IHOP 2009 Annual Report Download - page 54

• Introduced a line of healthy food and beverage offerings through a totally integrated marketing
communications approach, including network television, national visibility platform, local
support, social media, website support and public relations; and
• Developed a new menu design, engineered to increase profitability and make menu decisions
easier for our guests. The new menu was implemented across the system in early 2010.
Improve margins and unit level economics
We implemented numerous initiatives to improve the operations and profitability of Applebee’s
company operated restaurants, resulting in a 270 basis point profit margin improvement from the prior
year. The improved margins resulted from introduction of labor deployment tools, food and beverage
cost improvement initiatives and better control over other costs. The margin improvements were not at
the expense of the guest as we achieved all-time high guest satisfaction scores.
We also refined our franchisee operations rating system to provide greater visibility to our
franchisees concerning their performance in relation to guest experience, food safety and training.
Transform the business
The Company remains committed to our strategy to franchise a substantial majority of the 399
company-operated restaurants to buyers who are financially qualified, share our vision for revitalizing
the Applebee’s brand, are willing to invest in the business, and have well-qualified management teams.
We have the financial flexibility to meet our obligations without additional refranchising transactions, so
we will only pursue transactions that make economic sense. We anticipate it will take several years to
be completed and will continue to focus on optimizing the performance of the business
In a challenging economic environment and a highly competitive casual dining category, there can
be no assurance that the strategies described above, when implemented, will achieve the intended
results, including the franchising of the remaining Applebee’s domestic company-operated restaurants,
within the time frame described above.
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 seven years and we
expect to continue with this campaign in the future. 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, 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. Due to
this reallocation from local to national advertising, in 2009 we were able to provide continuous media
support for all national initiatives, such as limited time offers, and secondary messages, such as IHOP
for Dinner, Gift Cards and Kids Eat Free.
We developed new prototype and remodel programs in 2004, which have become the standards for
all development and remodel activity going forward. By the end of 2009, substantially all franchisees
have completed their remodels under this program. 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
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