IHOP 2010 Annual Report Download - page 33

Environmental Matters
We are not aware of any federal, state or local environmental laws or regulations that are likely to
materially impact our revenues, cash flow or competitive position, or result in any material capital
expenditure. However, we cannot predict the effect of possible future environmental legislation or
regulations.
Employees
At December 31, 2010, we employed approximately 17,700 employees, of whom approximately 650
were full-time, non-restaurant, corporate personnel. Our employees are not presently represented by
any collective bargaining agreements and we have never experienced a work stoppage. We believe our
relations with employees are good.
Item 1A. Risk Factors.
General
This Item 1A. includes forward-looking statements. You should refer to our discussion of the
qualifications and limitations on forward-looking statements included in Item 7.
The occurrence of any of the events discussed in the following risk factors may adversely affect,
possibly in a material manner, our business, financial condition and results of operations, which may
adversely affect the value of our shares of Common Stock or Preferred Stock.
Our business is affected by general economic conditions that are largely out of our control. Our
business is dependent to a significant extent on national, regional and local economic conditions, and,
to a lesser extent, on global economic conditions, particularly those conditions affecting the
demographics of the guests that frequently patronize Applebee’s or IHOP restaurants. If our customers’
disposable income available for discretionary spending is reduced (because of circumstances such as job
losses, credit constraints and higher housing, taxes, energy, interest or other costs) or if the perceived
wealth of customers decreases (because of circumstances such as lower residential real estate values,
increased foreclosure rates, increased tax rates or other economic disruptions), our business could
experience lower sales and customer traffic as potential customers choose lower-cost alternatives (such
as quick-service restaurants or fast casual dining) or choose alternatives to dining out. Any resulting
decreases in customer traffic or average value per transaction will negatively impact the financial
performance of Applebee’s or IHOP company-operated restaurants, as reduced gross sales result in
downward pressure on margins and profitability. These factors could also reduce gross sales at franchise
restaurants, resulting in lower royalty payments from franchisees, and could reduce the profitability of
franchise restaurants, potentially impacting the ability of franchisees to make royalty payments as they
become due.
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our
obligations under our debt. We have a significant amount of indebtedness which could have important
consequences to our financial health. For example, it could:
• make it more difficult for us to satisfy our obligations with respect to our debt;
• increase our vulnerability to general adverse economic and industry conditions or a downturn in
our business;
• require us to dedicate a substantial portion of our cash flow from operations to debt service,
thereby reducing the availability of our cash flow to fund working capital, capital expenditures
and other general corporate purposes;
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