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                  March 28, 2004
                               -------------------------------------------------

                                       OR

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

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

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


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

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

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

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

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

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

The number of shares of the  registrant's  common stock  outstanding as of April
23, 2004 was 54,917,012.


                                      -1-
<PAGE>


                         APPLEBEE'S INTERNATIONAL, INC.
                                    FORM 10-Q
                       FISCAL QUARTER ENDED MARCH 28, 2004
                                      INDEX

<TABLE>
<CAPTION>
<S>                <C>                                                                                          <C>
                                                                                                                Page
Part I             Financial Information

Item 1.            Consolidated Financial Statements:

                   Consolidated Balance Sheets as of March 28, 2004
                        and December 28, 2003................................................................      3

                   Consolidated Statements of Earnings for the 13 Weeks
                        Ended March 28, 2004 and March 30, 2003..............................................      4

                   Consolidated Statement of Stockholders' Equity for the
                        13 Weeks Ended March 28, 2004........................................................      5

                   Consolidated Statements of Cash Flows for the 13 Weeks
                        Ended March 28, 2004 and March 30, 2003 .............................................      6

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

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

Item 3.            Quantitative and Qualitative Disclosures About Market Risk................................     22

Item 4.            Controls and Procedures...................................................................     22



Part II            Other Information

Item 1.            Legal Proceedings.........................................................................     23

Item 2.            Changes in Securities and Use of Proceeds.................................................     23

Item 6.            Exhibits and Reports on Form 8-K..........................................................     24

Signatures ..................................................................................................     25

Exhibit Index................................................................................................     26

</TABLE>

                                      -2-
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                               March 28,         December 28,
                                                                                                  2004               2003
                                                                                             --------------     --------------
                                                              ASSETS
<S>                                                                                          <C>                <C>
Current assets:
    Cash and cash equivalents............................................................     $    9,488         $   17,867
    Short-term investments, at market value..............................................            280                 27
    Receivables (less allowance for bad debts of $4,243 in 2004 and $4,117 in 2003)......         35,946             31,950
    Receivables related to captive insurance subsidiary..................................          8,155                450
    Inventories..........................................................................         30,309             20,799
    Prepaid income taxes.................................................................            --               5,800
    Other current assets related to captive insurance subsidiary.........................          2,867                657
    Prepaid and other current assets.....................................................         11,372              9,072
                                                                                             --------------     --------------
         Total current assets............................................................         98,417             86,622
Property and equipment, net..............................................................        422,032            419,802
Goodwill.................................................................................        105,326            105,326
Restricted assets related to captive insurance subsidiary................................         13,837             10,763
Franchise interest and rights, net.......................................................          1,054              1,137
Other assets.............................................................................         23,560             20,351
                                                                                             --------------     --------------
                                                                                              $  664,226         $  644,001
                                                                                             ==============     ==============


                                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Current portion of long-term debt....................................................     $      198         $      192
    Accounts payable.....................................................................         41,237             37,633
    Accrued expenses and other current liabilities.......................................         79,873             96,637
    Loss reserve and unearned premiums related to captive insurance subsidiary...........         23,803             11,007
    Accrued income taxes.................................................................          8,423                --
    Accrued dividends....................................................................            --               3,863
                                                                                             --------------     --------------
         Total current liabilities.......................................................        153,534            149,332
                                                                                             --------------     --------------
Non-current liabilities:
    Long-term debt - less current portion................................................         25,623             20,670
    Other non-current liabilities........................................................         16,540             14,267
                                                                                             --------------     --------------
         Total non-current liabilities...................................................         42,163             34,937
                                                                                             --------------     --------------
         Total liabilities...............................................................        195,697            184,269
                                                                                             --------------     --------------
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...........................................................        206,183            200,574
    Retained earnings....................................................................        553,819            524,316
                                                                                             --------------     --------------
                                                                                                 760,725            725,613
    Treasury stock - 17,515,156 shares in 2004 and 17,143,845 shares in 2003, at cost....       (292,196)          (265,881)
                                                                                             --------------     --------------
         Total stockholders' equity......................................................        468,529            459,732
                                                                                             --------------     --------------
                                                                                              $  664,226         $  644,001
                                                                                             ==============     ==============
</TABLE>

                 See notes to consolidated financial statements.

                                      -3-
<PAGE>

<TABLE>
<CAPTION>

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


                                                                                 13 Weeks Ended
                                                                        --------------------------------
                                                                          March 28,         March 30,
                                                                            2004              2003
                                                                        -------------     -------------
       <S>                                                               <C>               <C>
         Revenues:
              Company restaurant sales................................    $ 243,560         $ 208,410
              Franchise royalties and fees............................       30,772            27,163
              Other franchise income..................................        3,115             2,641
                                                                        -------------     -------------
                   Total operating revenues...........................      277,447           238,214
                                                                        -------------     -------------
         Cost of company restaurant sales:
              Food and beverage.......................................       63,515            54,846
              Labor...................................................       79,659            68,364
              Direct and occupancy....................................       59,069            50,561
              Pre-opening expense.....................................          550               221
                                                                        -------------     -------------
                   Total cost of company restaurant sales.............      202,793           173,992
                                                                        -------------     -------------
         Cost of other franchise income...............................        2,937             2,500
         General and administrative expenses..........................       25,517            22,620
         Amortization of intangible assets............................           86                99
         Loss on disposition of restaurants and equipment.............          495               467
                                                                        -------------     -------------
         Operating earnings...........................................       45,619            38,536
                                                                        -------------     -------------
         Other income (expense):
              Investment income.......................................          223               336
              Interest expense........................................         (344)             (521)
              Other income (expense)..................................         (109)              205
                                                                        -------------     -------------
                   Total other income (expense).......................         (230)               20
                                                                        -------------     -------------
         Earnings before income taxes.................................       45,389            38,556
         Income taxes.................................................       15,886            13,954
                                                                        -------------     -------------
         Net earnings.................................................    $  29,503         $  24,602
                                                                        =============     =============
         Basic net earnings per common share..........................    $    0.54         $    0.45
                                                                        =============     =============
         Diluted net earnings per common share........................    $    0.52         $    0.43
                                                                        =============     =============
         Basic weighted average shares outstanding....................       54,658            55,272
                                                                        =============     =============
         Diluted weighted average shares outstanding..................       56,419            56,677
                                                                        =============     =============
</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>

                                                           Common Stock         Additional                                 Total
                                                     -------------------------   Paid-In      Retained     Treasury    Stockholders'
                                                        Shares       Amount      Capital      Earnings      Stock         Equity
                                                     ------------ ------------ ------------ ------------ ------------ --------------
<S>                                                  <C>           <C>         <C>           <C>         <C>           <C>
Balance, December 28, 2003.........................   72,336,788    $    723    $ 200,574     $ 524,316   $(265,881)    $  459,732

    Net earnings...................................          --          --           --         29,503         --          29,503
    Purchases of treasury stock....................          --          --           --            --      (32,039)       (32,039)
    Stock options exercised and
         related tax benefit.......................          --          --         3,746           --        4,334          8,080
    Shares issued under employee benefit
         plans.....................................          --          --         1,929           --          986          2,915
    Restricted shares awarded under equity
         incentive plan, net of cancellations......          --          --          (404)          --          404            --
    Amortization of unearned compensation
         relating to restricted shares.............          --          --           338           --          --             338
                                                     ------------ ------------ ------------ ------------ ------------ --------------

Balance, March 28, 2004............................   72,336,788    $    723    $ 206,183     $ 553,819   $(292,196)    $  468,529
                                                     ============ ============ ============ ============ ============ ==============
</TABLE>






                 See notes to consolidated financial statements.

                                      -5-
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                         13 Weeks Ended
                                                                                               --------------------------------
                                                                                                 March 28,          March 30,
                                                                                                   2004               2003
                                                                                               --------------    --------------
   <S>                                                                                          <C>                <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:
         Net earnings..................................................................          $  29,503          $  24,602
         Adjustments to reconcile net earnings to net
              cash provided by operating activities:
              Depreciation and amortization............................................             11,071              9,940
              Amortization of intangible assets........................................                 86                 99
              Amortization of deferred financing costs.................................                 39                 48
              Amortization of unearned compensation....................................                338                254
              Deferred income tax provision............................................                145                287
              Loss on disposition of restaurants and equipment.........................                495                467
              Income tax benefit from exercise of stock options........................              3,108              2,154
         Changes in assets and liabilities (exclusive of effects of acquisition):
              Receivables..............................................................             (3,996)            (3,022)
              Receivables related to captive insurance subsidiary......................             (7,705)            (9,573)
              Inventories..............................................................             (9,510)            (8,154)
              Prepaid income taxes.....................................................              5,800              5,002
              Other current assets related to captive insurance subsidiary.............             (2,210)            (2,655)
              Prepaid and other current assets.........................................             (1,953)             1,201
              Accounts payable.........................................................              3,604              1,513
              Accrued expenses and other current liabilities...........................            (16,764)            (9,082)
              Loss reserve and unearned premiums related to captive insurance
                   subsidiary..........................................................             12,796             12,206
              Accrued income taxes.....................................................              8,423              6,809
              Other....................................................................               (504)              (859)
                                                                                               --------------    --------------
              NET CASH PROVIDED BY OPERATING ACTIVITIES................................             32,766             31,237
                                                                                               --------------    --------------
    CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchases of property and equipment...........................................            (13,796)           (10,215)
         Restricted assets related to captive insurance subsidiary.....................             (3,074)               --
         Acquisition of restaurants....................................................                --             (20,758)
         Purchases of short-term investments...........................................               (253)               --
         Maturities and sales of short-term investments................................                --                  50
         Other investing activities....................................................               (966)               --
                                                                                               --------------    --------------
              NET CASH USED BY INVESTING ACTIVITIES....................................            (18,089)           (30,923)
                                                                                               --------------    --------------
    CASH FLOWS FROM FINANCING ACTIVITIES:
         Purchases of treasury stock...................................................            (32,039)           (13,282)
         Dividends paid................................................................             (3,863)            (3,323)
         Issuance of common stock upon exercise of stock options.......................              4,972              5,342
         Shares issued under employee benefit plans....................................              2,915                590
         Net proceeds from issuance of long-term debt..................................              4,959              4,995
                                                                                               --------------    --------------
              NET CASH USED BY FINANCING ACTIVITIES....................................            (23,056)            (5,678)
                                                                                               --------------    --------------
    NET DECREASE IN CASH AND CASH EQUIVALENTS..........................................             (8,379)            (5,364)
    CASH AND CASH EQUIVALENTS, beginning of period.....................................             17,867             15,169
                                                                                               --------------    --------------
    CASH AND CASH EQUIVALENTS, end of period...........................................          $   9,488          $   9,805
                                                                                               ==============    ==============
</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>

                                                                                             13 Weeks Ended
                                                                                 ------------------------------------
                                                                                    March 28,            March 30,
                                                                                      2004                 2003
                                                                                 ----------------    ----------------
<S>                                                                                 <C>                <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the 13 week period for:
         Income taxes........................................................        $    114           $    201
                                                                                 ================    ================
         Interest............................................................        $    173           $    306
                                                                                 ================    ================
</TABLE>

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

We issued  restricted  common  stock,  net of  forfeitures,  of  $1,497,000  and
$1,666,000  for the  thirteen  weeks ended  March 28,  2004 and March 30,  2003,
respectively.

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


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
28, 2003 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 28, 2003.

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 2004 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
                                                                                          ----------------------------------
                                                                                             March 28,          March 30,
                                                                                               2004               2003
                                                                                          ----------------  ----------------
<S>                                                                                        <C>               <C>
Net earnings, as reported.......................................................            $     29,503      $     24,602

Add: Compensation expense included in net earnings,
    net of related taxes........................................................                     298               455
Less: Total stock-based employee compensation expense
    determined under fair value based methods for all
    awards, net of related taxes................................................                   2,576             2,656
                                                                                          ----------------  ----------------
Pro forma net earnings..........................................................            $     27,225      $     22,401
                                                                                          ================  ================
Basic net earnings per common share, as reported................................            $       0.54      $       0.45
                                                                                          ================  ================
Basic net earnings per common share, pro forma..................................            $       0.50      $       0.41
                                                                                          ================  ================
Diluted net earnings per common share, as reported..............................            $       0.52      $       0.43
                                                                                          ================  ================
Diluted net earnings per common share, pro forma................................            $       0.48      $       0.40
                                                                                          ================  ================
</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 statements.

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 March 28, 2004, the aggregate  amount of these
lease payments totaled approximately $23,000,000. 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 have not  recorded a liability  as of March 28, 2004 or December
28, 2003.

Franchisee guarantees:  In November 2003, we arranged for a financing company to
provide up to $75,000,000 to qualified  franchisees for short-term loans to fund
remodel investments.  Under the terms of this financing program, we will provide
a limited  guarantee  pool for the loans advanced  during the three-year  period
ending December 2006. There were no loans  outstanding  under this program as of
March 28, 2004.

Contingent  consideration:  In 2002, we acquired the operations and assets of 21
Applebee's  restaurants located in the Washington,  D.C. area from a franchisee.
The purchase agreement provides for additional consideration in July 2004 if the
restaurants  achieve cash flows in excess of  historical  levels.  The amount of
additional  payments,  if any,  under this agreement will not be material to our
consolidated financial statements.

                                      -9-
<PAGE>


Severance  agreements:  We have severance and employment agreements with certain
officers and other senior executives 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 March 28,  2004,  we
would have been required to make payments totaling approximately $11,900,000. 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 $7,000,000 if
such officers had been terminated as of March 28, 2004.

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
                                                                                   ----------------------------------------------
                                                                                         March 28,                March 30,
                                                                                           2004                     2003
                                                                                   ----------------------  ----------------------
   <S>                                                                                 <C>                     <C>

    Net earnings................................................................        $     29,503            $     24,602
                                                                                   ======================  ======================

    Basic weighted average shares outstanding...................................              54,658                  55,272
    Dilutive effect of stock options and
         equity-based compensation..............................................               1,761                   1,405
                                                                                   ----------------------  ----------------------
    Diluted weighted average shares outstanding.................................              56,419                  56,677
                                                                                   ======================  ======================
    Basic net earnings per common share.........................................        $       0.54            $       0.45
                                                                                   ======================  ======================
    Diluted net earnings per common share.......................................        $       0.52            $       0.43
                                                                                   ======================  ======================
</TABLE>

We excluded  stock options with exercise  prices greater than the average market
price of our common stock for the  applicable  periods from the  computation  of
diluted weighted average shares outstanding. There were approximately 14,000 and
50,000 of these  options for the  thirteen  weeks ended March 28, 2004 and March
30, 2003, respectively.

5.  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.

                                      -10-
<PAGE>


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.

Actual  company   restaurant  sales  included  in  our  consolidated   financial
statements for these restaurants were approximately  $6,500,000 and $500,000 for
the  thirteen  weeks  ended  March 28,  2004 and March 30,  2003,  respectively.
Company  restaurant sales for these  restaurants  would have been  approximately
$6,600,000  for the  thirteen  weeks ended  March 30,  2003 had the  acquisition
occurred at the beginning of the period.

6.  Disposition

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.  In  connection  with the sale of these  restaurants,  we closed one
restaurant in the Atlanta market in June 2003.  This  transaction did not 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 $4,800,000 for the thirteen weeks ended March 30,
2003.

7.  Goodwill and Other Intangible Assets

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

                                                                                         March 28,              December 28,
                                                                                           2004                     2003
                                                                                   ----------------------  ----------------------
   <S>                                                                                 <C>                     <C>
    Carrying amount, beginning of the year......................................        $    105,326            $     88,715
    Goodwill acquired during the period.........................................                 --                   16,611
                                                                                   ----------------------  ----------------------
                                                                                        $    105,326            $    105,326
                                                                                   ======================  ======================
</TABLE>

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

                                                                                         March 28,              December 28,
                                                                                           2004                     2003
                                                                                   ----------------------  ----------------------
   <S>                                                                                 <C>                     <C>
    Gross carrying amount.......................................................        $      6,371            $      6,371
    Less, accumulated amortization..............................................               5,317                   5,234
                                                                                   ----------------------  ----------------------
    Net.........................................................................        $      1,054            $      1,137
                                                                                   ======================  ======================
</TABLE>

We expect annual  amortization  expense for all  intangible  assets for the next
five fiscal years to range from approximately $40,000 to $335,000.

8.  Captive Insurance Subsidiary

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

                                      -11-
<PAGE>


insurance claims, subject to individual and aggregate maximum claim limits under
the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive  insurance  company are established based upon third-party
actuarial  estimates of settlement costs for incurred claims and  administrative
fees. The  franchisee  premiums are included in other  franchise  income ratably
over the policy year.  The related  offsetting  expenses are included in cost of
other franchise income.  Accordingly,  we do not expect franchisee participation
in the captive insurance company to have a material impact on our net earnings.

As of March 28, 2004,  our  consolidated  balance  sheet  includes the following
balances  related  to  the  captive  insurance  subsidiary:
    o    Deferred policy acquisition costs of approximately  $2,900,000 included
         in other current assets related to captive insurance subsidiary.
    o    Franchise premium  receivables of approximately  $8,200,000 included in
         receivables   related  to   captive   insurance   subsidiary.
    o    Cash  equivalent investments restricted  for the  payment  of claims of
         approximately  $13,100,000  included in  restricted  assets  related to
         captive insurance subsidiary.
    o    Current liabilities of approximately  $25,100,000 recorded primarily in
         loss  reserve  and  unearned  premiums  related  to  captive  insurance
         subsidiary.
    o    Other miscellaneous  items, net, of approximately  $900,000 included in
         several line items in the consolidated balance sheet.

9.  New Accounting Pronouncement

In  December  2003,  the  FASB  issued  FASB  Interpretation  No.  ("FIN")  46R,
"Consolidation of Variable Interest Entities and  Interpretation of ARB No. 51."
This interpretation,  which replaces FASB Interpretation No. 46,  "Consolidation
of Variable Interest Entities," clarifies the application of Accounting Research
Bulletin No. 51,  "Consolidated  Financial  Statements," to certain  entities in
which  equity  investors  do  not  have  the  characteristics  of a  controlling
financial  interest or do not have  sufficient  equity at risk for the entity to
finance its activities without additional  subordinated  financial support. This
interpretation  is required in  financial  statements  for periods  ending after
March 15, 2004 for those  companies that have yet to adopt the provisions of FIN
46. We adopted FIN 46R in January  2004 and the initial  adoption did not have a
material impact on our consolidated financial statements.

10. Subsequent Event

On April 26, 2004, we completed our  acquisition of the operations and assets of
10  Applebee's   franchise   restaurants  located  in  Southern  California  for
$13,400,000  in cash,  subject  to  adjustment,  and the  assumption  of certain
liabilities.  We do not expect this transaction to have a significant  impact on
our net earnings for fiscal 2004.


                                      -12-
<PAGE>


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

Overview

Our results  continue to be driven by the  execution of  integrated  strategies,
including improved food, promotions backed by effective advertising, meeting our
guests' desires for more convenience, our focus on operations excellence and the
retention of better people.

We  completed  the  rollout  of our  Carside To Go(TM)  program  in all  company
restaurants in November 2003 where practicable and our franchisees will continue
implementation  during  2004.  We expect  Carside To Go(TM) to be a  significant
driver of sales and traffic growth in 2004.

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.

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

                                      -13-
<PAGE>


insurance claims, subject to individual and aggregate maximum claim limits under
the captive insurance company's reinsurance policies. Franchisee premium amounts
billed by the captive  insurance  company are established based upon third-party
actuarial  estimates of settlement costs for incurred claims and  administrative
fees. The  franchisee  premiums are included in other  franchise  income ratably
over the policy year.  The related  offsetting  expenses are included in cost of
other franchise income.  Accordingly,  we do not expect franchisee participation
in the captive insurance company to have a material impact on our net earnings.

As of March 28, 2004,  our  consolidated  balance  sheet  includes the following
balances  related  to  the  captive  insurance  subsidiary:
    o    Deferred policy acquisition costs of approximately  $2,900,000 included
         in other current assets related to captive insurance subsidiary.
    o    Franchise premium  receivables of approximately  $8,200,000 included in
         receivables related to captive insurance subsidiary.
    o    Cash  equivalent  investments  restricted  for the payment of claims of
         approximately  $13,100,000  included in  restricted  assets  related to
         captive insurance subsidiary.
    o    Current liabilities of approximately  $25,100,000 recorded primarily in
         loss  reserve  and  unearned  premiums  related  to  captive  insurance
         subsidiary.
    o    Other miscellaneous  items, net, of approximately  $900,000 included in
         several line items in the consolidated balance sheet.

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 our consolidated  financial  statements.
We believe that the following  significant  accounting policies involve a higher
degree of judgment or complexity.

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. Income from franchise premiums and
information  technology services is recognized ratably over the related contract
period.  Income from  information  technology  products is  recognized  when the
products are installed at the restaurant.

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.

                                      -14-
<PAGE>

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.

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
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.

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 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.

Actual  company   restaurant  sales  included  in  our  consolidated   financial
statements for these restaurants were approximately  $6,500,000 and $500,000 for
the  thirteen  weeks  ended  March 28,  2004 and March 30,  2003,  respectively.
Company  restaurant sales for these  restaurants  would have been  approximately
$6,600,000  for the  thirteen  weeks ended  March 30,  2003 had the  acquisition
occurred at the beginning of the period.

Disposition

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.  In  connection  with the sale of these  restaurants,  we closed one
restaurant in the Atlanta market in June 2003.  This  transaction did not 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 $4,800,000 for the thirteen weeks ended March 30,
2003.

                                      -15-
<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
                                                                                         ----------------------------------
                                                                                            March 28,          March 30,
                                                                                              2004               2003
                                                                                         ---------------    ---------------
        <S>                                                                                 <C>                <C>
         Revenues:
              Company restaurant sales..........................................              87.8%              87.5%
              Franchise royalties and fees......................................              11.1               11.4
              Other franchise income............................................               1.1                1.1
                                                                                         ---------------    ---------------
                   Total operating revenues.....................................             100.0%             100.0%
                                                                                         ===============    ===============
         Cost of sales (as a percentage of company restaurant sales):
              Food and beverage.................................................              26.1%              26.3%
              Labor.............................................................              32.7               32.8
              Direct and occupancy..............................................              24.3               24.3
              Pre-opening expense...............................................               0.2                0.1
                                                                                         ---------------    ---------------
                   Total cost of sales..........................................              83.3%              83.5%
                                                                                         ===============    ===============

         Cost of other franchise income (as a percentage of other
              franchise income).................................................              94.3%              94.7%
         General and administrative expenses....................................               9.2                9.5
         Amortization of intangible assets......................................               --                 --
         Loss on disposition of restaurants and equipment.......................               0.2                0.2
                                                                                         ---------------    ---------------
         Operating earnings.....................................................              16.4               16.2
                                                                                         ---------------    ---------------
         Other income (expense):
              Investment income.................................................               0.1                0.1
              Interest expense..................................................              (0.1)              (0.2)
              Other income (expense)............................................               --                 0.1
                                                                                         ---------------    ---------------
                   Total other income (expense).................................              (0.1)               --
                                                                                         ---------------    ---------------
         Earnings before income taxes...........................................              16.4               16.2
         Income taxes...........................................................               5.7                5.9
                                                                                         ---------------    ---------------
         Net earnings...........................................................              10.6%              10.3%
                                                                                         ===============    ===============
</TABLE>

                                      -16-
<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
                                                                                      -----------------------------------------
                                                                                           March 28,             March 30,
                                                                                             2004                  2003
                                                                                      -------------------   -------------------
   <S>                                                                                   <C>                   <C>
    Number of restaurants:
         Company:
              Beginning of period...............................................                   383                   357
              Restaurant openings...............................................                     8                     3
              Restaurants acquired from franchisees.............................                    --                    11
                                                                                      -------------------   -------------------
              End of period.....................................................                   391                   371
                                                                                      -------------------   -------------------
         Franchise:
              Beginning of period...............................................                 1,202                 1,139
              Restaurant openings...............................................                    11                    16
              Restaurant closings...............................................                    (1)                   (2)
              Restaurants acquired from franchisees.............................                   --                    (11)
                                                                                      -------------------   -------------------
              End of period.....................................................                 1,212                 1,142
                                                                                      -------------------   -------------------
         Total:
              Beginning of period...............................................                 1,585                 1,496
              Restaurant openings...............................................                    19                    19
              Restaurant closings...............................................                    (1)                   (2)
                                                                                      -------------------   -------------------
              End of period.....................................................                 1,603                 1,513
                                                                                      ===================   ===================
         Weighted average weekly sales per restaurant:
              Company...........................................................          $     48,402          $     44,666
              Franchise.........................................................          $     48,769          $     45,424
              Total.............................................................          $     48,680          $     45,243
         Change in comparable restaurant sales:(1)
              Company...........................................................                  8.7%                  4.6%
              Franchise.........................................................                  8.0%                  2.9%
              Total.............................................................                  8.2%                  3.3%
         Total operating revenues (in thousands):
              Company restaurant sales..........................................          $    243,560          $    208,410
              Franchise royalties and fees(2)...................................                30,772                27,163
              Other franchise income(3).........................................                 3,115                 2,641
                                                                                      -------------------   -------------------
              Total.............................................................          $    277,447          $    238,214
                                                                                      ===================   ===================
<FN>
(1) When computing comparable restaurant sales, restaurants open for at least 18
    months are compared from period to period.
(2) Franchise royalties are generally 4% of each franchise restaurant's reported
    monthly gross sales.  Reported franchise sales, in thousands,  were $764,116
    and  $676,312  in the  2004  quarter  and the  2003  quarter,  respectively.
    Franchise fees typically  range from $30,000 to $35,000 for each  restaurant
    opened.
(3) Other  franchise   income  includes   insurance   premiums  from  franchisee
    participation in our captive  insurance company and revenue from information
    technology products and services provided to certain franchisees.

</FN>
</TABLE>

                                      -17-
<PAGE>


Company Restaurant Sales.  Total company restaurant sales increased  $35,150,000
(17%) from $208,410,000 in the 2003 quarter to $243,560,000 in the 2004 quarter.
Company  restaurant  openings and weighted average weekly sales each contributed
approximately  8% of the increase in total company  restaurant sales in the 2004
quarter. The acquisition of 11 restaurants in Illinois,  Indiana,  Kentucky, and
Missouri  in late March 2003  contributed  approximately  3% of the  increase in
company restaurant sales. These increases were partially offset by the sale of 8
restaurants in the Atlanta, Georgia market in July 2003.

Comparable restaurant sales at company restaurants increased by 8.7% in the 2004
quarter.  Weighted  average weekly sales at company  restaurants  increased 8.4%
from $44,666 in the 2003 quarter to $48,402 in the 2004 quarter. 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 Carside To Go(TM)  initiative and menu
price  increases  of  approximately  1.5% in the 2004  quarter.  To Go sales mix
increased from 6.8% of company  restaurant  sales in the 2003 quarter to 9.4% of
company restaurant sales in the 2004 quarter.

Franchise Royalties and Fees.  Franchise royalties and fees increased $3,609,000
(13%) from  $27,163,000  in the 2003 quarter to  $30,772,000 in the 2004 quarter
due primarily to the increased number of franchise  restaurants operating during
2004 as compared  to 2003 and  increases  in  franchisee  comparable  restaurant
sales.  Weighted average weekly sales and franchise comparable  restaurant sales
increased 7.4% and 8.0%, respectively, in the 2004 quarter.

Other Franchise  Income.  Other franchise income  increased  $474,000 (18%) from
$2,641,000  in the 2003 quarter to  $3,115,000 in the 2004 quarter due primarily
to an increase of approximately  $360,000 in revenues  recognized related to the
franchisee premium amounts earned by the captive insurance  company.  Franchisee
premiums are included in other franchise income ratably over the policy year.

Cost of Company  Restaurant  Sales. Food and beverage costs decreased from 26.3%
in the 2003 quarter to 26.1% in the 2004 quarter,  due to menu price  increases,
operational improvements and benefits resulting from our supply chain management
initiatives which were partially offset by higher commodity costs.

Labor  costs  decreased  from  32.8%  in the 2003  quarter  to 32.7% in the 2004
quarter.  This  decrease  was due to lower  management  and hourly  costs due to
higher sales volume at company  restaurants  and was partially  offset by higher
costs  related to the  addition of  dedicated  To Go hourly labor at most of our
restaurants  beginning in the second half of 2003, higher workers'  compensation
costs and higher management incentive compensation.

Direct and  occupancy  costs were  24.3% in both the 2003  quarter  and the 2004
quarter due  primarily  to lower rent  expense and  depreciation  expense,  as a
percentage  of sales,  which were offset by increased  advertising  costs,  as a
percentage of sales,  due primarily to Carside To Go(TM)  advertising in company
markets,  higher  insurance  costs  and  higher  packaging  costs as a result of
increased To Go sales volumes.

Cost of  Other  Franchise  Income.  Cost of  other  franchise  income  increased
$437,000  (17%) from  $2,500,000  in the 2003 quarter to  $2,937,000 in the 2004
quarter  due  primarily  to an  increase  of  $360,000  in costs  related to the
operation of our captive insurance company.

                                      -18-
<PAGE>


General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased  from  9.5%  in the  2003  quarter  to 9.2% in the  2004  quarter  due
primarily to the absorption of general and administrative expenses over a larger
revenue base which was partially  offset by higher  compensation  expense due to
staffing levels.

Income Taxes.  The effective income tax rate, as a percentage of earnings before
income  taxes,  decreased  from  36.2% in the 2003  quarter to 35.0% in the 2004
quarter due to a reduction in state and local income taxes.

Liquidity and Capital Resources

Our need for  capital  historically  has  resulted  from  the  construction  and
acquisition of  restaurants,  the repurchase of our common shares and investment
in information technology systems. 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 $82,562,000 in 2003 (excluding the acquisition of 11
restaurants) and $13,796,000 in the 2004 quarter. We currently expect to open at
least 32 company restaurants,  and capital expenditures excluding  acquisitions,
are  expected  to  be  between  $95,000,000  and  $105,000,000  in  2004.  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.

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.  In  connection  with the sale of these  restaurants,  we closed one
restaurant in the Atlanta market in June 2003.  This  transaction did not have a
significant impact on our net earnings for fiscal 2003.

Our bank credit agreement, as amended,  expires in November of 2005 and provides
for a $150,000,000 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 March 28,  2004,  we had
borrowings of  $20,000,000  and had standby  letters of credit of  approximately
$11,900,000 outstanding under our revolving credit facility.

                                      -19-
<PAGE>

In December 2003, our Board of Directors authorized an additional  repurchase of
$80,000,000  of our common stock.  As of December 28, 2003,  we had  $99,800,000
remaining on our authorizations. During the 2004 quarter, we repurchased 855,300
shares of our common stock at an average  price of $37.46 for an aggregate  cost
of  $32,000,000.  As of March 28, 2004, we had  $67,700,000  remaining under our
repurchase authorization.

As of March 28,  2004,  our  liquid  assets  totaled  $9,768,000.  These  assets
consisted  of  cash  and  cash  equivalents  in the  amount  of  $9,488,000  and
short-term  investments in the amount of $280,000.  The working  capital deficit
decreased  from  $62,710,000  as of December 28, 2003 to $55,117,000 as of March
28, 2004. This decrease was due primarily to the redemption of gift cards in the
2004  quarter  sold in 2003,  the payment of accrued  dividends  and bonuses and
increases in inventories and was partially  offset by decreases in cash and cash
equivalents due to repurchases of our common stock in the 2004 quarter.

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.

The following table shows our debt amortization  schedule,  future capital lease
commitments (including principal and interest payments),  future operating lease
commitments and future purchase obligations as of March 28, 2004 (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)...........................     $  21,624      $     120     $  20,242     $     104     $   1,158
Capital Lease Obligations.......................         9,657            747         1,575         1,687         5,648
Operating Leases................................       220,911         19,530        37,232        36,279       127,870
Purchase Obligations - Company(1)...............       139,652         44,179        65,911         2,625        26,937
Purchase Obligations - Franchise(2).............       297,767         48,197       187,985           --         61,585
</TABLE>

    (1) The amounts for company  purchase  obligations  include  commitments for
    food items and supplies,  severance  and  employment  agreements,  and other
    miscellaneous commitments.

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

Other Contractual Obligations

We have outstanding  lease  guarantees of approximately  $23,000,000 as of March
28, 2004 (see Note 3). We have not recorded a liability for these  guarantees as
of March 28, 2004 or December 28, 2003.

We have  severance and  employment  agreements  with certain  officers and other
senior executives  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  March  28,  2004,  we would  have  been
required to make payments totaling  approximately  $11,900,000.  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  $7,000,000 if such officers
had been terminated as of March 28, 2004.

                                      -20-
<PAGE>


In 2002,  we acquired the  operations  and assets of 21  Applebee's  restaurants
located in the Washington,  D.C. area from a franchisee.  The purchase agreement
provides for additional  consideration  in July 2004 if the restaurants  achieve
cash flows in excess of historical levels. The amount of additional payments, if
any,  under this agreement  will not be material 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 Pronouncement

In  December  2003,  the  FASB  issued  FASB  Interpretation  No.  ("FIN")  46R,
"Consolidation of Variable Interest Entities and  Interpretation of ARB No. 51."
This interpretation,  which replaces FASB Interpretation No. 46,  "Consolidation
of Variable Interest Entities," clarifies the application of Accounting Research
Bulletin No. 51,  "Consolidated  Financial  Statements," to certain  entities in
which  equity  investors  do  not  have  the  characteristics  of a  controlling
financial  interest or do not have  sufficient  equity at risk for the entity to
finance its activities without additional  subordinated  financial support. This
interpretation  is required in  financial  statements  for periods  ending after
March 15, 2004 for those  companies that have yet to adopt the provisions of FIN
46. We adopted FIN 46R in January  2004 and the initial  adoption did not 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 11,
2004. We disclaim any obligation to update forward-looking statements.

                                      -21-
<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 0.625%, at our option. As of March 28, 2004, the
total amount of debt subject to interest rate fluctuations was $20,000,000 which
was outstanding on our revolving credit facility.  A 1% change in interest rates
would  result in an increase or  decrease  in interest  expense of $200,000  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 March 28, 2004,  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.

                                      -22-
<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 statements.

Item 2.  Changes in Securities and Use of Proceeds

(e) Issuer Purchases of Equity Securities.

<TABLE>
<CAPTION>

                                     Purchases of Equity Securities(1)
------------------------------------------------------------------------------------------------------------
<S>                          <C>            <C>        <C>                       <C>
                                   (a)          (b)               (c)                        (d)
---------------------------- -------------- ---------- ------------------------- ---------------------------
                                                                                   Maximum Dollar Value of
                                             Average     Total Number of Shares    Shares that May Yet Be
                              Total Number    Price       Purchased as Part of       Purchased Under the
                               of Shares     Paid Per      Publicly Announced         Plans or Programs
          Period               Purchased      Share        Plans or Programs            (in thousands)
---------------------------- -------------- ---------- ------------------------- ---------------------------
December 29, 2003 through
January 28, 2004                611,600       $37.25            611,600                    $76,976
---------------------------- -------------- ---------- ------------------------- ---------------------------
January 29, 2004 through
February 28, 2004               244,493(2)    $38.13            243,700                    $67,717
---------------------------- -------------- ---------- ------------------------- ---------------------------
February 29, 2004 through
March 28, 2004                    8,568(3)    $40.42                --                     $67,717
---------------------------- -------------- ---------- ------------------------- ---------------------------
           Total                864,661                         855,300
============================ ============== ========== ========================= ===========================

<FN>
(1) In May  2002,  our  Board of  Directors  authorized  a  repurchase  of up to
    $75,000,000  of our common stock  through May 2005.  In December  2003,  our
    Board of Directors authorized an additional  repurchase of up to $80,000,000
    of our common  stock.  The May 2002  authorization  limit was met in January
    2004. The December 2003 authorization has no expiration date.
(2) Includes  793 shares  received as partial  payment for shares  issued  under
    stock option plans.
(3) Represents  shares received as partial payment for shares issued under stock
    option plans.
</FN>
</TABLE>


                                      -23-
<PAGE>


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 filed a report on Form 8-K on January 5, 2004  announcing  executive
         promotions.

         We  furnished  a report on Form 8-K on January 7, 2004  announcing  our
         presentation at the 2nd Annual SG Cowen Consumer Conference.

         We  furnished  a  report  on Form 8-K on  January  12,  2004  reporting
         December comparable sales and updating fourth quarter earnings guidance
         and our 2004 outlook.

         We filed a report on Form 8-K on January  27,  2004  reporting  January
         comparable  sales and  announcing  the  webcast of our  fourth  quarter
         earnings conference call over the Internet.

         We furnished a report on Form 8-K on February 11, 2004 reporting fourth
         quarter earnings per share and full year 2003 earnings per share.

         We filed a report on Form 8-K on February 11, 2004 in  accordance  with
         the Private Securities Litigation Reform Act of 1995 as it relates to a
         safe  harbor  for  companies  making  forward-looking  statements.  The
         factors  listed in the report are  important  factors  that could cause
         actual  results  to  differ   materially   from  those  we  project  in
         forward-looking statements.

         We furnished a report on Form 8-K on February 18, 2004  announcing  our
         presentation  at the Tenth Annual Bear Stearns   Retail,  Restaurants &
         Apparel Conference.

         We furnished a report on Form 8-K on February 23, 2004  announcing  our
         presentation at the Raymond James Institutional Investors Conference.

         We filed a report on Form 8-K on February 24, 2004  reporting  February
         comparable sales.

         We filed a report  on Form 8-K on  February  24,  2004  announcing  the
         acquisition of 10 franchise restaurants.

         We  furnished  a report  on Form 8-K on March 4,  2004  announcing  our
         presentation  at the Goldman Sachs  Restaurant  Denver  Property Tour &
         Management Presentation 2004.

         We filed a report on March 17, 2004  announcing our CFO has established
         a 10b5-1 plan.

         We  furnished  a report on Form 8-K on March 23,  2004  announcing  our
         presentation at the Banc of America Securities Consumer Conference.




                                      -24-
<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: April 28, 2004                By:  /s/    Lloyd L. Hill
     -----------------------           -----------------------------------------
                                       Lloyd L. Hill
                                       Chairman and Chief Executive Officer
                                       (principal executive officer)

Date: April 28, 2004                By:  /s/    Steven K. Lumpkin
     -----------------------           -----------------------------------------
                                       Steven K. Lumpkin
                                       Executive Vice President and
                                       Chief Financial Officer
                                       (principal financial officer)

Date: April 28, 2004                By:  /s/    Beverly O. Elving
     -----------------------           -----------------------------------------
                                       Beverly O. Elving
                                       Vice President, Accounting
                                       (principal accounting officer)





                                      -25-
<PAGE>


                         APPLEBEE'S INTERNATIONAL, INC.
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

  Exhibit
   Number                                         Description of Exhibit
------------- ------------------------------------------------------------------------------------------------
<S>           <C>
    10.1      Executive Retirement Plan.

    10.2      Executive Health Plan.

    10.3      New Form of Change in Control and Noncompete Agreement.

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

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

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

                                      -26-