IHOP 2011 Annual Report Download - page 84

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66
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, 2011, there were a total of 1,550 IHOP
restaurants, of which 1,369 were subject to franchise agreements, 166 were subject to area license agreements and 15 were company-
operated restaurants. IHOP restaurants are located in all 50 states of the United States, two United States territories and three
countries outside of the United States.
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, 2011, there were a total of 2,019 Applebee's restaurants, of which
1,842 were subject to franchise agreements and 177 were company-operated restaurants. The restaurants were located in 49 states,
one United States territory and 15 countries outside of the United States.
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 2011, 2010 and 2009 fiscal years presented herein ended January 1, 2012, January 2, 2011 and January 3, 2010,
respectively. The 2011 and 2010 fiscal years each contained 52 weeks and the 2009 fiscal year contained 53 weeks. In a 52-week
fiscal year, each fiscal quarter contains 13 weeks, comprised of two, four-week fiscal months followed by a five-week fiscal month.
In a 53-week fiscal year, the last month of the fourth fiscal quarter contains six 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 other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company's cash, cash equivalents, receivables and investments are potentially subject to concentration of credit risk.
Cash, cash equivalents and investments are placed with financial institutions that management believes are creditworthy. The
Company does not believe that it is exposed to any significant credit risk on cash and cash equivalents. At times, cash and cash
equivalent balances may be in excess of FDIC insurance limits.
Receivables are derived from revenues earned from franchisees and distributors located primarily in the United States. The
Company is subject to a concentration of credit risk with respect to Applebee's franchisee receivables. As of December 31, 2011,
Applebee's franchisees operated 1,694 Applebee's restaurants in the United States (which comprised 91% of the total Applebee's
restaurants in the United States). Of those restaurants, the nine largest Applebee's franchisees owned 933 restaurants, representing
55% of all franchised Applebee's restaurants in the United States. Receivables from all Applebee's franchisees totaled $31.2 million