IHOP 2008 Annual Report Download - page 51

IHOP’s Key Strategies
We pursue growth through a three-part strategic framework: (1) energize the IHOP brand;
(2) improve operations performance; and (3) maximize franchise development.
Energize the IHOP Brand
We seek to energize our brand by continuing our ‘‘Come Hungry. Leave Happy’’ advertising
campaign. This message has successfully resonated with our guests for almost six years and we expect
to continue with this campaign in the future. In addition, we seek to enhance our media strategies to
emphasize national advertising on broadcast, cable and syndicated television and strengthen our
product promotion process. Over the last two years, we have shifted the allocation of our media
spending towards national advertising. Five of the six media windows utilized by us in 2008 placed
significant emphasis on national media spending. We had not utilized any national media prior to 2003.
In 2003, we also initiated the strategy of limited time offers on promotional products. Since that time,
we have enhanced our execution of this promotional product approach by improving the appeal of
these promotions and the franchisees’ execution.
In addition, by the end of 2010, our franchisees will have completed the remodel of all restaurants
to our current updated look. We developed new prototype and remodel programs in 2004, which have
become the standards for all development and remodel activity going forward. We also launched our
‘‘IHOP ‘n Go’’ takeout program in February 2007 and a successful gift card program in 2006 in order
to ensure that we remain relevant with our customers and meet their changing dining patterns.
Improve Operations Performance
We will seek to continue to improve the operations of the restaurants. During 2003, we established
an IHOP franchisee ratings system to evaluate the operational standards of each of our restaurant
units. This franchisee rating system is a comprehensive scorecard in which we assign grades that covers
mystery shop scores, operational assessment scores and health department ratings, among other things.
By December 31, 2008, 88.5% of all franchisees had received grades of ‘‘A’’ or ‘‘B’’ for their restaurants.
In addition, we intend to continue focusing on making exceptional service a priority for franchisees by
providing tools for improved restaurant execution, while highlighting our motto ‘‘service as good as our
pancakes.’’ Substantially all IHOP restaurants are using pollable point-of-sale (‘‘POS’’) systems to
capture and report a broad range of sales and product mix data. This information is used by
management to, among other things, gauge guest acceptance of menu items and the success of
promotions and limited time offers.
Maximize Franchise Development
Under the Current Business Model, IHOP seeks to maximize franchise development by
emphasizing the recruitment of franchise developers within and outside the current system in order to
grow its revenues. Because of our strong existing franchisee base, since 2003, more than 70% of new
restaurants have been opened by pre-existing franchisees. This strategy has proven very successful as
franchisees have developed approximately 287 units since the inception of the Current Business Model
and we have a pipeline of 418 additional new units committed, optioned or pending. In addition, we
may take steps to intervene, consolidate, and rehabilitate one or two existing markets if we believe that
doing so is advisable in order to fully realize development potential. To effect this strategy, we would
repurchase units from certain existing franchisees and package them in a sale to a franchise developer
who would commit to maximize development in the market.
37