Handbrake with an existing (or new) preset. Or a first pass with MakeMKV to simply dump the main title into an MKV container and then Handbrake for the transcode and re-wrap in an MP4 container.

I don't have an AppleTV yet, but I'll be picking up a new one shortly. Mostly for testing, so I'll be able to answer questions like this with empirical evidence soon.