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TWST: Joe, how do you see the investor sentiment surrounding the restaurant industry today? How has it changed over the last year or two?

Mr. Buckley: I'd say that investor sentiment for the restaurant industry has changed pretty significantly in the last three months, becoming favorable at long last. If you look back over the last year and a half, investor sentiment has been very negative. Up until the past couple of months, investors tended to shrug off what has been a very good fundamental performance by the industry. That has shifted more favorably partially due to rotation of money away from technology and also due to growing concerns about a slowing overall economy where the relative earnings growth of restaurants is apt to look quite good.

TWST: Joe, what are your three top picks?

Mr. Buckley: I would choose Applebee’s (Nasdaq:APPB) as one of our top three. It’s a very significant player in casual dining but one that has underperformed. Several people on the panel have mentioned going with the dogs of 2000, and Applebee’s has been a dog in 2000 from a same-store sales perspective. There are two or three aspects of Applebee’s that appeal to us. One is that they have taken steps to try to improve the quality of their food by rolling out a new core menu in the company markets. When you get past the first quarter of 2001, the company has very easy comparisons. Ideally, we like to think that you can capture the growth of casual dining in a fast food-like franchising business model that permits Applebee’s to offer investors a unique combination of growth and defensiveness. I’ll note that with disappointing sales in 2000, our estimate for Applebee’s early in the year was $2.42 for 2000. Our current estimate is $2.40. There aren’t many companies that would have experienced that little variability given the disappointments in same-store sales, which have been up only modestly in the past two quarters. And that’s driven by the franchising business model. So when we look out to next year, if investors are seeking a little bit more defensive posture, Applebee’s provides that, but it also provides growth opportunities in casual dining as well as growth opportunities specific to the company after a disappointing 2000 that creates easy comps.

TWST: At this level I assume then that the risks are pretty modest.

Mr. Buckley: Yes, although Applebee’s has had a nice move in the last six or eight weeks as well, and they face difficult same-store sales comparisons in the fourth quarter against 1999 and in the first quarter of 2001 against a good first quarter in 2000. But overall, the risks are modest and from a valuation perspective the stock is selling at about 11 times our 2001 estimate at a big discount to the other casual dining players. I understand how it came to be, given the sales performance this year, but it’s a discount that could be closed with better fundamental performance from the company.

TWST: Joe, do you have a final word for investors who are looking at the restaurants?

Mr. Buckley: I think I would sum it up by saying the industry has undergone a lot of significant changes. I think we’ve seen a lot more fiscal responsibility and financial discipline within the industry that the stocks have not been given credit for. I think that the business will be less cyclical than is widely perceived, in part because the expansion rate has stayed so well under control.