IHOP 2012 Annual Report Download - page 24

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6
International Franchising
We continue to pursue franchising of the Applebee's concept internationally. To this end we seek qualified franchisees that
possess the resources needed to open multiple restaurants in each territory and are familiar with the specific local business
environment in which they propose to develop and operate Applebee's restaurants. We currently are focusing on international
franchising primarily in Canada, Mexico, Central and South America, Southeast Asia and the Mediterranean/Middle East region.
We work closely with our international franchisees to develop and implement the Applebee's system outside the United States,
recognizing commercial, cultural and dietary diversity. Differences in tastes and cultural norms and standards mean we need to
be flexible and pragmatic regarding many elements of the Applebee's system, including menu, restaurant design, restaurant
operations, training, marketing, purchasing and financing.
As of December 31, 2012, there were 149 international Applebee's franchise restaurants. During 2012, 14 international
franchise restaurants opened and 13 international franchise restaurants closed. The number of restaurants held by an individual
franchisee ranges from one to 22 restaurants. The table below sets forth information regarding the number of Applebee's restaurants
owned by international franchisees as of December 31, 2012 as well as the total number of restaurants falling into each of the
listed ownership ranges.
Franchisees Restaurants
Number of Restaurants Held by Franchisee Number Percent
of Total Number Percent
of Total
One ...................................................................................... 5 17.9% 5 3.4%
Two to five........................................................................... 14 50.0% 41 27.5%
Six to ten.............................................................................. 5 17.9% 40 26.8%
Eleven to twenty.................................................................. 3 10.7% 41 27.5%
Greater than twenty ............................................................. 1 3.6% 22 14.8%
Total(a)............................................................................................ 28 100.0% 149 100.0%
_______________________________________________
(a) Percentages may not add due to rounding.
The success of further international expansion will depend on, among other things, local acceptance of the Applebee's concept
and menu offerings and our ability to attract qualified franchisees and operating personnel. Our franchisees must comply with the
regulatory requirements of the local jurisdictions.
Company-Operated Restaurants
In 2012, we completed the refranchising and sale of related restaurant assets of 154 Applebee's company-operated restaurants,
comprised as follows:17 restaurants located in a six-state market area geographically centered around Memphis, Tennessee, 33
restaurants located primarily in Missouri and Indiana, 65 restaurants located in Michigan and 39 restaurants located primarily in
Virginia. In total, of the 510 Applebee's company-operated restaurants open when the acquisition was completed, we have
refranchised 479 restaurants since the refranchising strategy was initiated in 2008 and closed eight.
As of December 31, 2012, the remaining 23 Applebee's company-operated restaurants were located in the Kansas City market
area. We intend to operate these restaurants primarily to test new remodel programs, operating procedures, products, technology,
cooking platforms and service models.
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 89 development agreements with 35 franchise groups in place covering the entire United States (except
Hawaii and our company-operated market) and 11 development agreements with 11 franchise groups calling for restaurant
development in foreign countries. In conjunction with the refranchising of company-operated restaurants, we entered into
development agreements with the new franchisees setting forth requirements for additional development in each market.