IHOP 2010 Annual Report Download - page 52

of positive results since 2005 and outpaced our group of competitors. We accomplished this by
executing our key strategies as follows:
Drive Profitable Sales and Traffic
• Continued to focus on meeting the consumer’s need for value throughout 2010, with such
promotions as the midyear introduction of our new Sizzling Skillets starting at $8.99 nationwide,
the rotation of new products into our ‘‘2 for $20’’ offering and ended the year with the
introduction of Flavor Loaded Steaks starting at $9.99 nationwide;
• Continued innovation of the menu. Since the acquisition in 2007, more than 80% of Applebee’s
menu now consists of either new offerings or improved offerings with better, fresher ingredients;
• Expanded our unique healthy food offerings by launching our Under 550 calorie menu in
January 2010 to complement our Weight Watchers menu and developed new food offerings for
both healthy dining options which were introduced in early 2011;
• Focused on late night business through beverage and appetizer innovation and local restaurant
marketing efforts around sports and holiday events and
• Developed and tested a guest-driven lunch program which we launched nationally in early 2011.
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 40 basis point profit margin improvement from the prior
year. The improved margins resulted from implementing cost management tools to reduce food waste
and optimize hourly labor. We continued to reap the benefits of our supply chain co-op to leverage our
scale to reduce food cost and cost of distribution for both franchise and company operated restaurants.
The margin improvements were not at the expense of the guest as we achieved system wide all-time
high guest satisfaction scores.
We continue to monitor our franchisees through our franchisee operations rating system which
provides visibility concerning their performance in relation to guest experience, food safety and
training.
Transform the Business
In June, we rolled out ‘‘Connections,’’ the new comprehensive restaurant revitalization program
involving people, place and promotional aspects. The people aspect involves re-training and
re-certification for kitchen staff and team members. The place aspect involves exterior and interior
modifications to the restaurant to signal change. The promotional aspect involves a local public
relations and marketing plan to re-connect with the neighborhood. In 2010, 91 restaurants in the system
were revitalized under this program.
During 2010, we franchised an additional 83 company-operated restaurants in Minnesota,
Wisconsin and Virginia. Additionally, in January and February of 2011 we franchised 65 company-
owned restaurants in Missouri, Illinois and Virginia. The Company remains committed to our strategy
to franchise a substantial majority of the 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 that reaching our goal of 98% franchise-operated restaurants will take several
years to complete. This heavily franchised business model is expected to require less capital investment,
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