RESTAURANTS - IHOP orders up Applebee's - The pancake house makes a deal worth $2.1 billion for the bigger chain, with plans to franchise most of its locations.

The Glendale-based restaurant chain famous for its pancakes agreed Monday to acquire the much bigger Applebee's International Inc., whose casual restaurants cater to the lunch-and-dinner crowd.

Applebee's has been struggling with declining profit as many of its customers cut their spending to grapple with higher gasoline prices and mortgage payments, industry experts say.

IHOP executives believe that they can perk things up by selling most of Applebee's 508 corporate-owned restaurants to franchisees.

That strategy cuts overhead costs while shifting more risk to owner-operators and away from the parent company, said IHOP Chief Executive Julia Stewart, who ran Applebee's domestic operations from 1998 to 2001.

It also enables individual restaurants to respond quickly to changing trends and tastes in their markets, she said.

Franchisees "are savvy. They are local. They know their markets and their customers," Stewart said. "We want to tap into that entrepreneurial spirit. We did it successfully at IHOP and we will do it again at Applebee's."

Applebee's, headquartered in Overland Park, Kan., currently franchises about three-quarters of its 1,900 restaurants worldwide. In contrast, 99% of IHOP's approximately 1,300 eateries are operated by franchisees.

Casual-dining restaurants such as Applebee's, Chili's and TGI Friday's are particularly vulnerable to economic soft patches.

"The guy who enjoys his steak at Morton's is still going to enjoy his steak at Morton's and gas prices are not going to be an issue," said Darren Tristano, an executive vice president at Technomic Inc., a food industry consulting and research firm.

"But casual diners, mainstream Americans, they are going to downgrade to a place

Family-style restaurants such as IHOP are vulnerable to a slowing economy as well, but the company posted record profit of $44.6 million last year thanks in part to its increased reliance on franchising. Profit at Applebee's has fallen for the last two years, to $80.9 million in 2006.

There are more than 30 Applebee's and 120 IHOP restaurants in Southern California.

Applebee's has a market value of about $2 billion, double that of IHOP. Its restaurants sell more than twice the dollar amount of food, $4.5 billion last year, compared with IHOP's $2.1 billion in sales.