IHOP 2009 Annual Report Download - page 27

The actual number of openings may differ from both our expectations and development
commitments due to various factors, including economic conditions, franchisee access to capital, and
the impact of currency fluctuations on our international franchisees. The timing of new restaurant
openings may also be affected by various factors including weather-related and other construction
delays and difficulties in obtaining regulatory approvals.
Composition of Franchise System
The number of restaurants held by an individual franchisee ranges from one to 205 restaurants.
The table below sets forth information regarding the number of Applebee’s restaurants owned by
domestic franchisees as of December 31, 2009 as well as the total number of restaurants falling into
each of the listed ownership ranges.
Franchisees Restaurants
Percent Percent
Number of Restaurants Held by Franchisee Number of Total Number of Total
One to Ten ......................................... 10 24% 60 4%
Eleven to Twenty-Five ................................. 13 31% 246 17%
Twenty-Six to Fifty .................................... 10 24% 378 26%
Fifty-One to One Hundred .............................. 7 17% 478 33%
One Hundred-One and over ............................. 2 5% 308 21%
Total(a) ............................................ 42 100% 1,470 100%
(a) Percentages may not add due to rounding.
There were 31 international franchisees with 139 restaurants open as of December 31, 2009. All of
these franchisees had fewer than 23 restaurants open as of December 31, 2009. In addition, three
international franchisees had not yet opened a restaurant as of December 31, 2009.
Menu
Applebee’s restaurants offer a diverse menu of high quality, moderately-priced food and beverage
items consisting of traditional favorites and signature dishes. The restaurants feature a broad selection
of entrees as well as appetizers, salads, sandwiches, specialty drinks and desserts. All Applebee’s
restaurants offer beer, wine, liquor and premium specialty drinks.
During 2004, Applebee’s began a five-year exclusive strategic alliance with Weight Watchers
International, Inc. to offer Weight Watchers branded menu items to our guests. At the conclusion of
the exclusive agreement the parties entered into a new, non-exclusive endorsement agreement which
became effective in January 5, 2009. Under the new agreement, Applebee’s and participating
franchisees pay Weight Watchers a royalty equal to 2.5% of the proceeds from the sale of Weight
Watchers endorsed items on the Applebee’s menu. The initial term of the agreement was for one year
and has been extended through at least December 2010.
Marketing and Advertising
Applebee’s has historically concentrated its advertising and marketing efforts primarily on
food-specific promotions, as well as on Weight Watchers, Carside To Go and other Applebee’s
branded messaging. Our advertising and marketing includes national, regional and local expenditures,
utilizing primarily television, radio, direct mail and print media, as well as alternative channels such as
the Internet, product placements and the use of third-party retailers to market our gift cards. For the
year ended December 31, 2009, approximately 4% of Applebee’s company restaurant sales were
allocated for marketing activities. This amount includes contributions to the national advertising fund,
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