IHOP 2010 Annual Report Download - page 23

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, 2010, 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 through the sale of company-operated
restaurants to franchisees. 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.
As of December 31, 2010, our company-operated Applebee’s restaurants were located in the
following areas:
Area
New England (includes Maine, Massachusetts, New Hampshire, New York,
Rhode Island and Vermont) .................................... 66
Detroit/Southern Michigan ...................................... 65
Virginia .................................................... 39
St. Louis, Missouri/Illinois ....................................... 56
Kansas City, Missouri/Kansas ..................................... 34
Washington, D.C. (includes Maryland and Virginia) .................... 30
Central Missouri/Kansas/Arkansas ................................. 12
Memphis, Tennessee ........................................... 7
309
In 2010, we completed the sale of 83 company-owned restaurants in two separate transactions: 63
restaurants in Minnesota and parts of Wisconsin and 20 restaurants in the Roanoke and Lynchburg
markets in the state of Virginia. The sale of 61 of the 63 Minnesota restaurants closed in October 2010;
the sale of the remaining two of the 63 closed in November 2010. The sale of the 20 Virginia
restaurants closed in December 2010. As of December 31, 2010, we have franchised 193 company-
operated restaurants since the transition process was begun in 2008. In 2010 we also signed asset
purchase agreements for the sale of 36 restaurants in the St. Louis market area and 30 restaurants in
the Washington, D.C. market. The sale of the St. Louis restaurants closed in January, 2011 and the sale
of 29 of the 30 Washington, D.C. restaurants closed in February, 2011; the sale of the one remaining
Washington, D.C. restaurant is expected to close before the end of the second fiscal quarter of 2011.
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