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 28, 2003
                              --------------------------------------------------

                                       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, Suite 100, 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 Act). Yes  X       No
                                      -----       -----

The number of shares of the registrant's  common stock outstanding as of October
27, 2003 was 54,976,791.

                                       1
<PAGE>


                         APPLEBEE'S INTERNATIONAL, INC.
                                    FORM 10-Q
                     FISCAL QUARTER ENDED SEPTEMBER 28, 2003
                                      INDEX

<TABLE>
<CAPTION>

                                                                                                                Page

<S>                <C>                                                                                          <C>
Part I              Financial Information

Item 1.             Consolidated Financial Statements:

                    Consolidated Balance Sheets as of September 28, 2003
                       and December 29, 2002................................................................      3

                    Consolidated Statements of Earnings for the 13 Weeks and 39 Weeks
                       Ended September 28, 2003 and September 29, 2002......................................      4

                    Consolidated Statement of Stockholders' Equity for the
                       39 Weeks Ended September 28, 2003....................................................      5

                    Consolidated Statements of Cash Flows for the 39 Weeks
                       Ended September 28, 2003 and September 29, 2002......................................      6

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

Item 2.             Management's Discussion and Analysis of
                       Financial Condition and Results of Operations........................................     14

Item 3.             Quantitative and Qualitative Disclosures About Market Risk..............................     24

Item 4.             Controls and Procedures.................................................................     24


Part II             Other Information

Item 1.             Legal Proceedings.......................................................................     25

Item 6.             Exhibits and Reports on Form 8-K........................................................     25


Signatures .................................................................................................     26

Exhibit Index...............................................................................................     27


</TABLE>


                                       2
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                          September 28,        December 29,
                                                                                              2003                 2002
                                                                                         ----------------     ---------------
                                       ASSETS
<S>                                                                                       <C>                  <C>
Current assets:
     Cash and cash equivalents........................................................     $     3,359          $    15,169
     Short-term investments, at market value (amortized cost of $478 in 2002).........              26                  503
     Receivables (less allowance for bad debts of $4,096 in 2003 and $4,089 in 2002)..          31,778               26,092
     Receivables related to captive insurance subsidiary..............................           2,093                1,803
     Inventories......................................................................          14,114               11,504
     Prepaid income taxes.............................................................            --                  5,002
     Prepaid and other current assets.................................................           9,729                9,506
                                                                                         ----------------     ---------------
         Total current assets.........................................................          61,099               69,579
Property and equipment, net...........................................................         405,141              383,002
Goodwill..............................................................................         105,326               88,715
Franchise interest and rights, net....................................................           1,220                1,468
Restricted assets related to captive insurance subsidiary.............................           8,830                 --
Other assets, net.....................................................................          18,201               23,350
                                                                                         ----------------     ---------------
                                                                                           $   599,817          $   566,114
                                                                                         ================     ===============

                        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt................................................     $       186          $       377
     Notes payable....................................................................           4,800                 --
     Accounts payable.................................................................          34,700               27,479
     Accrued expenses and other current liabilities...................................          79,478               82,204
     Loss reserve and unearned premiums related to captive insurance subsidiary.......          11,876                1,803
     Accrued dividends................................................................            --                  3,323
     Accrued income taxes.............................................................             457                 --
                                                                                         ----------------     ---------------
         Total current liabilities....................................................         131,497              115,186
                                                                                         ----------------     ---------------
Non-current liabilities:
     Long-term debt - less current portion............................................          23,714               52,186
     Other non-current liabilities....................................................          10,188                6,161
                                                                                         ----------------     ---------------
         Total non-current liabilities................................................          33,902               58,347
                                                                                         ----------------     ---------------
         Total liabilities............................................................         165,399              173,533
                                                                                         ----------------     ---------------
Commitments and contingencies (Note 3)
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 - 72,336,788 shares.....................................................             723                  723
     Additional paid-in capital.......................................................         197,611              187,523
     Retained earnings................................................................         505,005              434,621
     Accumulated other comprehensive income, net of income taxes......................            --                     16
                                                                                         ----------------     ---------------
                                                                                               703,339              622,883
     Treasury stock - 17,432,947 shares in 2003 and 16,948,371 shares in 2002, at
       cost...........................................................................        (268,921)            (230,302)
                                                                                         ----------------     ---------------
         Total stockholders' equity...................................................         434,418              392,581
                                                                                         ----------------     ---------------
                                                                                           $   599,817          $   566,114
                                                                                         ================     ===============

                 See notes to consolidated financial statements.

</TABLE>


                                       3
<PAGE>


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

                                                                13 Weeks Ended                    39 Weeks Ended
                                                         ------------------------------    -----------------------------
                                                         September 28,    September 29,    September 28,   September 29,
                                                             2003             2002              2003            2002
                                                         -------------    -------------    -------------   -------------
<S>                                                       <C>              <C>              <C>             <C>
Revenues:
     Company restaurant sales........................      $ 222,429        $ 182,807        $ 650,946       $ 536,673
     Franchise royalties and fees....................         27,594           26,033           82,088          76,357
     Other franchise income..........................          2,972              168            8,881             765
                                                         -------------    -------------    -------------   -------------
        Total operating revenues.....................        252,995          209,008          741,915         613,795
                                                         -------------    -------------    -------------   -------------
Cost of company restaurant sales:
     Food and beverage...............................         57,200           47,765          169,086         142,245
     Labor...........................................         73,018           60,054          213,186         176,392
     Direct and occupancy............................         55,869           47,009          160,816         134,172
     Pre-opening expense.............................            576              792            1,131           1,432
                                                         -------------    -------------    -------------   -------------
        Total cost of company restaurant sales.......        186,663          155,620          544,219         454,241
                                                         -------------    -------------    -------------   -------------
Cost of other franchise income.......................          2,837               99            8,510             252
General and administrative expenses..................         23,589           20,118           69,096          59,361
Amortization of intangible assets....................             87               95              278             285
Loss on disposition of restaurants and equipment.....            116              458            1,314           1,479
                                                         -------------    -------------    -------------   -------------
Operating earnings...................................         39,703           32,618          118,498          98,177
                                                         -------------    -------------    -------------   -------------
Other income (expense):
     Investment income...............................            227              346            1,048           1,124
     Interest expense................................           (330)            (414)          (1,369)         (1,602)
     Impairment of Chevys note receivable (Note 7)...            --               --            (8,803)            --
     Other income....................................            395              513              601           1,096
                                                         -------------    -------------    -------------   -------------
        Total other income (expense).................            292              445           (8,523)            618
                                                         -------------    -------------    -------------   -------------
Earnings before income taxes.........................         39,995           33,063          109,975          98,795
Income taxes.........................................         14,398           12,068           39,591          36,060
                                                         -------------    -------------    -------------   -------------
Net earnings.........................................      $  25,597        $  20,995        $  70,384       $  62,735
                                                         =============    =============    =============   =============

Basic net earnings per common share..................      $    0.46        $    0.38        $    1.27       $    1.12
                                                         =============    =============    =============   =============
Diluted net earnings per common share................      $    0.45        $    0.37        $    1.24       $    1.10
                                                         =============    =============    =============   =============

Basic weighted average shares outstanding............        55,556            55,654           55,421          55,801
                                                         =============    =============    =============   =============
Diluted weighted average shares outstanding..........        57,184            56,714           56,988          57,119
                                                         =============    =============    =============   =============

</TABLE>




                 See notes to consolidated financial statements.

                                       4

<PAGE>



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

<TABLE>
<CAPTION>


                                                                                             Accumulated
                                               Common Stock         Additional                  Other                     Total
                                        --------------------------    Paid-In    Retained   Comprehensive   Treasury   Stockholders'
                                            Shares        Amount     Capital     Earnings   Income (Loss)    Stock        Equity
                                        --------------- ---------- ------------ ----------- ------------- ------------ -------------

<S>                                      <C>             <C>       <C>          <C>           <C>         <C>           <C>
Balance, December 29, 2002.............   72,336,788      $ 723     $ 187,523    $ 434,621     $     16    $(230,302)    $ 392,581

   Comprehensive income:
     Net earnings......................         --          --           --         70,384           --         --          70,384
     Change in unrealized gain on
       short-term investments,
       net of income taxes.............         --          --           --           --            (16)        --             (16)
                                        --------------- ---------- ------------ ----------- ------------- ------------ -------------

   Total comprehensive income..........         --          --           --         70,384          (16)        --          70,368
                                        --------------- ---------- ------------ ----------- ------------- ------------ -------------

   Purchases of treasury stock.........         --          --           --           --             --      (49,757)      (49,757)
   Stock options exercised and
     related tax benefit...............         --          --          7,701         --             --        9,104        16,805
   Shares issued under employee
     stock and 401(k) plans............         --          --          2,046         --             --        1,440         3,486
   Restricted shares awarded under
     equity incentive plan, net of
     cancellations.....................         --          --           (543)        --             --          594            51
   Unearned compensation relating
     to restricted shares..............         --          --            785         --             --         --             785
   Repayments of notes receivable from
     officers for stock sales..........         --          --             99         --             --         --              99
                                        --------------- ---------- ------------ ----------- ------------- ------------ -------------

Balance, September 28, 2003............   72,336,788      $ 723     $ 197,611    $ 505,005     $     --    $(268,921)    $ 434,418
                                        =============== ========== ============ =========== ============= ============ =============

</TABLE>


                 See notes to consolidated financial statements.

                                       5
<PAGE>

<TABLE>
<CAPTION>


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

                                                                                                 39 Weeks Ended
                                                                                        -----------------------------------
                                                                                         September 28,       September 29,
                                                                                             2003                2002
                                                                                        ---------------     ---------------
<S>                                                                                     <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings....................................................................     $    70,384         $    62,735
     Adjustments to reconcile net earnings to net cash provided by operating
     activities:
        Depreciation and amortization................................................          30,091              25,812
        Amortization of intangible assets............................................             278                 285
        Amortization of deferred financing costs.....................................             146                 145
        Deferred income tax provision (benefit)......................................            (541)                635
        Gain on sale of investments..................................................             (24)               --
        Loss on disposition of restaurants and equipment.............................           1,314               1,479
        Impairment of Chevys note receivable.........................................           8,803                --
        Income tax benefit from exercise of options..................................           5,536               1,397
     Changes in assets and liabilities (exclusive of effects of acquisitions or
     dispositions):
        Receivables..................................................................          (5,890)             (2,380)
        Receivables related to captive insurance subsidiary..........................            (290)               --
        Inventories..................................................................          (2,454)              3,095
        Prepaid income taxes.........................................................           5,002                --
        Prepaid and other current assets.............................................             420              (1,574)
        Restricted assets related to captive insurance subsidiary....................          (8,830)               --
        Accounts payable.............................................................           7,300               5,910
        Accrued expenses and other current liabilities...............................          (1,798)             (5,263)
        Loss reserve and unearned premiums related to captive insurance subsidiary...          10,073                --
        Accrued income taxes.........................................................             457                 940
        Other........................................................................             853               1,038
                                                                                        ---------------     ---------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES....................................         120,830              94,254
                                                                                        ---------------     ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment.............................................         (54,893)            (49,680)
     Acquisition of restaurants......................................................         (21,557)               --
     Proceeds from sale of restaurants and equipment.................................           8,579                   3
     Purchases of short-term investments.............................................            --                  (150)
     Maturities and sales of short-term investments..................................             480                 350
                                                                                        ---------------     ---------------
        NET CASH USED BY INVESTING ACTIVITIES........................................         (67,391)            (49,477)
                                                                                        ---------------     ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchases of treasury stock.....................................................         (49,757)            (26,113)
     Dividends paid..................................................................          (3,323)             (3,010)
     Issuance of common stock upon exercise of stock options.........................          11,269               3,791
     Shares sold under employee stock purchase plan..................................           2,134               1,529
     Proceeds from issuance of notes payable.........................................           4,800               3,500
     Net payments on long-term debt..................................................         (30,372)            (39,000)
                                                                                        ---------------     ---------------
        NET CASH USED BY FINANCING ACTIVITIES........................................         (65,249)            (59,303)
                                                                                        ---------------     ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................................         (11,810)            (14,526)
CASH AND CASH EQUIVALENTS, beginning of period.......................................          15,169              22,048
                                                                                        ---------------     ---------------
CASH AND CASH EQUIVALENTS, end of period.............................................     $     3,359         $     7,522
                                                                                        ===============     ===============

</TABLE>


                 See notes to consolidated financial statements.




                                       6
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                                    39 Weeks Ended
                                                                                         -------------------------------------
                                                                                           September 28,       September 29,
                                                                                               2003                2002
                                                                                         -----------------   -----------------

<S>                                                                                        <C>                 <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the 39 week period for:
       Income taxes..................................................................       $   29,494          $   30,172
                                                                                         =================   =================
       Interest......................................................................       $      887          $    1,159
                                                                                         =================   =================
</TABLE>

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

We issued  restricted  common stock of $1,836,000  and $757,000 for the 39 weeks
ended September 28, 2003 and September 29, 2002, respectively.

On March 24, 2003, we assumed a loan of  approximately  $1,400,000 in connection
with the acquisition of 11 restaurants.

As of  September  28,  2003,  we have  recorded a receivable  of  $1,125,000  in
connection with the sale of a restaurant.

DISCLOSURE OF ACCOUNTING POLICY:

For  purposes of the  consolidated  statements  of cash flows,  we consider  all
highly liquid  investments  purchased with a maturity of three months or less to
be cash equivalents.


                 See notes to consolidated financial statements.



                                       7
<PAGE>


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

1.  Basis of Presentation

Our  consolidated  financial  statements  included  in this  Form 10-Q have been
prepared without audit (except that the balance sheet information as of December
29, 2002 has been  derived from  consolidated  financial  statements  which were
audited) 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  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 29, 2002.

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 consolidated financial statements
to conform to the 2003 presentation.

2.  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. 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  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).



                                       8
<PAGE>

<TABLE>
<CAPTION>

                                                               13 Weeks Ended                  39 Weeks Ended
                                                       ------------------------------- -------------------------------
                                                        September 28,   September 29,   September 28,   September 29,
                                                            2003            2002            2003            2002
                                                       --------------- --------------- --------------- ---------------

<S>                                                     <C>             <C>             <C>             <C>
Net earnings, as reported............................    $  25,597       $  20,995       $  70,384       $  62,735
Less: Total stock-based employee
    compensation expense determined under
    fair value based methods for all awards,
    net of related taxes.............................        1,884           1,683           6,197           4,329
                                                       --------------- --------------- --------------- ---------------
Pro forma net earnings...............................    $  23,713       $  19,312       $  64,187       $  58,406
                                                       =============== =============== =============== ===============
Basic net earnings per common share,
    as reported......................................    $    0.46       $    0.38       $    1.27       $    1.12
                                                       =============== =============== =============== ===============
Basic net earnings per common share,
    pro forma........................................    $    0.43       $    0.35       $    1.16       $    1.05
                                                       =============== =============== =============== ===============
Diluted net earnings per common share,
    as reported......................................    $    0.45       $    0.37       $    1.24       $    1.10
                                                       =============== =============== =============== ===============
Diluted net earnings per common share,
    pro forma........................................    $    0.41       $    0.34       $    1.13       $    1.02
                                                       =============== =============== =============== ===============
</TABLE>

3.  Commitments and Contingencies

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

While the  resolution of the matters  described  above may have an impact on our
financial results for the period in which they are resolved, 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:  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 28, 2003,  the aggregate  amount of
these lease payments totaled approximately  $25,100,000.  These leases expire at
various times  throughout the next several years with the final lease  agreement
expiring in 2025.  The buyers  have  indemnified  us from any losses  related to
these  guarantees.  We do not consider our exposure under these guarantees to be
material.

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  28, 2003,  we would have been required to
make payments totaling approximately $10,000,000. 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  $5,800,000 if such officers had
been terminated as of September 28, 2003.

                                       9
<PAGE>


4.  Earnings Per Share

We compute  basic  earnings  per share by dividing  income  available  to common
shareholders by the weighted average number of common shares outstanding for the
reporting  period.  Diluted  earnings per 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  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 28,   September 29,   September 28,   September 29,
                                                            2003            2002            2003            2002
                                                       --------------- --------------- --------------- ---------------

<S>                                                      <C>             <C>             <C>             <C>
Net earnings.........................................     $  25,597       $  20,995       $  70,384       $  62,735
                                                       =============== =============== =============== ===============

Basic weighted average shares outstanding............        55,556          55,654          55,421          55,801
Dilutive effect of stock options and
  equity-based compensation..........................         1,628           1,060           1,567           1,318
                                                       --------------- --------------- --------------- ---------------
Diluted weighted average shares outstanding..........        57,184          56,714          56,988          57,119
                                                       =============== =============== =============== ===============

Basic net earnings per common share..................     $    0.46       $    0.38       $    1.27       $    1.12
                                                       =============== =============== =============== ===============
Diluted net earnings per common share................     $    0.45       $    0.37       $    1.24       $    1.10
                                                       =============== =============== =============== ===============
</TABLE>

5.  Acquisitions

On November 7, 2002,  we acquired  the  operations  and assets of 21  Applebee's
restaurants  located in the Washington,  D.C. area from a franchisee.  Under the
terms of the purchase agreement and the agreement with the franchisee's  secured
lender,  the  total  purchase  price of the  acquisition  was  $34,250,000.  The
agreement  also  provides  for  additional  consideration  in  July  2004 if the
restaurants  achieve cash flows in excess of  historical  levels.  Our financial
statements reflect the results of operations for these restaurants subsequent to
the date of acquisition. The purchase price of $34,250,000 has been allocated to
the fair value of property and equipment of $25,200,000, goodwill of $10,100,000
and other net current liabilities of $1,050,000.

On March 24,  2003,  we  acquired  the  operations  and assets of 11  Applebee's
restaurants located in Illinois,  Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing,  approximately  $200,000 paid as a deposit
in fiscal 2002 and  approximately  $800,000 paid in the second  quarter of 2003.
Our financial statements reflect the results of operations for these restaurants
subsequent to the date of  acquisition.  The purchase price of  $23,200,000  has
been  allocated  to the fair value of  property  and  equipment  of  $7,900,000,
goodwill of $16,600,000, and other net liabilities of $1,300,000.


                                       10
<PAGE>


The following table is comprised of actual company  restaurant sales included in
our  consolidated  financial  statements for each period presented and pro forma
company restaurant sales assuming the acquisitions  occurred at the beginning of
each respective period (in thousands):
<TABLE>
<CAPTION>

                                                               13 Weeks Ended                  39 Weeks Ended
                                                       ------------------------------- -------------------------------
                                                        September 28,   September 29,   September 28,   September 29,
                                                            2003            2002            2003            2002
                                                       --------------- --------------- --------------- ---------------
<S>                                                      <C>             <C>             <C>             <C>
Actual company restaurant sales
    for acquired restaurants.........................     $  18,400       $     --        $  49,100       $     --
                                                       =============== =============== =============== ===============

Pro forma company restaurant sales
    for acquired restaurants.........................     $  18,400       $  17,500       $  55,100       $  52,500
                                                       =============== =============== =============== ===============
</TABLE>

6.  Dispositions

On July 20, 2003,  we completed  the sale of eight  company  restaurants  in the
Atlanta, Georgia market to an affiliate of an existing franchisee for $8,000,000
and recognized an immaterial gain in our consolidated statements of earnings. In
connection with the sale of these  restaurants,  we closed one restaurant in the
Atlanta  market  in June  2003.  We do not  expect  this  transaction  to have a
significant  impact  on  our  net  earnings  for  fiscal  2003.  Actual  company
restaurant sales included in our consolidated  financial statements for the nine
restaurants  were  approximately  $900,000 and  $4,500,000 in the 13 weeks ended
September 28, 2003 and September 29, 2002, respectively,  and were approximately
$10,300,000  and  $14,000,000  in the 39  weeks  ended  September  28,  2003 and
September 29, 2002, respectively.

7.  Impairment of Chevys Note Receivable

In 1999, we received a $6,000,000,  8% subordinated  note in connection with the
sale of the Rio Bravo concept to Chevys  Holdings,  Inc  ("Chevys") due in 2009.
The note  receivable  balance of  approximately  $8,800,000 and $8,600,000 as of
September  28, 2003 and December 29,  2002,  respectively,  is included in other
assets in our consolidated  balance sheets.  In June 2003,  Chevys announced the
sale of the majority of its  restaurants.  Subsequent  to the  announcement,  we
received Chevys' audited financial statements for the fiscal year ended December
31,  2002.  Based upon this  information,  we believe that the note is impaired.
During the fiscal  quarter ended June 29, 2003, we fully  reserved the principal
by  recording  an  allowance  of  approximately  $8,800,000.  A  charge  for the
impairment of this note is included in our  consolidated  statements of earnings
for the thirty-nine weeks ended September 28, 2003. We no longer accrue interest
receivable on this note and will record future interest income on this note only
upon the receipt of any related  cash  payments.  In October  2003,  Chevys Inc.
filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy
Code.



                                       11
<PAGE>
8.  Goodwill and Other Intangible Assets

Changes in goodwill are summarized below (in thousands):
<TABLE>
<CAPTION>

                                                               September 28,            December 29,
                                                                   2003                     2002
                                                           ----------------------  ----------------------
<S>                                                           <C>                     <C>
Carrying amount, beginning of the year..................       $     88,715            $     78,614
Goodwill acquired during the period.....................             16,611                  10,101
                                                           ----------------------  ----------------------
                                                               $    105,326            $     88,715
                                                           ======================  ======================
</TABLE>

Intangible  assets subject to amortization  pursuant to SFAS No. 142,  "Goodwill
and Other Intangible  Assets," consist of franchise  interest and rights and are
summarized below (in thousands):
<TABLE>
<CAPTION>

                                                               September 28,            December 29,
                                                                   2003                     2002
                                                           ----------------------  ----------------------
<S>                                                           <C>                     <C>
Gross carrying amount...................................       $      6,371            $      6,371
Less accumulated amortization...........................              5,151                   4,903
                                                           ----------------------  ----------------------
Net......................................................      $      1,220            $      1,468
                                                           ======================  ======================
</TABLE>

We expect annual  amortization  expense for all  intangible  assets for the next
five fiscal years to range from approximately $40,000 to $330,000.

9.  Captive Insurance Subsidiary

On  September  20,  2002,  we formed  Neighborhood  Insurance,  Inc.,  a Vermont
corporation  and a  wholly-owned  subsidiary,  as a captive  insurance  company.
Neighborhood   Insurance,   Inc.   was   established   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 ultimate  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.

As of September  28, 2003 we have  included in our  consolidated  balance  sheet
approximately  $1,100,000 in deferred  policy  acquisition  costs in prepaid and
other  current  assets  and   approximately   $8,800,000  of  restricted  assets
restricted  for the  payment  of  claims,  held  primarily  in  cash  equivalent
investments.  In addition, we have recorded current liabilities of approximately
$11,900,000  in loss and  premium  reserves  related  to the  captive  insurance
subsidiary.

10. New Accounting Pronouncements

In June 2002, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
146,  "Accounting for Costs Associated with Exit or Disposal  Activities."  This
Statement  requires  that a  liability  for a cost  associated  with  an exit or
disposal activity be recognized only when the liability is incurred and measured
at fair value.  SFAS No. 146 is effective for exit or disposal  activities  that
are initiated  after December 31, 2002.  The initial  adoption of this Statement
did not have a  material  impact  on our  results  of  operations  or  financial
position.

                                       12
<PAGE>

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  including  Indirect  Guarantees of
Indebtedness of Others." Interpretation No. 45 supersedes Interpretation No. 34,
"Disclosure  of Indirect  Guarantees  of  Indebtedness  of Others," and provides
guidance to guarantors on the recognition and disclosure concerning  obligations
under certain guarantees in interim and annual financial statements. The initial
recognition and measurement  provisions of  Interpretation  No. 45 are effective
for guarantees issued or modified after December 31, 2002, and are to be applied
prospectively.   The  disclosure   requirements  were  effective  for  financial
statements  for interim or annual  periods  ending after  December 15, 2002.  We
adopted the initial  recognition  provisions of Interpretation No. 45 in January
of 2003. The initial adoption of  Interpretation  No. 45 did not have a material
impact on our results of operations or financial position.

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based  Compensation," and provides  alternative methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee compensation. This Statement also amends the disclosure
requirements  of SFAS No.  123 to  require  prominent  disclosure  in annual and
interim financial statements about the effects of stock-based compensation.  The
transition  guidance  and  annual  disclosure  provisions  of SFAS  No.  148 are
effective for financial statements issued for fiscal years ending after December
15, 2002. The interim disclosure provisions of this Statement were effective for
financial reports containing  financial statements for interim periods beginning
after December 15, 2002. We have adopted the  disclosure  provisions of SFAS No.
148.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable   Interest   Entities,   an   Interpretation   of  ARB  No.  51."  This
Interpretation  provides  clarification on the consolidation of certain entities
in which equity  investors do not have sufficient  equity at risk for the entity
to finance its activities without additional subordinated financial support from
other parties. Such entities are defined as variable interest entities ("VIEs").
This Interpretation  requires that VIEs be consolidated by the entity considered
to be the primary  beneficiary of the VIE. The  Interpretation was effective for
newly created VIEs after January 31, 2003.  We have  concluded  that we have not
created or obtained any VIEs  subsequent  to January 31, 2003 that would require
consolidation  and  the  initial  adoption  did  not  have  any  impact  on  our
consolidated financial statements.

FASB Staff  Position No. 46-6  "Effective  Date of FASB  Interpretation  No. 46,
Consolidation of Variable  Interest  Entities,"  deferred the effective date for
applying the provisions of the  Interpretation  for VIEs created before February
1, 2003 to the first interim or annual period ending after December 15, 2003, if
certain  conditions are met. We will implement the provisions of  Interpretation
46 for any VIEs created prior to February 1, 2003 in our consolidated  financial
statements for the fiscal year ending December 28, 2003.

As of the date of this  filing,  the FASB is  deliberating  certain  FASB  Staff
Positions ("FSPs") and may issue additional FSPs prior to our fiscal year ending
December 28, 2003.  These FSPs, when finalized,  may impact the accounting under
this  Interpretation.  We are  currently  assessing  Interpretation  No. 46 and,
although we have not completed  our  analysis,  we do not expect the adoption to
have a material impact on our consolidated financial statements.


                                       13
<PAGE>
Item 2.       Management's  Discussion and  Analysis of  Financial Condition and
              Results of Operations

General

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  from  franchisee  participation  in  our  captive
insurance company and revenue from information  technology products and services
provided to certain franchisees.

Comparable  restaurant sales are based upon those  restaurants open for at least
18 months and are compared from period to period.

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 company and costs related to information
technology products and services provided to certain franchisees.

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

We operate on a 52 or 53 week fiscal year ending on the last Sunday in December.
Our fiscal  quarters  ended  September  28,  2003 and  September  29,  2002 each
contained 13 weeks and are  referred to hereafter as the "2003  quarter" and the
"2002 quarter,"  respectively.  Our 39 week periods ended September 28, 2003 and
September 29, 2002 are referred to hereafter as the "2003  year-to-date  period"
and the "2002 year-to-date period," respectively.

On  September  20,  2002,  we formed  Neighborhood  Insurance,  Inc.,  a Vermont
corporation  and a  wholly-owned  subsidiary,  as a captive  insurance  company.
Neighborhood   Insurance,   Inc.   was   established   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 ultimate  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.

                                       14
<PAGE>

As of September  28, 2003 we have  included in our  consolidated  balance  sheet
approximately  $1,100,000 in deferred  policy  acquisition  costs in prepaid and
other  current  assets  and   approximately   $8,800,000  of  restricted  assets
restricted  for the  payment  of  claims,  held  primarily  in  cash  equivalent
investments.  In addition, we have recorded current liabilities of approximately
$11,900,000  in loss and  premium  reserves  related  to the  captive  insurance
subsidiary.

Application of Critical Accounting Policies

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  is based  upon our  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  consolidated  financial
statements  and notes thereto.  Actual results may differ from these  estimates,
and such differences may be material to the consolidated  financial  statements.
We believe that the following  significant  accounting policies involve a higher
degree of  judgment  or  complexity  (see Note 2 of our  Consolidated  Financial
Statements in our Annual Report on Form 10-K for the fiscal year ended  December
29, 2002 for a complete discussion of our significant accounting policies).

Franchise revenues: Franchise revenues consist of franchise royalties, franchise
fees and other franchise income. We recognize  royalties on a franchisee's sales
in the period in which the sales are reported to have occurred.  We also receive
a franchise fee for each restaurant that a franchisee  opens. The recognition of
franchise  fees is deferred  until we have  performed  substantially  all of our
related  obligations as franchisor,  typically when the restaurant opens.  Other
franchise income includes  insurance  premiums from franchisee  participation in
our captive insurance company and revenue from information  technology  products
and services provided to certain franchisees.

Property  and   equipment:   Property  and  equipment  are   depreciated   on  a
straight-line  basis over the estimated  useful lives of the assets.  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.

Impairment of long-lived  assets: We periodically  review property and equipment
for impairment on a restaurant by restaurant  basis using  historical cash flows
as well as current  estimates  of future  cash  flows  and/or  appraisals.  This
assessment  process  requires the use of  estimates  and  assumptions  which are
subject to a significant degree of judgment. In addition, we periodically assess
the recoverability of goodwill and other intangible assets, which requires us to
make assumptions  regarding the future cash flows and other factors to determine
the fair value of the assets. If these assumptions  change in the future, we may
be required to record impairment charges for these assets.

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.

                                       15
<PAGE>

Employee  incentive  compensation  plans:  We have  various  long-term  employee
incentive compensation plans which require us to make estimates to determine our
liability  based  upon  projected   performance  of  plan  criteria.  If  actual
performance  against the criteria  differs from our estimates in the future,  we
will be required to adjust our liability accordingly.

Receivables:   We  continually   assess  the  collectibility  of  our  franchise
receivables.  We establish our allowance for bad debts based on several factors,
including historical collection experience, the current economic environment and
other  specific  information  available to us at the time. The allowance for bad
debts may change in the future due to changes in the factors  above or other new
developments.

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

Acquisitions

On November 7, 2002,  we acquired  the  operations  and assets of 21  Applebee's
restaurants  located in the Washington,  D.C. area from a franchisee.  Under the
terms of the purchase agreement and the agreement with the franchisee's  secured
lender,  the  total  purchase  price of the  acquisition  was  $34,250,000.  The
agreement  also  provides  for  additional  consideration  in  July  2004 if the
restaurants  achieve cash flows in excess of  historical  levels.  Our financial
statements reflect the results of operations for these restaurants subsequent to
the date of acquisition.

On March 24,  2003,  we  acquired  the  operations  and assets of 11  Applebee's
restaurants located in Illinois,  Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing,  approximately  $200,000 paid as a deposit
in fiscal 2002 and  approximately  $800,000 paid in the second  quarter of 2003.
Our financial statements reflect the results of operations for these restaurants
subsequent to the date of acquisition.

The following table is comprised of actual company  restaurant sales included in
our  consolidated  financial  statements for each period presented and pro forma
company restaurant sales assuming the acquisitions  occurred at the beginning of
each respective period (in thousands):
<TABLE>
<CAPTION>
                                                               13 Weeks Ended                  39 Weeks Ended
                                                       ------------------------------- -------------------------------
                                                        September 28,   September 29,   September 28,   September 29,
                                                            2003            2002            2003            2002
                                                       --------------- --------------- --------------- ---------------
<S>                                                      <C>             <C>             <C>             <C>
Actual company restaurant sales
    for acquired restaurants.........................     $  18,400       $     --        $  49,100       $     --
                                                       =============== =============== =============== ===============

Pro forma company restaurant sales
    for acquired restaurants.........................     $  18,400       $  17,500       $  55,100       $  52,500
                                                       =============== =============== =============== ===============
</TABLE>

Dispositions

On July 20, 2003,  we completed  the sale of eight  company  restaurants  in the
Atlanta, Georgia market to an affiliate of an existing franchisee for $8,000,000
and recognized an immaterial gain in our consolidated statements of earnings. In
connection with the sale of these  restaurants,  we closed one restaurant in the
Atlanta  market  in June  2003.  We do not  expect  this  transaction  to have a
significant  impact  on  our  net  earnings  for  fiscal  2003.  Actual  company
restaurant sales included in our consolidated  financial statements for the nine
restaurants  were  approximately  $900,000 and  $4,500,000 in the 13 weeks ended
September 28, 2003 and September 29, 2002, respectively,  and were approximately
$10,300,000  and  $14,000,000  in the 39  weeks  ended  September  28,  2003 and
September 29, 2002, respectively.

                                       16
<PAGE>

Results of Operations

The  following  table  contains   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 28,       September 29,      September 28,       September 29,
                                                           2003                2002                2003               2002
                                                      ----------------    ----------------    ---------------    ----------------
<S>                                                        <C>                 <C>                 <C>                <C>
Revenues:
     Company restaurant sales.....................           87.9%               87.5%               87.7%              87.4%
     Franchise royalties and fees.................           10.9                12.5                11.1               12.4
     Other franchise income.......................            1.2                 0.1                 1.2                0.1
                                                      ----------------    ----------------    ---------------    ----------------
        Total operating revenues..................          100.0%              100.0%              100.0%             100.0%
                                                      ================    ================    ===============    ================
Cost of sales (as a percentage of company
   restaurant sales):
     Food and beverage............................           25.7%               26.1%               26.0%              26.5%
     Labor........................................           32.8                32.9                32.8               32.9
     Direct and occupancy.........................           25.1                25.7                24.7               25.0
     Pre-opening expense..........................            0.3                 0.4                 0.2                0.3
                                                      ----------------    ----------------    ---------------    ----------------
        Total cost of sales.......................           83.9%               85.1%               83.6%              84.6%
                                                      ================    ================    ===============    ================
Cost of other franchise income (as a percentage
   of other franchise income).....................           95.5%               58.9%               95.8%              32.9%
General and administrative expenses...............            9.3                 9.6                 9.3                9.7
Amortization of intangible assets.................             --                  --                  --                 --
Loss on disposition of restaurants and equipment..             --                 0.2                 0.2                0.2
                                                      ----------------    ----------------    ---------------    ----------------
Operating earnings................................           15.7                15.6                16.0               16.0
                                                      ----------------    ----------------    ---------------    ----------------
Other income (expense):
     Investment income............................            0.1                 0.2                 0.1                0.2
     Interest expense.............................           (0.1)               (0.2)               (0.2)              (0.3)
     Impairment of Chevys note receivable.........             --                  --                (1.2)                --
     Other income.................................            0.2                 0.2                 0.1                0.2
                                                      ----------------    ----------------    ---------------    ----------------
        Total other income (expense)..............            0.1                 0.2                (1.1)               0.1
                                                      ----------------    ----------------    ---------------    ----------------
Earnings before income taxes......................           15.8                15.8                14.8               16.1
Income taxes......................................            5.7                 5.8                 5.3                5.9
                                                      ----------------    ----------------    ---------------    ----------------
Net earnings......................................           10.1%               10.1%                9.5%              10.2%
                                                      ================    ================    ===============    ================


</TABLE>


                                       17

<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 28,    September 29,   September 28,    September 29,
                                                          2003            2002            2003             2002
                                                    ---------------  --------------  ---------------  ---------------
<S>                                                 <C>              <C>             <C>              <C>
 Number of restaurants:
      Company:
          Beginning of period.....................          373             318              357              310
          Restaurant openings.....................            8              11               15               19
          Restaurants closed......................           --              --               (2)              --
          Restaurants acquired from franchisee....           --              --               11               --
          Restaurants acquired by franchisee......           (9)             --               (9)              --
                                                    ---------------  --------------  ---------------  ---------------
          End of period...........................          372             329              372              329
                                                    ---------------  --------------  ---------------  ---------------
      Franchise:
          Beginning of period.....................        1,155           1,103            1,139            1,082
          Restaurant openings.....................           12              26               41               50
          Restaurants closed......................           (5)             --               (7)              (3)
          Restaurants acquired from franchisee....           --              --              (11)              --
          Restaurants acquired by franchisee......            9              --                9               --
                                                    ---------------  --------------  ---------------  ---------------
          End of period...........................        1,171           1,129            1,171            1,129
                                                    ---------------  --------------  ---------------  ---------------
      Total:
          Beginning of period.....................        1,528           1,421            1,496            1,392
          Restaurant openings.....................           20              37               56               69
          Restaurants closed......................           (5)             --               (9)              (3)
                                                    ---------------  --------------  ---------------  ---------------
          End of period...........................        1,543           1,458            1,543            1,458
                                                    ===============  ==============  ===============  ===============

 Weighted average weekly sales per restaurant:
          Company.................................   $   45,976       $  43,474       $   45,356       $   43,424
          Franchise...............................   $   45,760       $  44,105       $   45,637       $   44,252
          Total...................................   $   45,812       $  43,963       $   45,569       $   44,067
 Change in comparable restaurant sales:(1)
          Company.................................         5.9%            1.7%             5.2%             1.5%
          Franchise...............................         4.4%            3.1%             3.5%             3.6%
          Total...................................         4.8%            2.8%             3.9%             3.1%

 System-wide sales (in thousands):(2)
 Company..........................................   $  222,429       $ 182,807       $  650,946       $  536,673
 Franchise........................................   $  687,292       $ 639,833       $2,047,735       $1,893,739
 Total............................................   $  909,721       $ 822,640       $2,698,681       $2,430,412


<FN>

--------

(1) When computing comparable restaurant sales, restaurants open for at least 18
    months are compared from period to period.

(2) System-wide  sales are a non-GAAP  financial  measure that includes sales at
    all   company   and  franchisee  Applebee's  restaurants,  as  reported   by
    franchisees.  We  believe  that  system-wide  sales information is useful in
    analyzing  Applebee's  market  share and growth, and because franchisees pay
    royalties and  contribute  to  the  national  advertising  pool  based  on a
    percentage of their sales.

</FN>

</TABLE>

                                       18

<PAGE>

Company Restaurant Sales.  Total company restaurant sales increased  $39,622,000
(22%) from  $182,807,000 in the 2002 quarter to $222,429,000 in the 2003 quarter
and increased  $114,273,000  (21%) from  $536,673,000  in the 2002  year-to-date
period to  $650,946,000  in the 2003  year-to-date  period.  Company  restaurant
openings  contributed   approximately  8%  of  the  increase  in  total  company
restaurant sales in both the 2003 quarter and the 2003 year-to-date  period. The
remaining  increase in both periods was due to the  acquisition  of 21 franchise
restaurants in the  Washington  D.C. area in November 2002 and 11 restaurants in
Illinois,  Indiana,  Kentucky,  and  Missouri  in  late  March  2003  as well as
increases in weighted  average  weekly  sales.  The increase in both periods was
partially offset by the sale of 8 restaurants in the Atlanta,  Georgia market in
July 2003.

Comparable restaurant sales at company restaurants increased by 5.9% and 5.2% in
the  2003  quarter  and the 2003  year-to-date  period,  respectively.  Weighted
average weekly sales at company  restaurants  increased 5.8% from $43,474 in the
2002 quarter to $45,976 in the 2003 quarter and also increased 4.4% from $43,424
in the 2002  year-to-date  period to  $45,356 in the 2003  year-to-date  period.
These  increases  were due  primarily to  increases in guest  traffic and in the
average guest check resulting from our food promotions.  In addition,  a portion
of the increase  resulted from the  implementation  of our To Go initiative  and
menu price  increases  of  approximately  1.5% in fiscal  2003.  To Go sales mix
increased from 4.9% of company  restaurant  sales in the 2002 quarter to 6.9% of
company restaurant sales in the 2003 quarter.

Franchise  Royalties and Fees.  Overall  franchise  royalties and fees increased
$1,561,000 (6%) from  $26,033,000 in the 2002 quarter to $27,594,000 in the 2003
quarter and increased  $5,731,000 (8%) from $76,357,000 in the 2002 year-to-date
period to $82,088,000 in the 2003 year-to-date  period. These increases were due
primarily to the increased number of franchise Applebee's  restaurants operating
during the 2003 quarter and 2003 year-to-date period and increases in comparable
restaurant  sales.  Weighted  average  weekly  sales  at  franchise  restaurants
increased  3.8% and  3.1% in the 2003  quarter  and  2003  year-to-date  period,
respectively and franchise  comparable  restaurant sales increased 4.4% and 3.5%
in the 2003 quarter and 2003 year-to-date periods, respectively.

Other Franchise  Income.  Other franchise  income increased from $168,000 in the
2002 quarter to $2,972,000  in the 2003 quarter and  increased  from $765,000 in
the 2002 year-to-date  period to $8,881,000 in the 2003 year-to-date  period due
primarily to revenues recognized related to the franchise premium amounts billed
by the captive insurance  company which was formed in September 2002.  Franchise
premiums are included in other franchise income ratably over the policy year.

Cost of Company  Restaurant  Sales. Food and beverage costs decreased from 26.1%
in the 2002 quarter to 25.7% in the 2003 quarter and decreased from 26.5% in the
2002 year-to-date period to 26.0% in the 2003 year-to-date period. The decreases
in both the 2003 quarter and the 2003 year-to-date period were due to menu price
increases  and  operational   improvements   resulting  from  our  supply  chain
management initiatives.

Labor  costs  decreased  from  32.9%  in both  the  2002  quarter  and the  2002
year-to-date  period  to 32.8% in both the 2003  quarter  and 2003  year-to-date
period.  These  decreases  were due to lower  hourly  costs due to higher  sales
volume at company  restaurants and were partially offset by higher costs related
to the  addition  of  dedicated  To Go hourly  labor at most of our  restaurants
during the 2003 quarter and workers  compensation  costs. In addition,  the 2003
quarter was impacted by higher management incentive compensation.

Direct and occupancy  costs decreased from 25.7% in the 2002 quarter to 25.1% in
the 2003 quarter and from 25.0% in the 2002 year-to-date  period to 24.7% in the
2003  year-to-date  period.  The decrease in both periods was due primarily to a
decrease in advertising  costs,  as a percentage of sales,  due to the timing of
our menu  promotions  and was  partially  offset by higher  insurance  costs and
higher  packaging  costs relating to our To Go initiative.  In addition,  higher
sales  volume at company  restaurants  during  both  periods  resulted  in lower
depreciation  expense,  as a percentage of sales,  due to its  relatively  fixed
nature.

                                       19
<PAGE>

Cost of Other Franchise  Income.  Cost of other franchise  income increased from
$99,000 in the 2002 quarter to $2,837,000 in the 2003 quarter and increased from
$252,000 in the 2002 year-to-date  period to $8,510,000 in the 2003 year-to-date
due  primarily to the costs  related to the  operation of our captive  insurance
company, which was formed in September 2002.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased from 9.6% in the 2002 quarter and 9.7% in the 2002 year-to-date period
to 9.3% in both the 2003  quarter  and 2003  year-to-date  period.  General  and
administrative   expenses   were  lower  in  both  the  2003  quarter  and  2003
year-to-date  period as a result of the absorption of general and administrative
expenses over a larger  revenue base.  Decreases in both periods were  partially
offset by a higher  depreciation  expense related to our new information systems
and increased incentive compensation.

Impairment of Chevys Note Receivable. In June 2003, Chevys announced the sale of
the majority of its  restaurants.  Subsequent to the  announcement,  we received
Chevys'  audited  financial  statements  for the fiscal year ended  December 31,
2002. Based upon this information,  we believe that the note is impaired. During
the fiscal  quarter  ended June 29, 2003,  we fully  reserved the  principal and
accrued  interest by recording an allowance of  approximately  $8,800,000  as of
September 28, 2003. In October 2003,  Chevys Inc. filed a voluntary  petition to
reorganize under Chapter 11 of the U.S. Bankruptcy Code.

Income Taxes.  The effective income tax rate, as a percentage of earnings before
income  taxes,   decreased  from  36.5%  in  both  the  2002  quarter  and  2002
year-to-date  period to 36.0% in both the 2003 quarter and the 2003 year-to-date
period  due  to  a  reduction   in  state  and  local   income   taxes  and  the
discontinuation of goodwill amortization required under SFAS No. 142.

Liquidity and Capital Resources

Our need for  capital  historically  has  resulted  from  the  construction  and
acquisition of restaurants, investment in information technology systems and the
repurchase of our common shares.  In the past, we have obtained  capital through
public stock offerings,  debt financing, and our ongoing operations.  Cash flows
from our ongoing  operations  include cash  generated from company and franchise
operations,  credit from trade  suppliers,  real  estate  lease  financing,  and
landlord contributions to leasehold  improvements.  We have also used our common
stock as consideration in the acquisition of restaurants.  In addition,  we have
assumed  debt or  issued  new  debt  in  connection  with  certain  mergers  and
acquisitions.

Capital  expenditures  were  $64,874,000  in  fiscal  year 2002  (excluding  the
acquisition of 21 restaurants) and $54,893,000 in the 2003  year-to-date  period
(excluding  the  acquisition  of 11  restaurants).  We currently  expect to open
approximately  25  company  restaurants,   and  capital  expenditures  excluding
acquisitions  are expected to be between  $70,000,000  and  $80,000,000 in 2003.
These  expenditures  will primarily be for the  development of new  restaurants,
refurbishment  and  capital  replacement  for  existing  restaurants,   and  the
enhancement of information systems.  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  open  more  restaurants  than  we  currently
anticipate or acquire  additional  restaurants,  our capital  requirements  will
increase accordingly.

                                       20
<PAGE>


On November 7, 2002,  we acquired  the  operations  and assets of 21  Applebee's
restaurants  located in the Washington,  D.C. area from a franchisee.  Under the
terms of the purchase agreement and the agreement with the franchisee's  secured
lender,  the  total  purchase  price of the  acquisition  was  $34,250,000.  The
agreement  also  provides  for  additional  consideration  in  July  2004 if the
restaurants  achieve cash flows in excess of  historical  levels.  Our financial
statements reflect the results of operations for these restaurants subsequent to
the date of acquisition.

On March 24,  2003,  we  acquired  the  operations  and assets of 11  Applebee's
restaurants located in Illinois,  Indiana, Kentucky and Missouri for $21,800,000
in cash and $1,400,000 in assumed debt from a franchisee. The total cash payment
included $20,800,000 paid at closing,  approximately  $200,000 paid as a deposit
in fiscal 2002 and  approximately  $800,000 paid in the second  quarter of 2003.
Our financial statements reflect the results of operations for these restaurants
subsequent to the date of acquisition.

On July 20, 2003,  we completed  the sale of eight  company  restaurants  in the
Atlanta, Georgia market to an affiliate of an existing franchisee for $8,000,000
and recognized an immaterial gain in our consolidated statements of earnings. In
connection with the sale of these  restaurants,  we closed one restaurant in the
Atlanta  market  in June  2003.  We do not  expect  this  transaction  to have a
significant impact on our net earnings for fiscal 2003.

Our bank credit  agreement  provides  for a  $150,000,000  three-year  unsecured
revolving credit facility,  of which $25,000,000 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,  and limit
additional indebtedness and capital expenditures in excess of specified amounts.
Cash dividends are limited to $10,000,000  annually.  The facility is subject to
standard  other terms,  conditions,  covenants,  and fees.  We are  currently in
compliance with the covenants contained in our credit agreement. As of September
28, 2003, we had  borrowings  of  $22,800,000  and standby  letters of credit of
$11,892,000 outstanding under our revolving credit facility.

In May 2002,  our Board of Directors  authorized  an  additional  repurchase  of
$75,000,000 of our common stock through May 2005.  During the 2003  year-to-date
period,  we  repurchased  1,679,500  shares at an average  cost of $29.63 for an
aggregate  cost of  $49,800,000.  As of September 28, 2003,  we had  $19,800,000
remaining under the 2002 authorization.

As of September 28, 2003,  our liquid assets  totaled  $3,385,000.  These assets
consisted  of  cash  and  cash  equivalents  in the  amount  of  $3,359,000  and
short-term  investments in the amount of $26,000.  The working  capital  deficit
increased  from  $45,607,000  as of  December  29,  2002  to  $70,398,000  as of
September  28, 2003.  This  increase was due  primarily to decreases in cash and
cash equivalents due to the acquisition of 11 restaurants in Illinois,  Indiana,
Kentucky and Missouri, repurchases of our common stock and the repayment of debt
and was  partially  offset by the  redemption of gift  certificates  in the 2003
year-to-date period sold in 2002.

We believe that our liquid assets and cash generated from  operations,  combined
with borrowings  available under our credit facilities,  will provide sufficient
funds for our  operating,  capital and other  requirements  for the  foreseeable
future.

                                       21
<PAGE>

The following  table shows our debt  amortization  schedule,  our future capital
lease  commitments  (including  principal and interest  payments) and our future
operating lease commitments as of September 28, 2003 (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).....................      $   24,480     $    4,919    $   18,242    $     136    $     1,183
Capital Lease Obligations................      $   10,005     $      735    $    1,548    $   1,635    $     6,087
Operating Leases.........................      $  211,122     $   18,349    $   34,381    $  33,336    $   125,056
</TABLE>

In addition,  we have outstanding lease guarantees of approximately  $25,100,000
as of September 28, 2003 (see Note 3 to our Consolidated Financial Statements).

Inflation

Substantial  increases in costs and expenses could impact our operating  results
to the extent such increases cannot be passed along to customers. In particular,
increases  in  food,  supplies,  labor  and  operating  expenses  could  have  a
significant  impact on our operating  results.  We do not believe that inflation
has materially affected our operating results during the past three years.

A majority of our  employees  are paid hourly rates related to federal and state
minimum  wage laws and  various  laws that allow for  credits to that wage.  The
Federal  government  continues  to consider  an  increase  in the minimum  wage.
Several  state  governments  have  increased  the  minimum  wage and other state
governments are also considering an increased minimum wage. In the past, we have
been able to pass along cost  increases to  customers  through food and beverage
price  increases,  and  we  will  attempt  to do so in  the  future.  We  cannot
guarantee,  however,  that all future cost  increases  can be  reflected  in our
prices or that increased  prices will be absorbed by customers  without at least
somewhat diminishing customer spending in our restaurants.

New Accounting Pronouncements

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." This Statement requires that a liability for
a cost associated with an exit or disposal  activity be recognized only when the
liability is incurred and measured at fair value.  SFAS No. 146 is effective for
exit or disposal  activities  that are initiated  after  December 31, 2002.  The
initial adoption of this Statement did not have a material impact on our results
of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure  Requirements for Guarantees,  including  Indirect  Guarantees of
Indebtedness of Others." Interpretation No. 45 supersedes Interpretation No. 34,
"Disclosure  of Indirect  Guarantees  of  Indebtedness  of Others," and provides
guidance to guarantors on the recognition and disclosure concerning  obligations
under certain guarantees in interim and annual financial statements. The initial
recognition and measurement  provisions of  Interpretation  No. 45 are effective
for guarantees issued or modified after December 31, 2002, and are to be applied
prospectively.   The  disclosure   requirements  were  effective  for  financial
statements  for interim or annual  periods  ending after  December 15, 2002.  We
adopted the initial  recognition  provisions of Interpretation No. 45 in January
of 2003. The initial adoption of  Interpretation  No. 45 did not have a material
impact on our results of operations or financial position.

                                       22
<PAGE>

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based  Compensation," and provides  alternative methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee compensation. This Statement also amends the disclosure
requirements  of SFAS No.  123 to  require  prominent  disclosure  in annual and
interim financial statements about the effects of stock-based compensation.  The
transition  guidance  and  annual  disclosure  provisions  of SFAS  No.  148 are
effective for financial statements issued for fiscal years ending after December
15, 2002. The interim disclosure provisions of this Statement were effective for
financial reports containing  financial statements for interim periods beginning
after December 15, 2002. We have adopted the  disclosure  provisions of SFAS No.
148.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable   Interest   Entities,   an   Interpretation   of  ARB  No.  51."  This
Interpretation  provides  clarification on the consolidation of certain entities
in which equity  investors do not have sufficient  equity at risk for the entity
to finance its activities without additional subordinated financial support from
other parties. Such entities are defined as variable interest entities ("VIEs").
This Interpretation  requires that VIEs be consolidated by the entity considered
to be the primary  beneficiary of the VIE. The  Interpretation was effective for
newly created VIEs after January 31, 2003.  We have  concluded  that we have not
created or obtained any VIEs  subsequent  to January 31, 2003 that would require
consolidation  and  the  initial  adoption  did  not  have  any  impact  on  our
consolidated financial statements.

FASB Staff  Position No. 46-6  "Effective  Date of FASB  Interpretation  No. 46,
Consolidation of Variable  Interest  Entities,"  deferred the effective date for
applying the provisions of the  Interpretation  for VIEs created before February
1, 2003 to the first interim or annual period ending after December 15, 2003, if
certain  conditions are met. We will implement the provisions of  Interpretation
46 for any VIEs created prior to February 1, 2003 in our consolidated  financial
statements for the fiscal year ending December 28, 2003.

As of the date of this  filing,  the FASB is  deliberating  certain  FASB  Staff
Positions ("FSPs") and may issue additional FSPs prior to our fiscal year ending
December 28, 2003.  These FSPs, when finalized,  may impact the accounting under
this  Interpretation.  We are  currently  assessing  Interpretation  No. 46 and,
although we have not completed  our  analysis,  we do not expect the adoption to
have a material impact on our consolidated financial statements.

Forward-Looking Statements

The  statements  contained  in the  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations"  section  regarding  restaurant
development,  capital expenditures 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,  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 12,
2003. We disclaim any obligation to update forward-looking statements.

                                       23
<PAGE>

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 1.0%,  at our option.  As of September 28, 2003,
the total amount of debt subject to interest rate  fluctuations was $24,500,000.
A 1% change in  interest  rates  would  result in an  increase  or  decrease  in
interest  expense  of  $245,000  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.  Many of the food  products  we  purchase  are  subject  to price
volatility  due to factors  that are outside of our control  such as weather and
seasonality.  As part of our  strategy  to  moderate  this  volatility,  we have
entered into fixed price purchase commitments.

Item 4.       Controls and Procedures

As of the end of the  period  covered  by this  report,  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.




                                       24
<PAGE>


                           PART II. OTHER INFORMATION

Item 1.     Legal Proceedings

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

While the  resolution of the matters  described  above may have an impact on our
financial results for the period in which they are resolved, 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 6.     Exhibits and Reports on Form 8-K

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

            (b)  We  furnished  a report on Form 8-K on July 2, 2003  announcing
                 our  presentation  at the CIBC World  Markets  Consumer  Growth
                 Conference.

                 We  furnished a report on Form 8-K on July 23, 2003  announcing
                 our broadcast of the second  quarter 2003  earnings  conference
                 call over the Internet.

                 We  furnished a report on Form 8-K on July 25, 2003  announcing
                 plans  to   co-develop   a  new  menu  with   Weight   Watchers
                 International, Inc.

                 We  furnished a report on Form 8-K on July 25, 2003  announcing
                 the temporary  suspension of trading under an employee  benefit
                 plan.

                 We filed a report on Form 8-K on July 31, 2003 reporting second
                 quarter earnings.

                 We filed a report  on Form 8-K on  August  26,  2003  reporting
                 August comparable sales.

                 We  furnished  a  report  on Form  8-K on  September  10,  2003
                 announcing our  presentation at the Banc of America  Securities
                 Investment Conference.

                 We  furnished  a  report  on Form  8-K on  September  24,  2003
                 announcing our presentation at the RBC Capital Markets Consumer
                 Conference.


                                       25
<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 29, 2003            By:  /s/    Lloyd L. Hill
     -----------------------           -----------------------------------------
                                       Lloyd L. Hill
                                       Chairman and Chief Executive Officer
                                       (principal executive officer)

Date:   October 29, 2003            By:  /s/    Steven K. Lumpkin
     -----------------------           -----------------------------------------
                                       Steven K. Lumpkin
                                       Executive Vice President and
                                       Chief Financial Officer
                                       (principal financial officer)

Date:   October 29, 2003            By:  /s/    Beverly O. Elving
     -----------------------           -----------------------------------------
                                       Beverly O. Elving
                                       Vice President, Accounting
                                       (principal accounting officer)


                                       26
<PAGE>





                         APPLEBEE'S INTERNATIONAL, INC.
                                  EXHIBIT INDEX




  Exhibit
   Number                           Description of Exhibit
------------- ------------------------------------------------------------------

      10.1    Memorandum of  Understanding  dated  May 12, 2003  with  Robert T.
              Steinkamp

      10.2    Confidentiality,  Non-Solicitation and  Non-Competition  Agreement
              dated May 12,  2003 with Robert T. Steinkamp

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

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

        32    Certification  of Chairman and Chief Executive  Officer and  Chief
              Financial  Officer Pursuant to 18 U.S.C. Section 1350




                                       27