IHOP 2009 Annual Report Download - page 25

International Franchising
We continue to pursue franchising of the Applebee’s concept as the primary method of
international expansion. To this end we seek qualified franchisees that possess the resources needed to
open multiple restaurants in each territory and are familiar with the specific local business environment
in which they propose to develop and operate Applebee’s restaurants. We currently are focusing on
international franchising primarily in Canada, Mexico, Central and South America, and the
Mediterranean/Middle East. We currently have 31 international franchisees. As of December 31, 2009,
these franchisees operated 139 Applebee’s restaurants. During 2009, 15 new international franchise
restaurants were opened while four international franchise restaurants were closed. The success of
further international expansion will depend on, among other things, local acceptance of the Applebee’s
concept and menu offerings and our ability to attract qualified franchisees and operating personnel.
Our franchisees must comply with the regulatory requirements of the local jurisdictions.
We work closely with our international franchisees to develop and implement the Applebee’s
system outside the United States, recognizing commercial, cultural and dietary diversity. Differences in
tastes and cultural norms and standards mean we need to be flexible and pragmatic regarding many
elements of the Applebee’s system, including menu, restaurant design, restaurant operations, training,
marketing, purchasing and financing.
Franchise Operations
We continuously monitor franchise restaurant operations, principally through our Franchise Area
Directors and our Directors of Franchise Operations. Company and third-party representatives make
both scheduled and unannounced inspections of restaurants to ensure that only approved products are
in use and that our prescribed operations practices and procedures are being followed. We have the
right to terminate a franchise agreement if a franchisee does not operate and maintain a restaurant in
accordance with our requirements. We also monitor the financial health of our franchisees through
business and financial reviews.
We maintain a Franchise Business Council which provides input about operations, marketing,
product development and other aspects of restaurants for the purpose of improving the franchise
system. As of December 31, 2009, the Franchise Business Council consisted of eight franchisee
representatives and three members of our senior management team. One franchisee representative, the
founder of Applebee’s, is a member for life. The other franchisee representatives are elected by
franchisees to staggered two-year terms. The Franchise Business Council is also responsible for the
appointment of members to advisory committees related to marketing, restaurant operations,
information technology and product development.
Company-Operated Restaurants
Historically, company-operated Applebee’s restaurants have been clustered in targeted markets to
increase consumer awareness and convenience and enable us to take advantage of operational,
distribution and advertising efficiencies. We plan to continue to execute our strategy, initiated in 2008,
of transitioning to an approximately 98% franchised system. The timing of completing this transition is
subject to numerous variables, including qualifications of the prospective buyers, the economic climate
in general and credit markets in particular, and the attainment of satisfactory valuations for each
transaction.
In 2009, we franchised seven company-owned restaurants in the New Mexico market, bringing the
total number of company-operated restaurants that have been franchised to 110 since the transition
process was begun in 2008.
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