IHOP 2012 Annual Report Download - page 25

7
During 2013, we expect franchisees to open a total of between 40 to 50 new Applebee's franchise restaurants, the majority of
which are expected to be opened domestically. We do not plan to open any company-operated restaurants. The following table
represents commitments for 2013 and 2014 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.
Contractual Opening of
Restaurants by Year
2013 2014
Domestic development agreements............................................................................................ 35 51
International development agreements....................................................................................... 11 5
Total............................................................................................................................................ 46 56
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.
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, digital, product placements and the use of third-party retailers to market our gift cards.
During 2012, we launched Applebee's new campaign, “See You Tomorrow®,” which communicates that we are doing whatever
it takes to make sure our guests return. The campaign includes TV, radio, online, and outdoor ads to encourage repeat visits by
highlighting recent changes to the Applebee's brand, such as the revitalization of the restaurants.
For the year ended December 31, 2012, 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 our company-
operated restaurant marketing expenditures on local marketing in the Kansas City area.
We currently require domestic franchisees of Applebee's restaurants to contribute 2.75% of their gross sales to the national
advertising fund and to spend at least 1% of their gross sales on local marketing and promotional activities. Under the current
Applebee's franchise agreements, we have the ability to increase the amount of the required combined contribution to the national
advertising fund and the amount required to be spent on local marketing and promotional activities to a maximum of 5% of gross
sales.
Supply Chain
Maintaining high food quality, system-wide consistency and availability is the central focus of our supply chain program,
which includes the franchisee-owned purchasing cooperative established in 2009. We establish quality specifications for products
used in the restaurants, and we maintain a list of approved suppliers and distributors from which we and our franchisees must
select. We periodically review the quality of the products served in our domestic restaurants in an effort to ensure compliance with
these standards. Due to cultural and regulatory differences, we may have different requirements for restaurants opened outside of
the United States.
IHOP
We develop, franchise and operate restaurants in the family dining category of the restaurant industry under the names IHOP
and International House of Pancakes. IHOP is the largest family dining brand in the world in terms of system-wide sales(2) . As of
December 31, 2012 there were a total of 1,581 IHOP restaurants of which 1,404 were subject to franchise agreements, 165 were
subject to area license agreements, 10 were company-operated restaurants and two restaurants were reacquired from franchisees
and operated by IHOP on a temporary basis. Franchisees and area licensees are independent third parties who are licensed by us
to operate their restaurants using our trademarks, operating systems and methods and offer a broad range of entrées, appetizers,
desserts and non-alcoholic beverages specified by IHOP, including our award-winning pancakes.
____________________________________________________________________________
(2)Source: Nation's Restaurant News, "Special Report: Top 100," June 25, 2012 (based on U.S. system-wide sales in the family dining category).