IHOP 2014 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2014 IHOP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

23
Applebee's IHOP
Franchise Company Total Franchise Company Area License Total
International
Bahrain ................................ — — — 1 — — 1
Brazil................................... 13 — 13 — — — —
Canada................................. 18 — 18 10 — 13 * 23
Chile .................................... 4 — 4 — — — —
Costa Rica ........................... 3 — 3 — — — —
Dominican Republic ........... 1 — 1 — — — —
Egypt ................................... 1 — 1 — — — —
Guam................................... 1 — 1 — — — —
Guatemala ........................... 4 — 4 3 — — 3
Honduras ............................. 3 — 3 — — — —
Indonesia ............................. 1 — 1 — — — —
Jordan .................................. 1 — 1 — — — —
Kuwait................................. 6 — 6 4 — — 4
Mexico ................................ 59 — 59 26 — — 26
Philippines........................... — — — 6 — — 6
Puerto Rico.......................... 4 — 4 3 — — 3
Qatar.................................... 6 — 6 — — — —
Saudi Arabia........................ 15 — 15 1 — — 1
St. Croix, Virgin Islands...... — — — 1 — — 1
United Arab Emirates.......... 7 — 7 3 — — 3
Total International .......... 147 — 147 58 — 13 71
Totals ......................... 1,994 23 2,017 1,472 11 167 1,650
* of these restaurants 62 in Florida, 4 in Georgia and 12 in Canada have been sub-licensed by the area licensee
As of December 31, 2014, we operated 23 Applebee's restaurants and 11 IHOP restaurants. We operate the 23 Applebee's
restaurants in the Kansas City, Missouri market and 10 IHOP restaurants in the Cincinnati, Ohio market. Of these restaurants,
we leased the building for five sites, owned the building and leased the land for 11 sites, owned the land and building for one
site and leased the land and building for 17 sites. We are temporarily operating one IHOP company-operated restaurant until it
is refranchised.
Of the 1,472 IHOP restaurants operated by franchisees, 60 were located on sites owned by us, 649 were located on sites
leased by us from third parties and 763 were located on sites owned or leased by franchisees. All of the IHOP restaurants
operated by area licensees and 1,993 of the franchisee-operated Applebee's restaurants were located on sites owned or leased by
the area licensees or the franchisees. We owned one site on which a franchisee-operated Applebee's restaurant was located.
Leases of IHOP restaurants generally provide for an initial term of 20 to 25 years, with most having one or more five-year
renewal options. Leases of Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to
20 years. In addition, a substantial number of the leases for both IHOP and Applebee's restaurants include provisions calling for
the periodic escalation of rents during the initial term and/or during renewal terms. The leases typically provide for payment of
rents in an amount equal to the greater of a fixed amount or a specified percentage of gross sales and for payment of taxes,
insurance premiums, maintenance expenses and certain other costs. Historically, it has been our practice to seek to extend,
through negotiation, those leases that expire without renewal options. However, from time to time, we choose not to renew a
lease or are unsuccessful in negotiating satisfactory renewal terms. When this occurs, the restaurant is closed and possession of
the premises is returned to the landlord.
Under our Applebee's franchise agreements, we have certain rights to gain control of a restaurant site in the event of
default under the franchise agreement. Because substantially all IHOP franchised restaurants developed by us under our
Previous Business Model are subleased to the franchisees, IHOP has the ability to regain possession of the subleased restaurant
if the franchisee defaults in the payment of rent or other terms of the sublease.
We currently occupy our principal corporate offices and IHOP restaurant support center in Glendale, California, under a
lease expiring in June 2020. The Applebee's restaurant support center is located in Kansas City, Missouri under a lease expiring
in October 2021.