IHOP 2011 Annual Report Download - page 50

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Improve Operations Performance
We strive to improve every aspect of restaurant operations. To enhance our guest-centric culture, in 2010 IHOP moved
our guest feedback process from a mystery shop to a “Voice of the Guest” program, which provides real-time consumer responses
to the operators and the brand. IHOP continues its use of a franchisee grading system adopted during 2003, which evaluates the
operational standards of each of our restaurants. This franchisee grading system is a comprehensive scorecard that includes Voice
of the Guest scores, operational assessment scores and health department ratings, among other things. In addition, we intend to
continue our focus on making exceptional service a priority for franchisees by providing tools for improved restaurant execution,
while highlighting our motto, “service as good as our pancakes.” Our goal is to create a memorable guest experience while
consistently delivering delicious, appealing food. Substantially all IHOP restaurants are using pollable point-of-sale systems to
capture and report a broad range of sales and product mix data. This information is used by management to, among other things,
gauge guest acceptance of menu items and the success of promotions and limited time offers.
Optimize Franchise Development
Under the Current Business Model, IHOP seeks to optimize franchise development by recruiting franchise developers
within and outside the current system and working with these franchise developers in the site selection and building process. This
strategy has proved successful as we have developed approximately 453 restaurants since the inception of the Current Business
Model and we have a pipeline of 299 additional new restaurants committed, optioned or pending. The strong existing franchisee
base accounts for over 95% of these future development obligations. In addition, we may take steps to consolidate and rehabilitate
existing markets if we believe that doing so is advisable in order to fully realize development potential.
In a challenging economic environment and a highly competitive family dining category, there can be no assurance that
the strategies described above, when implemented, will achieve the intended results within the time frame anticipated.
2011 Highlights
Highlights of our fiscal 2011 performance include:
• Reducing our long-term debt by $308.6 million, in turn lowering our consolidated leverage ratio to 5.3x at December
31, 2011 from 5.7x at December 31, 2010. The reduction primarily came from a combination of cash proceeds and
elimination of financing obligations from the refranchising of Applebee's company-operated restaurants and our free
cash flow.
• Increasing Applebee's domestic same-restaurant sales by 2.0% during 2011, the second consecutive year of same-
restaurant sales growth. Applebee's same-restaurant sales have increased in five of the last six quarters.
• Refranchising of 132 Applebee's company-operated restaurants, bringing the total number of Applebee's refranchised
to 325 since the acquisition and increasing the percentage of franchise restaurants in Applebee's system to 91% .
• Repricing of our senior secured credit facility, which lowered the interest rate floor on the variable-rate facility from
6.0% to 4.25% and increased the amount of our revolving credit facility. The interest rate reduction lowered our
interest expense on borrowings under the senior secured credit facility by approximately $10 million.
• Opening of 58 new restaurants worldwide by IHOP franchisees and area licensees.
• Remodeling over 500 restaurants system-wide. Applebee's and its franchisees remodeled 351 restaurants during 2011
while IHOP and its franchisees remodeled 182 restaurants.
• Expanding the international scope of IHOP's system by entering into a multi-restaurant franchise agreement for the
development of 40 new IHOP restaurants in Kuwait, the Kingdom of Saudi Arabia, Jordan, Lebanon, Qatar, the United
Arab Emirates, Oman, Bahrain and Egypt.