IHOP 2012 Annual Report Download - page 80

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62
$0.2 million as the majority of our cash and cash equivalents, restricted cash and long-term investment holdings are currently
yielding less than 1%.
Commodity Prices
Many of the food products purchased by us and our franchisees and area licensees are affected by commodity pricing and
are, therefore, subject to unpredictable price volatility. Extreme increases in commodity prices and/or long-term changes could
affect our franchisees, area licensees and company-operated restaurants adversely. The risk with respect to company-operated
restaurants has lessened now that both of our brands are 99% franchised. We expect that, in most cases, the IHOP and Applebee's
systems would be able to pass increased commodity prices through to our consumers via increases in menu prices. From time to
time, competitive circumstances could limit short-term menu price flexibility, and in those cases, margins would be negatively
impacted by increased commodity prices. We believe that any changes in commodity pricing that cannot be adjusted for by changes
in menu pricing or other strategies would not be material to our financial condition, results of operations or cash flows.
In February 2009, the Company and owners of Applebee's and IHOP franchise restaurants formed CSCS to manage
procurement activities for the Applebee's and IHOP restaurants choosing to join the Co-op. We believe the larger scale created by
combining the supply chain requirements of both brands under one organization can provide cost savings and efficiency in the
purchasing function. As of December 31, 2012, 100% of Applebee's franchise restaurants and 99% of IHOP franchise restaurants
are members of CSCS. In some instances, IHOP and Applebee's may be required to guarantee their purchase of any remaining
inventory of certain food and other items purchased by CSCS for the purpose of supplying limited time promotions on behalf of
the IHOP Applebee's and IHOP systems as a whole. None of these food product guarantees is a derivative instrument. At
December 31, 2012, our outstanding guarantees for food product purchases were $9.6 million.