IHOP 2015 Annual Report Download - page 27

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7
International Franchising
We continue to pursue international franchising of the Applebee's and the IHOP concepts. To this end, we seek qualified
franchisees that possess the resources needed to open multiple restaurants in each territory and are familiar with the specific
local business environment in which they propose to develop and operate our restaurants. We work closely with our
international franchisees to develop and implement the Applebee's and IHOP systems outside the United States, recognizing
commercial, cultural and dietary diversity. Differences in tastes and cultural norms and standards require that we be flexible
and pragmatic regarding many elements of the Applebee's and IHOP systems, including menu, restaurant design, restaurant
operations, training, marketing, purchasing and financing.
The success of further international expansion will depend on, among other things, local acceptance of the Applebee's and
IHOP concepts and menu offerings and our ability to attract qualified franchisees and operating personnel. Our franchisees
must comply with the regulatory requirements of the local jurisdictions.
Domestic and International Franchise Restaurant Development
Each franchisee is responsible for selecting the site for each new restaurant. We may consult with franchisees when they
are selecting appropriate sites, and any selection made by a franchisee is subject to our approval. We also conduct a physical
inspection, review any proposed lease or purchase agreement for compliance with our requirements and may make available to
franchisees demographic and other studies. We make the design specifications for a typical restaurant available to franchisees,
and we retain the right to prohibit or modify the use of any set of plans.
As of December 31, 2015, the Applebee’s development agreements in place call for the anticipated opening of a combined
total of 72 domestic restaurants and 35 international restaurants over the next six years.
As of December 31, 2015, we had signed commitments from IHOP franchisees to build 322 IHOP restaurants over the next
17 years, comprised of seven restaurants under single restaurant or non-traditional development agreements, 175 restaurants
under domestic multi-restaurant development agreements and 140 restaurants under international development agreements. The
signed agreements include options to build an additional 55 restaurants over the next 14 years, primarily under domestic multi-
restaurant development agreements.
Franchise Operations
We continuously monitor franchise restaurant operations. Company and third-party representatives make both scheduled
and unannounced inspections of franchised restaurants to ensure that only approved products are in use and that our prescribed
operations practices and procedures are being followed. We have the right to terminate a franchise agreement if a franchisee
does not operate and maintain a restaurant in accordance with our requirements. Due to cultural and regulatory differences, we
may have different requirements for restaurants opened outside of the United States. We also monitor the financial health of our
franchisees through business and financial reviews.
Composition of Franchise Systems
As of December 31, 2015, there were 32 Applebee’s franchisees that owned a total of 1,878 domestic Applebee's franchise
restaurants. The number of domestic restaurants held by an individual franchisee ranged from one restaurant to 484 restaurants.
As of December 31, 2015, there were 26 franchisees that owned a total of 155 international Applebee's franchise restaurants.
The number of international restaurants held by an individual franchisee ranged from one restaurant to 19 restaurants. Our five
largest Applebee’s franchisees owned 50% of the total 2,033 Applebee's franchise restaurants.
As of December 31, 2015, there were 323 franchisees that owned a total of 1,593 domestic IHOP franchise restaurants,
including 141 franchisees that each own one franchise restaurant. The largest individual IHOP franchisee owned 290 domestic
restaurants. As of December 31, 2015, there were 16 franchisees that owned a total of 79 international IHOP franchise
restaurants. The number of international restaurants held by an individual franchisee ranged from one restaurant to 13
restaurants. Our five largest IHOP franchisees owned 28% of the total 1,672 IHOP franchise restaurants.