IHOP 2011 Annual Report Download - page 47

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29
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Statement Regarding Forward-Looking Statements
Statements contained in this report may constitute forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may
cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-
looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and
other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading
“Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing
elsewhere in this report and our other filings with the United States Securities and Exchange Commission. The forward-looking
statements contained in this report are made as of the date hereof and the Company assumes no obligation to update or supplement
any forward-looking statements.
You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations in
conjunction with the consolidated financial statements and the related notes that appear elsewhere in this report.
Business Overview
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. (the "Company," "we" or "our"). The first International House
of Pancakes® ("IHOP") restaurant opened in 1958 in Toluca Lake, California. Shortly thereafter, we began developing and
franchising additional restaurants. In November 2007, we completed the acquisition of Applebee's International, Inc. ("Applebee's")
which became a wholly-owned subsidiary of the Company. Through various IHOP and Applebee's subsidiaries (see Exhibit 21,
Subsidiaries of DineEquity, Inc.) we own and operate two restaurant concepts in the casual dining and family dining categories
of the food service industry: Applebee's Neighborhood Grill and Bar® and IHOP®. DineEquity, Inc. is the parent of the IHOP
and Applebee's subsidiaries. References herein to Applebee's and IHOP restaurants are to these two restaurant concepts, whether
operated by franchisees, area licensees or the Company.
Domestically, IHOP restaurants are located in all 50 states while Applebee's restaurants are located in every state except
Hawaii. Internationally, IHOP restaurants are located in two United States territories and three foreign countries; Applebee's
restaurants are located in one United States territory and 15 foreign countries.
As of December 31, 2011, our system-wide restaurant portfolio consisted of:
Domestic:
Franchise/Area license
Company
International
Franchise/Area license
Total
Percentage franchised
December 31, 2011
Applebee's
1,694
177
148
2,019
91%
IHOP
1,499
15
36
1,550
99%
Total
3,193
192
184
3,569
95%
With over 3,500 restaurants combined, we believe we are the largest full-service restaurant company in the world.
Since the Applebee's acquisition, we have pursued a strategy to transition from an Applebee's system that was 74% franchised
at the time of the acquisition to a 99% franchised Applebee's system, similar to IHOP's 99% franchised system. We have made
substantial progress in executing that strategy. As of December 31, 2011, we have refranchised 325 Applebee's company-operated
restaurants since the acquisition. We refranchised an additional 17 Applebee's company-operated restaurants in a six-state market
area geographically centered around Memphis, Tennessee in January 2012. We are planning to franchise a significant majority
of the remaining 160 Applebee's company-operated restaurants over the next several years while retaining part of the Kansas City
area as a Company market. We believe our highly franchised business model requires less capital investment, generates higher
gross profit margins and reduces the volatility of free cash flow performance over time, as compared to a model based on operating
a significant number of company restaurants.