IHOP 2015 Annual Report Download - page 43

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23
Applebee's (a) IHOP (a)
Franchise Company Total Franchise Company Area License Total
International
Bahrain............................... — — — 1 — — 1
Brazil.................................. 13 — 13 — — — —
Canada................................ 16 — 16 11 — 13 (b) 24
Chile................................... 4 — 4 — — — —
Costa Rica.......................... 3 — 3 — — — —
Dominican Republic .......... 1 — 1 — — — —
Egypt.................................. 1 — 1 — — — —
Guam.................................. 1 — 1 1 — — 1
Guatemala .......................... 5 — 5 3 — — 3
Indonesia............................ 2 — 2 — — — —
Jordan................................. 1 — 1 — — — —
Kuwait................................ 7 — 7 5 — — 5
Mexico ............................... 59 — 59 28 — — 28
Philippines ......................... 1 — 1 7 — — 7
Puerto Rico......................... 5 — 5 4 — — 4
Qatar................................... 7 — 7 1 — — 1
Saudi Arabia....................... 19 — 19 1 — — 1
St. Croix, Virgin Islands..... — — — 1 — — 1
United Arab Emirates......... 10 — 10 3 — — 3
Total International......... 155 — 155 66 — 13 79
Totals........................ 2,033 — 2,033 1,507 11 165 1,683
(a) The properties identified in this table generate revenue in our franchise, rental, company and financing operating segments.
(b) Of these restaurants, 45 in Florida, two in Georgia and 10 in Canada have been sub-licensed by the area licensee.
As of December 31, 2015, we operated 11 IHOP restaurants. We operate 10 IHOP restaurants in the Cincinnati, Ohio
market area. We also are temporarily operating one reacquired IHOP restaurant in Alabama until it is refranchised. Of these
restaurants, we owned the building and leased the land for five sites and leased the land and building for six sites.
Of the 1,507 IHOP restaurants operated by franchisees, 59 were located on sites owned by us, 637 were located on sites
leased by us from third parties and 811 were located on sites owned or leased by franchisees. All of the IHOP restaurants
operated by area licensees and 2,029 of the franchisee-operated Applebee's restaurants were located on sites owned or leased by
the area licensees or the franchisees. We leased three sites and owned one site on which franchisee-operated Applebee's
restaurants were 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 IHOP 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 April 2023. The Applebee's restaurant support center was located in Kansas City, Missouri under a lease
expiring in October 2021. We are in the process of consolidating core Applebee's brand and franchisee support functions that
had been based in Kansas City into the Glendale facility and expect to vacate a significant portion of the Kansas City facility in
the first half of 2016. We are presently evaluating alternatives, including sub-leasing, for the portion of the Kansas City facility
we anticipate will be vacated.