IHOP 2011 Annual Report Download - page 25

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7
restaurant assets of 17 Applebee’ s company-operated restaurants located in a six-state market area geographically centered around
Memphis, Tennessee. This transaction closed in January 2012. Including this most recent transaction, we have refranchised 342
company-operated restaurants since the transitioning strategy was initiated in 2008.
Restaurant Development
We make the design specifications for a typical restaurant available to franchisees, and we retain the right to prohibit or
modify the use of any set of plans. Each franchisee is responsible for selecting the site for each restaurant within its territory. We
may assist franchisees in selecting appropriate sites, and any selection made by a franchisee is subject to our approval. We also
conduct a physical inspection, review any proposed lease or purchase agreement and make available to franchisees demographic
and other studies.
There are currently 83 development agreements with 37 franchise groups in place covering the entire United States (except
Hawaii and company-operated markets) and 12 development agreements with 12 franchise groups calling for restaurant
development in foreign countries. As noted above, we are in the process of refranchising the majority of our domestic company-
operated restaurants. In conjunction with the refranchising of these company-operated restaurants, we expect to enter into
development agreements with the new franchisees setting forth requirements for additional development in each market.
In 2012, we expect franchisees to open a total of between 25 to 30 new Applebee's franchise restaurants. We do not plan to
open any company-operated restaurants. The following table represents commitments for 2012-2013 by franchisees under
development agreements to develop Applebee's restaurants. We disclose development commitments for only a two-year period
as the Applebee's development agreements generally provide for a series of two-year development commitments after the initial
development period.
Domestic development agreements
International development agreements
Total
Contractual Opening of
Restaurants by Year
2012
20
15
35
2013
37
11
48
The actual number of openings may differ from both our expectations and development commitments due to various factors,
including economic conditions, franchisee access to capital, and the impact of currency fluctuations on our international franchisees.
The timing of new restaurant openings also may be affected by various factors including weather-related and other construction
delays and difficulties in obtaining regulatory approvals.
Menu
Applebee's restaurants offer a diverse menu of high quality, moderately-priced food and beverage items consisting of
traditional favorites and signature dishes. The restaurants feature a broad selection of entrées as well as appetizers, salads,
sandwiches, specialty drinks and desserts. All Applebee's restaurants offer beer, wine, liquor and premium specialty drinks.
Applebee's updates its menu offerings regularly to better serve our customers and give them new reasons to return to our restaurants.
Since 2007, more than 80% of Applebee's menu now consists of either new offerings or improved offerings with high quality
ingredients.
In 2009, Applebee's entered into a non-exclusive endorsement agreement with Weight Watchers International, Inc. ("Weight
Watchers") to offer Weight Watchers® branded menu items to our guests. Under the agreement, Applebee's and participating
franchisees pay Weight Watchers a royalty equal to 2.5% of the proceeds from the sale of Weight Watchers-endorsed items on the
Applebee's menu. The agreement has been extended through at least November 2014.
Marketing and Advertising
Applebee's has historically concentrated its marketing and advertising efforts primarily on food-specific promotions, as well
as on Weight Watchers and other Applebee's branded messaging. Our marketing and advertising includes national, regional and
local expenditures, utilizing primarily television, radio, direct mail and print media, as well as alternative channels such as the
Internet, social media, product placements and the use of third-party retailers to market our gift cards. Our "2 for $20" promotion,
first introduced nationally in 2009, continues to resonate with our guests as we continually rotate different entrée selections into
the promotion.
For the year ended December 31, 2011, approximately 4% of Applebee's company restaurant sales were allocated for
marketing activities. This amount includes contributions to the national advertising fund, which develops and funds the national
promotions and the development of television and radio commercials and print advertising materials. We focus the remainder of