IHOP, originally known as the International House of Pancakes, was founded in 1958 in Los Angeles, California. Today, it is headquartered in Glendale, California, and has become a leading name in the family dining sector. IHOP began franchising in 1960, just two years after its inception, and has since expanded to over 1,750 locations worldwide, including the USA, Puerto Rico, Guam, and various countries such as Mexico, Canada, Ecuador, Egypt, India, Pakistan, Panama, and Peru.
IHOP is renowned for its extensive menu that goes beyond pancakes, offering a variety of breakfast, lunch, and dinner options. What sets IHOP apart is its consistent focus on creating a welcoming and friendly dining experience, which is reflected in their commitment to high-quality service and affordable prices. The chain has maintained its popularity by continuously evolving its menu and maintaining strong brand recognition through effective marketing and a recognizable brand identity.
One of the significant advantages of owning an IHOP franchise is the comprehensive support system provided by the company. Franchisees benefit from professional training, ongoing operational support, and marketing assistance, which help in managing the business effectively. Additionally, IHOP franchisees gain access to an established customer base and the credibility of a well-known brand.
IHOP Franchise Financial Model
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IHOP Franchise Financial Model
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Initial investment
Here’s what you can expect to spend to start a IHOP franchise.
Note:The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in theItem 7of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by thefranchisor, please consult the Franchise Disclosure Document.
Franchise fees & Royalties
Here are the main ongoing fees the franchisor will ask you to pay going forward to run the franchise.
Initial Franchise Fee
The initial franchise fee for an IHOP franchise is $50,000. This fee is reduced by the $15,000 Location Fee if a Single Store Development Agreement is signed.
Royalty Fee
The royalty fee is 4.5% of gross sales.
Marketing/Advertising Fee
The marketing or advertising fee is 3.5% of gross sales.
Transfer Fees
The transfer fee for a franchise agreement is $7,500, plus a $5,000 training fee per person per restaurant. For a Multi-Store Development Agreement, the transfer fee is $2,500.
Renewal Fees
The renewal fee is $50,000 for extending the right to operate a restaurant under a new franchise agreement after the expiration of the existing agreement.
IHOP Franchise Financial Model
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IHOP Franchise Financial Model
Get a professional financial plan for your franchise application. In 2023 we have helped over 120 franchisees get funding for their franchise.
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Franchise pros and cons
Pros
- Solid franchise support: IHOP provides its franchisees with all the support they need to grow and succeed in the operations of their restaurants. It gives franchisees support in site selection assistance, restaurant design planning assistance, restaurant opening assistance, ongoing operations, and marketing consulting.
- Financial assistance: The franchisor may offer to finance a portion of the initial fee under the purchase program. Also, in some exceptional cases, the franchisor may finance the entire initial franchise fee for its franchisees.
- Global presence: With more than 1,600 units worldwide, IHOP is one of the fastest-growing franchises. This gives new franchisees great growth opportunities. As it continues exploring new markets, would-be franchisees can easily penetrate existing and new markets since the parent company already enjoys a huge customer following.
- Brand popularity: The IHOP brand is well known for its award-winning breakfast pancakes, dinner, and lunch items. It offers delicious food and warm friendly services that give customers a great dining experience. Franchisees can market easily with fewer efforts as customers already know what the brand offers.
- Training support: IHOP offers new franchisees extensive training to help them get started on the right foot. This includes restaurant operation skills training, brand standard operating practices, an IHOP-approved food safety certification program, ongoing training, and refresher courses.
- Exclusive territory: In exceptional cases, the franchisor grants franchisees the right to operate a single restaurant at a specified location approved by the franchisor. The franchisor offers exclusive protection to franchisees who are committed to growth.
Cons
- Competition: One drawback of IHOP is that it faces stiff competition from market leaders such as Waffle House and Denny’s. This gives customers many options and makes an IHOP franchise less attractive to investors.
- Limited lunch and dinner menus: The brand has a great breakfast menu but not dinner or lunch. This means that its competitors can offer customers better lunch and dinner options. Therefore, new franchisees may not have a competitive advantage in this segment.
- No absentee ownership: The franchisor requires the franchisee to be actively involved in the day-to-day operations of the restaurant. Franchisees must also attend and complete the training program together with the appointed certified leaders. The IHOP does not provide passive investment opportunities and is quite demanding.
How to open a IHOP franchise
Opening a IHOP franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a IHOP franchise.
1. Research and Evaluate the Franchise Opportunity
- Understand the Brand: Learn about IHOP’s history, market presence, and brand values to ensure it aligns with your business goals.
- Review Financial Requirements: Ensure you meet the financial criteria, including a minimum net worth of $1.5 million and $500,000 in liquid assets per restaurant.
- Consider Location: Evaluate potential locations for your IHOP franchise, considering both traditional and non-traditional venues.
2. Submit a Request for Consideration
- Initial Inquiry: Complete the initial franchise inquiry form to express your interest in becoming an IHOP franchisee.
- Application Process: Fill out a detailed application that includes your financial status, business experience, and location preferences.
- Review: The IHOP Franchise Development Team will review your application to determine if it aligns with their development goals.
3. Attend an Interview and Undergo Due Diligence
- Interview: Participate in an interview with IHOP representatives to discuss your qualifications and plans.
- Site Visit: Visit existing IHOP locations to gain a better understanding of operations and expectations.
- Financial and Legal Review: Conduct a thorough review of the franchise disclosure document (FDD) and seek advice from financial and legal advisors to understand the terms and conditions.
4. Secure Financing and Finalize Agreements
- Obtain Financing: Secure the necessary financing, either through personal funds or loans from lending partners recommended by IHOP.
- Sign Agreements: Sign the franchise agreement and any other necessary documents, committing to the terms and conditions outlined by IHOP.
- Pay Initial Fees: Pay the initial franchise fee and other upfront costs required to begin the franchising process.
5. Complete Training and Prepare for Opening
- Initial Training: Attend comprehensive training programs provided by IHOP, covering operations, customer service, marketing, and management.
- Site Selection and Build-Out: Work with IHOP’s team to select a suitable site and design the restaurant layout according to brand standards.
- Pre-Opening Support: Receive assistance with the restaurant opening, including marketing support and operational setup.
Disclaimer
Disclaimer: This content has been madefor informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained inthis articleconstitutes a solicitation, recommendation, endorsem*nt, advertisem*nt, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.
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