2  to  the  5-year  Revolving  Credit  Agreement  dated  October 26,  2005
              (incorporated by reference to Form 8-K filed on October 27, 2005)

    31.1      Certification of Chairman and Chief Executive Officer Pursuant to SEC Rule 13a-14(a)

    31.2      Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14(a)

    32.1      Certification  of Chairman and Chief Executive  Officer and Chief Financial  Officer Pursuant
              to 18 U.S.C. Section 1350
</TABLE>




                                       35