IHOP Inks Largest Franchise Agreement

Dine Brands Global Inc., the Glendale restauranteur which owns the IHOP and Applebee’s chains, has signed a franchise development agreement with TravelCenters of America Inc. to open 94 IHOP locations throughout the U.S. over the next five years. It is the single largest IHOP development agreement in the brand’s 61-year history, according to the company. The IHOP restaurants will be inside TA and Petro branded travel stops along interstate freeways. They will be operated by the TA Restaurant Group, a division of TravelCenters of America. This is the latest move in what has been a landmark year for Dine Brands’ franchising of IHOP, especially in international markets. Contracts the company entered in 2019 will result in a combined 76 IHOP restaurants built in foreign markets from Canada to Peru to Pakistan over the next decade. “Last year I think we did more (international franchising) than we’ve done in the most recent five years,” Dan Lecocq, Dine Brands’ executive director of international development, told the Business Journal. He said the company has several more transactions lined up that will be announced before year’s end. In all, Dine Brands has more than 3,600 restaurants in 18 countries and about 370 franchisees. According to Lecocq, Dine Brands is targeting three “core” foreign markets for IHOP — Latin America, Canada and the Middle East. “Where do people know about the brand and want us as a product?” Lecocq said of the company’s approach to choosing franchise locations. “Where do we think we can execute efficiently? By that I mean supply chain and existing teams to leverage scale. (In those locations) the learning curve is much shorter for the consumer and that translates into sales right away.” In October, the company entered a franchising agreement with construction firm Minhas Holdings, headquartered in Vancouver, Canada, to bring more than a dozen IHOP restaurants to Toronto. That contract will see 15 IHOP locations built in the metropolis over the next seven years, with the first slated to open in mid-2020. The campaign is projected to create about 900 jobs and contribute $15 million to Toronto’s construction industry. The partners have not disclosed exactly where the restaurants will be located. The agreement with Minhas is IHOP’s second expansion deal in Canada this year. In April, Dine Brands partnered with hospitality franchisee Corey Craig Group, based in Moncton, New Brunswick, to open the first five IHOP restaurants in Canada’s North Atlantic provinces of New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, over the next six years. The first restaurant is scheduled to open in Moncton this December. Canada was Dine Brands’ first international market for IHOP, with the brand’s first non-U.S. restaurant opening in the British Columbia community New Westminster in 1969 — making this IHOP’s 50th year in the country. Lecocq said the next target market for IHOP in Canada will be Quebec. Since March, Dine Brands also signed deals to open 19 IHOP franchises in Pakistan, 25 in Peru and 12 in Ecuador, three of which are already open. The first openings in Peru and Pakistan are expected during the fourth quarter this year and the first quarter of 2020, respectively. “We already have an existing team in Mexico, so being Spanish-speakers and being somewhat familiar with cultures makes it easier to leverage that (in Central and South America). … For us this is a natural continuation further south. Ecuador and Peru seem to have an affinity for American brands and an evolving lifestyle for breakfast,” Lecocq said. “Over a multi-year time horizon, it doesn’t look as scattershot an approach.” He added Dine Brands is actively exploring opportunities to franchise IHOP in the United Kingdom and Ireland. “There’s a space in the market for our brand,” he said. “We’ll do something there in the next year.” In the company’s quarterly earnings call, Chief Executive Steve Joyce said: “One of the many compelling attributes of our highly franchised model is the ability to generate stable and substantial free cash flow. This enables us to return significant capital to our shareholders.” For the third quarter, the company reported adjusted net income of $23.9 million ($1.55 a share) on total revenue of $845 million, beating analyst estimates. The report marked IHOP’s seventh consecutive quarter of positive sales growth.