IHOP 2009 Annual Report Download - page 23

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Applebee’s
The franchise operations segment consists of 1,609 restaurants operated by Applebee’s franchisees
in the United States, one U.S. territory and 15 countries outside of the United States. Franchise
operations revenue consists primarily of franchise royalty revenues and the portion of the franchise fees
allocated to Applebee’s intellectual property. Franchise operations expenses include pre-opening
training expenses and other franchise-related costs.
The company restaurant operations segment consists of 398 company-operated restaurants in the
United States and one company-operated restaurant in China. Company restaurant sales are retail sales
at company-operated restaurants. Company restaurant expenses are operating expenses at company-
operated restaurants and include food, beverage (alcoholic and non-alcoholic), labor, benefits, utilities,
rent and other restaurant operating costs.
Rental operations activities are not currently a significant part of Applebee’s business. Financing
operations activities are not currently a part of Applebee’s business.
IHOP
The franchise operations segment consists of 1,443 restaurants operated by IHOP franchisees and
area licensees in the United States, two U.S. territories and two countries outside of the U.S. Franchise
operations revenue consists primarily of franchise royalty revenues, sales of proprietary products
(primarily pancake and waffle dry-mixes), franchise advertising fees and the portion of the franchise
fees allocated to IHOP intellectual property. Franchise operations expenses include advertising expense,
the cost of proprietary products, pre-opening training expenses and other franchise-related costs.
The company restaurant operations segment consists of 12 company-operated restaurants in the
United States and one restaurant reacquired from a franchisee that was operated by IHOP on a
temporary basis until refranchised on January 4, 2010. Company restaurant sales are retail sales at
company-operated restaurants. Company restaurant expenses are operating expenses at company-
operated restaurants and include food, beverage, labor, benefits, utilities, rent and other restaurant
operating costs.
Rental operations revenue includes revenue from operating leases and interest income from direct
financing leases. Rental operations expenses are costs of operating leases and interest expense on
capital leases on franchisee-operated restaurants. Currently, the rental operations revenue and expenses
are substantially generated by IHOP.
Financing operations revenue consists of the portion of franchise fees not allocated to IHOP
intellectual property, sales of equipment, as well as interest income from the financing of franchise fees
and equipment leases. Financing expenses are primarily the cost of restaurant equipment.
Financial information for our four operating segments for the last three fiscal years is set forth in
Note 22, Segment Reporting, of the Notes to the Consolidated Financial Statements included in this
Annual Report on Form 10-K. Revenue derived from all foreign countries, in the aggregate, comprises
less than 5% of total consolidated revenue.
Restaurant Concepts
Applebee’s
We develop, franchise and operate restaurants in the bar and grill segment of the casual dining
category of the restaurant industry under the name ‘‘Applebee’s Neighborhood Grill & Bar.’’ With
2,008 system-wide restaurants as of December 31, 2009, Applebee’s Neighborhood Grill & Bar is the
largest casual dining concept in the world, in terms of number of restaurants and market share. As of
December 31, 2009, franchisees operated 1,609 of these restaurants and 399 restaurants were
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