IHOP 2009 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2009 IHOP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 174

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174

Franchise Operations
IHOP’s Operations Department is charged with ensuring that high operational standards are met
at all times by our franchisees. Operating standards have been developed in consultation with
franchisees and are detailed in the ‘‘IHOP Manual of Standard Operating Procedures.’’ Due to cultural
and regulatory differences we may have different requirements for restaurants opened outside of the
United States.
We highly value good franchisor/franchisee relations and strive to maintain positive working
relationships with our franchisees. We sponsor the IHOP Franchise Board of Advisors, an elected body
of IHOP franchisees formed to advise and assist IHOP management with respect to a broad range of
matters relating to the operation of IHOP restaurants. The group meets with IHOP management at
least three times a year to discuss operational issues, marketing matters, development and construction
issues, information technology and many other topics. In February 2009, we announced the formation
of CSCS, an independent purchasing cooperative to manage all procurement activities for domestic
Applebee’s and IHOP restaurants choosing to join the cooperative (see ‘‘Purchasing Cooperative’’ on
page 9).
Company-Operated Restaurants
Company-operated IHOP restaurants are essentially comprised of our IHOP-owned restaurants in
the Cincinnati, Ohio market. In addition, from time to time, restaurants developed by us under the
Previous Business Model are returned by franchisees to us and may be operated by the Company for
an indefinite period until they are refranchised. As of December 31, 2009, there were a total of 13
company-operated restaurants, 10 of which were located in the Cincinnati market, two of which were
IHOP Caf´
es and one was a former franchise restaurant being operated temporarily that was
refranchised in January 2010.
We utilize the company-operated restaurants in the Cincinnati market to facilitate the testing of
new building types and remodel designs, new products and equipment, new operational procedures, and
new marketing, brand and design elements.
Restaurant Development
The Current Business Model relies on franchisees to obtain their own financing to develop IHOP
restaurants. We review and approve the franchisees’ proposed sites but do not contribute capital or
become the franchisees’ landlord. Under the Current Business Model, substantially all new IHOP
restaurants are financed and developed by franchisees or area licensees. In 2009, our franchisees and
area licensees financed and developed 75 new restaurants and we developed one company-operated
IHOP Caf´
e restaurant. We currently do not intend to build additional traditional IHOP restaurants in
the Cincinnati market.
New IHOP restaurants are only developed after a stringent site selection process. All restaurant
development is approved by the Franchise Review Committee comprised of senior management. We
expect our franchisees to add restaurants to the IHOP system in major markets where we already have
a core guest base. We believe that concentrating growth in existing markets allows us to achieve
economies of scale in our supervisory and advertising functions. We also look to have our franchisees
strategically add restaurants in new markets in which we currently have no presence or our presence is
limited.
Future Restaurant Development
In 2009, IHOP entered into 13 franchise development agreements. As of December 31, 2009, we
had signed commitments from franchisees to build 254 IHOP restaurants over the next eight years plus
12