IHOP 2013 Annual Report Download - page 52

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31
• Continued innovation of the menu. Since the acquisition in 2007, more than 90% of Applebee's menu now consists of
either new offerings or improved offerings with high quality ingredients;
• Continued our unique healthy food offerings by refreshing our “Under 550” calorie menu in January 2013 with
Roma Pepper Chicken and Napa Chicken and Portabellos. Since its launch in 2011, our “Under 550” calorie menu
combined with our Weight Watchers menu has established us as a category leader in providing healthy dining options
to our guests;
• Broadened our commitment to healthy dining by introducing a new Kids Menu featuring 10 new Kids Live Well-
approved meals. The new menu, which has received very positive guest feedback, offers a variety of new entrées and
sides that are both healthy and kid-approved. This allows parents to concentrate on engaging with their family
knowing their growing kids can get a fun, healthy meal at Applebee’s; and
• Focused on late-night business through beverage and appetizer innovation and local restaurant marketing efforts.
Invest in Process and Product Innovation
We continue to invest in and drive innovation at Applebee's from both a product and process perspective. We maintain a
significant test and implementation focus to both develop and discover new trends and opportunities within the casual dining
segment and beyond. Our history of innovation is readily apparent in our continual evolution of limited-time product offerings
as well as core menu items. We take a similar approach to evaluation of media strategies and consumer touch points.
Transform the Business
In June 2010, we rolled out “Connections,” the new comprehensive restaurant revitalization program involving people,
place and promotional aspects. The people aspect involves re-training and re-certification for kitchen staff and team members.
The place aspect involves exterior and interior modifications to the restaurant to signal change. The promotional aspect involves
a local public relations and marketing plan to re-connect with the neighborhood. Our franchisees have embraced this initiative
and by year-end 2013, over 70% of the restaurants in the domestic system have been revitalized.
Along with our historical focus on food innovation, the completion of our refranchising transition in 2012 has allowed
Applebee’s to place additional focus on development and implementation of innovative technology solutions. We realize that
customers' tastes are constantly changing and as a brand, Applebee’s continues to learn and grow with our customers, evolving
into a brand of the future.
Improve Franchisee Margins and Restaurant Level Economics
We have continued to build upon process and system improvements deployed in prior years by ongoing improvement
efforts in operating metrics for our franchise partners. Our franchisees continue to reap the benefits of our supply chain co-op by
leveraging our scale to manage through commodity cost inflation, which was also mitigated by the realignment of our
distribution centers in 2010.
We continue to monitor our franchisees through our franchisee operations rating system, which provides visibility
concerning their performance in relation to guest experience, food safety and training.
With our transition to a 99% franchised system, restaurant operating margin at the remaining 23 Applebee's company-
operated restaurants is not significant to our results of operations. Given that the primary focus of these restaurants in the future
will be to test new products and processes, their operating margin as a percentage of sales is expected to decline. However, we
will continue to invest in product and process innovation to help our franchisees maintain and improve their restaurant level
economics for the overall financial well-being of the Applebee's system.
In a challenging economic environment and a highly competitive casual dining category, there can be no assurance that the
strategies described above, when implemented, will achieve the intended results.
IHOP's Key Strategies
To re-ignite growth we have been pursuing key initiatives within the three pillars of our strategic framework: (1) re-energize
and grow the IHOP brand; (2) improve operations performance; and (3) optimize franchise development.