IHOP 2013 Annual Report Download - page 89

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68
DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
1. The Company
The first International House of Pancakes® (“IHOP®”) restaurant opened in 1958 in Toluca Lake, California. Shortly
thereafter, the Company's predecessor began developing and franchising additional restaurants. The Company was incorporated
as IHOP Corp. under the laws of the State of Delaware in 1976. In November 2007, the Company acquired Applebee's
International, Inc., which became a wholly-owned subsidiary of the Company. Effective June 2, 2008, the name of the
Company was changed to DineEquity, Inc. (“DineEquity”). The Company owns, franchises and operates two restaurant
concepts: Applebee's Neighborhood Grill and Bar® (“Applebee's®”), in the bar and grill segment within the casual dining
category of the restaurant industry, and IHOP in the family dining category of the restaurant industry.
As of December 31, 2013, there was a total of 1,620 IHOP restaurants, of which 1,439 were subject to franchise
agreements, 168 were subject to area license agreements and 13 were company-operated restaurants. IHOP restaurants were
located in all 50 states of the United States, the District of Columbia, two United States territories and eight countries outside of
the United States. As of December 31, 2013, there were a total of 2,011 Applebee's restaurants, of which 1,988 were subject to
franchise agreements and 23 were company-operated restaurants. Applebee's restaurants were located in 49 states of the United
States, one United States territory and 15 countries outside of the United States.
References herein to Applebee's and IHOP restaurants are to these 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. 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. 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
2013, 2012 and 2011 fiscal years presented herein ended December 29, 2013, December 30, 2012 and January 1, 2012,
respectively, and each contained 52 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, if any, 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, and the valuation of
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 and accounts receivable are potentially subject to concentration of credit risk. Cash
and cash equivalents 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.
Accounts receivable are derived from revenues earned from franchisees and area licensees located primarily in the United
States. Financing receivables arise from the financing of restaurant equipment, leases or franchise fees by IHOP franchisees.
The Company is subject to a concentration of credit risk with respect to receivables from franchisees that own a large number
of Applebee's or IHOP restaurants. As of December 31, 2013, there were 15 franchisees that owned 57 or more restaurants each
(11 Applebee's franchisees and four IHOP franchisees). These franchisees operated 1,659 Applebee's and IHOP restaurants in