IHOP 2010 Annual Report Download - page 97

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
1. The Company
The Company was incorporated under the laws of the State of Delaware in 1976 with the name
IHOP Corp. Effective June 2, 2008, the name of the Company was changed to DineEquity, Inc.
(‘‘DineEquity’’). The Company owns and operates two restaurant concepts: Applebee’s Neighborhood
Grill and Bar, or Applebee’s, in the bar and grill segment of the casual dining category of the
restaurant industry, and International House of Pancakes, or IHOP, in the family dining category of
the restaurant industry. The first International House of Pancakes restaurant opened in 1958 in Toluca
Lake, California. Shortly thereafter the Company’s predecessor began developing and franchising
additional restaurants. As of December 31, 2010, there were a total of 1,504 IHOP restaurants of which
1,329 were subject to franchise agreements, 164 were subject to area license agreements and 11 were
company-operated restaurants. IHOP restaurants are located in all 50 states of the United States, two
United States territories and in Canada and Mexico.
In November 2007, the Company completed the acquisition of Applebee’s International, Inc.
(‘‘Applebee’s’’), which became a wholly owned subsidiary of the Company. As of December 31, 2010,
there were a total of 2,010 Applebee’s restaurants, of which 1,701 were subject to franchise agreements
and 309 were company-operated restaurants. The restaurants were located in 49 states, 16 countries
outside of the United States and one United States territory.
References herein to Applebee’s and IHOP restaurants are to these two restaurant concepts,
whether operated by franchisees, area licensees or the Company. Retail sales at restaurants that are
owned by franchisees and area licensees are not attributable to the Company.
2. Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of DineEquity, Inc. and its wholly
owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Fiscal Periods
The Company has a 52/53 week fiscal year that ends on the Sunday nearest to December 31 of
each year. For convenience, the Company refers to all fiscal years as ending on December 31 and fiscal
quarters as ending on March 31, June 30 and September 30. The 2010, 2009 and 2008 fiscal years
presented herein ended January 2, 2011, January 3, 2010 and December 28, 2008, respectively. The
2010 fiscal year contained 52 weeks, the 2009 fiscal year contained 53 weeks and the 2008 fiscal year
contained 52 weeks.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted
accounting principles (‘‘U.S. GAAP’’) requires the Company’s management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its
estimates, including those related to provisions for doubtful accounts, legal contingencies, income taxes,
goodwill and intangible assets. The Company bases its estimates on historical experience and on various
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