10k Research Report Ihop

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10 K Research Report
FIN 400
The first International House of Pancakes ("IHOP") restaurant opened in 1958 in Toluca Lake, California. IHOP was incorporated under the laws of the State of Delaware in 1976. The company has intense growth plan. In November 2007, IHOP Corp. completed the acquisition of Applebee’s International, Inc. (Applebee’s) which became a wholly-owned subsidiary of the company. The IHOP Corp 10K is larger than in years past due to this acquisition. The primary reason for the Applebee's acquisition was to add a growth vehicle in the casual dining segment of the restaurant industry. IHOP Corp. attribute the goodwill associated with the transaction to the long-term historical performance and the anticipated future performance of Applebee's. IHOP and Applebee’s combined has one of the largest full-service restaurant companies in the world.

IHOP Corp. develops franchises and operates IHOP restaurants, a well known family restaurant chain. As of December 31, 2007, there were a total of 1,344 IHOP restaurants of which 1,176 were subject to franchise agreements, 157 were subject to area license agreements and 11 were company-operated restaurants. In January 2003 IHOP constructed a “New Business Model”, in which a potential franchisee first enters into a single store development agreement or a multi-store development agreement and, upon completion of a prescribed approval procedure, is primarily responsible for the initial development and financing of the new IHOP franchised restaurant. In 2007, IHOP entered into 30 franchise development agreements. As of December 31, 2007, they had signed commitments from our franchisees to build 347 IHOP restaurants over the next several years plus options for an additional 98 restaurants. Applebee’s franchise and operate restaurants in the bar and grill segment of the casual dining industry. With 1,976 system-wide restaurants as of December 31, 2007, Applebee's Neighborhood Grill & Bar is one of the largest casual dining concepts in the world, in terms of number of restaurants and market share. As of December 31, 2007 franchises operated 1,465 of these restaurants and 511 restaurants were company operated. California had the most Applebee’s restaurants, but the Minneapolis/St. Paul, Minnesota and Detroit/Southern Michigan regions have the largest portion of Applebee’s restaurants for a given area. Each Applebee's restaurant is designed as an attractive, friendly, neighborhood establishment featuring moderately-priced high quality food and beverage items, table service and a comfortable atmosphere. Each franchisee enters into a separate franchise agreement for the operation of each Applebee's restaurant. The standard franchise agreement has a term of 20 years and permits renewal for up to an additional 20 years upon payment of an additional franchise fee. Applebee’s currently has 78 franchise groups, including 35 international franchisees. The IHOP Corp. is currently in process of franchising the 511 companies that are company operated. Applebee's and IHOP restaurant chains are amongst the numerous restaurant chains participating in the $500 billion plus consumer food service market in the United States. IHOP competes in the family dining segment against national and multi-state operators such as Denny's, Cracker Barrel Old Country Store, Bob Evans Restaurants and Perkins Restaurant and Bakery. The restaurant business is very competitive and is affected by, among other things, changes in eating habits and preferences, local, regional and national economic conditions, population trends and traffic patterns. Applebee’s and IHOP do have a competitive advantage over a few competitors in the fact that they do not have seasonal operations to any material degree. December 31, 2007, they both employed roughly 32,300 employees, of whom 860 were full-time, non-restaurant, corporate employees. There are many of risk factors related to the restaurant business,...
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