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IHOP as a Successful Franchise

By: Angelo Tenerelli


North Carolina Graduation Project
Spring 2016
Zimmerman 3rd Period
English IV

IHOP as a Successful Franchise


A franchise is defined as the right to sell a company's goods or services in a particular
area; also : a business that is given such a right (Franchise 1). There were many franchises in
the late 1950s around the time that IHOP was established. Franchises such as Dennys
Incorporated and Waffle House Incorporated were, and still are, competition for IHOP as a
family-dining franchise. Since its beginning in 1958, the IHOP franchise has grown
significantly over the years and shown its competitiveness with other food chains.
IHOP is a franchise that is very successful in the family-dining industry. With average
ticket sales of $7, IHOP franchises have to make their money one waffle at a time (Ramos 1).
All of IHOPs menu items are around seven or eight dollars, which means an average ticket sale
of seven dollars is pretty decent. IHOP has 51 locations in Georgia, making it the state with the
fourth-highest number of IHOPs after California, Texas and Florida. But franchise owners have
plans to build more than a dozen new locations soon (Ramos 1). IHOP has expanded as a
corporation across the country. It shows how owners plan to expand the franchise. Ramos wrote
Scripture said the new corporate policy makes much more sense. Good franchisees who know
how to operate a restaurant properly within the structure can develop on their own, he said. The
new challenge, added Scripture, is learning how to be competent developers and get
financing (Ramos 1). IHOPs corporate made changes to the policy that all of the IHOP
restaurants run off of to advance the franchise further into the world of family-dining. The more
a company experiments with its own rules and policies, the more it can figure out about how to
run the business smoothly. Scripture said about $100 million was moved from financing new
franchises into corporate management, marketing, and dividends, Now, the chain advertises

nationally as opposed to fragmented by region, which Scripture said helped boost store sales
(Ramos 1). IHOPs corporate realized the potential of the food chain and made a move in the
direction of advertising the franchise for increased publicity. Of course IHOPs specialty food
category is breakfast which means the restaurants must excel in the making of breakfast food
items. Scripture said that about 35 percent of the business in his five locations, which include
Woodstock, Cobb Parkway, South Cobb Drive and Austell, comes from breakfast. So while
revenue from the three meals are split about evenly, he said many customers order breakfast all
day long, which is one reason IHOP doesnt want to retreat from its market position as the place
for breakfast 24/7 (Ramos 2). IHOP is known all over the country for being the International
House of Pancakes, which just so happens to be a breakfast food. The fact that IHOP serves
breakfast all day is a business decision that worked out quite well for the franchise. It is always
good to do something that your competitors have not done, such as serving breakfast all day or
serving four different syrup flavors such as old fashioned, butter pecan, strawberry, and
blueberry. With all these options, IHOP had to come up with a slogan to match. With the slogan,
Come hungry and leave happy, new menu items have bolder flavors like cheese blintzes (crepestyle pancakes filled with cheese, strawberry preservatives and creme cheese) and grilled cod
hollandaise. All of these changes led to double-digit increases in year-over-year comparable sales
in 2003 and 2004 (Ramos 2). IHOP continued to expand its menu for more variety to satisfy all
different types of people, however it may have been taken a little too far. Some people are either
too picky about what they want to eat, or they just like everything and cant decide which dish
sounds best to them. IHOP as a corporation has expanded its business and become very
successful over the years.

The company now stands as the third-largest family-style dining chain, just behind
Dennys Corporation and Waffle House Inc. Each year, IHOP restaurants serve over 700 million
pancakes, 20 million pounds of breakfast meats, and over 300 million cups of coffee (IHOP 1).
These were results of a survey taken in 2003. The results show how far IHOP has come since it
opened in 1958 and how successful the franchise is. A year later, in 1959, the IHOP chain
became an operating division of International Industries, a public company that held more than
20 different businesses and was strongly rooted in the franchising concept (IHOP 1). It only
took IHOP a short amount of time, about a year, before the start of the small business gradual
economic incline up through the family-dining industry. By 1975, International Industries
folded, releasing its unprofitable divisions and leaving IHOP on its own. Its chief financial
officer, Richard K. Herzer, saw promise in the previously successful IHOP division and began
working with its creditors to keep the IHOP concept alive (IHOP 2). Some people saw a future
for the franchise and took the motive to help it back up on its feet when it fell down. In 1979, a
majority of IHOP Corporations stock was purchased by Wienerwald Holding, a swiss company
that controlled other restaurant chains in the United States, including the 225-unit Lums chain.
Herzer was appointed president of IHOP by Wienerwalds chairman, swiss entrepreneur
Friedrich Jahn (IHOP 2). Herzer must have felt a big relief when Wienerwald purchased most of
IHOPs stock because that lifted the debt obligations from his shoulders. Herzer then had more
time to focus on restructuring and improving IHOP. In 1981, IHOP became a private company
when Jahn repurchased 52 percent of its stock. Unfortunately, he had actually borrowed $8
million to complete the $12 million transaction. Wienerwald declared bankruptcy in August
1982, leaving IHOP to SVIDO, a swiss holding company which had no restaurant management
background and left IHOPs management in place to run the chain (IHOP 2). Jahn must have

overlooked the risks of borrowing such an enormous sum of money, because the company ended
up with a holding company that knew nothing about running a restaurant. Herzer was named
IHOPs chief executive and chairman in 1983 and began the long process of restructuring IHOP
in order to position the restaurant chain as a dominant presence in the family restaurant business
(IHOP 2). Herzer was continually doing things to improve the IHOP chain because he believed
in it. He knew that the chain would succeed and possibly go down in history.
IHOPs history is an interesting one. 1958: Founders Al and Jerry Lapin, along with
early investors Al and Trudy Kallis, open the first International House of Pancakes in the Los
Angeles suburb of Toluca Lake, California (IHOP History 1). IHOP started off very small and
had to expand as a business. 1960: Company begins to expand through franchising (IHOP
History 1). IHOP started its roller coaster of a journey up in the food franchise industry. 1985:
The Rooty Tooty Fresh N Fruity is introduced, and guests across the country have fun
pronouncing the one-of-a-kind breakfast (IHOP History 1). Unique names for food dishes
makes it fun for the customers and creates a friendly environment that they would be happy to
come back to. 2003: The award-winning Come Hungry. Leave Happy. advertising campaign
launches and IHOP introduces our popular Stuffed French Toast (IHOP History 2). Creating a
catchy slogan for the company is smart way to bring in customers to further grow the company
and keep customers happy.
Satisfied customers lead to good franchise reviews about the chain. We were shown to
our booth and waited on by a young lady that I have determined to be the best waitress in the
world, ever. Youthful, upbeat, smart, dutiful, funny, Jessica. She handed us a pile of glossy,
colorful menus. She took our drink orders, tea, sweet tea, and for Adam, an iced mocha. I didnt
even know he liked mocha (Bentley 1). Customer service is an immense aspect of any smooth

running business, and IHOP does it well. If I have one complaint about IHOP, its the menu.
Theyre pretty and spill-proof, but it contains too much. We sent poor Jessica away three times,
replying to her that yes indeed, we still needed a few more minutes to choose. There was too
much to choose from and it all looked very good (Bentley 1). IHOP may have grown itself to
meet such a variety of appetites, however it lead to the unhappiness of some customers due to the
rather large selection of delicious food. The coffee was fresh and good, not too weak. Within a
few more minutes our plates arrived. About the food, I can only say this. It was near perfect.
Properly prepared, as ordered, not too much or too little of anything. Thats the benefit of IHOPs
menu, theres nothing bold or complicated. No fussy sauces or fickle proteins or produce. These
are basic, simple dishes, no grand recipes. IHOP lives up to their name when it comes to
pancakes, light, fluffy, perfectly browned (Bentley 2). IHOP found ways that it could have such
a large selection of food items yet still balance it properly to keep customers happy. The place
was clean, roomy, and comfortable. The food was, for the most part, exactly what we expected,
wanted, and we left fully satisfied, with a takeout box of mozzarella sticks and chicken fingers
(Bentley 2). Customers can not only come hungry to IHOP, but they can leave happy, knowing
that they still have some leftovers.
IHOP, as a franchise, is very successful. It all started with two brothers who just
wanted to start a business, and it grew into an enormous franchise. IHOP had points where it
didnt look like the food chain was going to survive, but somehow it got back up on its feet and
kept chugging along. Different business strategies and decisions helped to further expand the
franchise and become more successful over the years. IHOP should continue with whatever
future plans it has going on for the franchise because previous plans seemed to have worked out
in the companys favor in the past, therefore IHOP has good luck with change. IHOP should

most likely see another great increase in sales and production over the next couple of years based
on the direction the franchise is headed currently.

Works Cited
Bentley, Dennis. "IHOP." Review. Web log post. Eat and Critique Blog. N.p., 10 July 2012. Web.
04 Feb. 2016. <http://eatandcritique.blogspot.com/2012/07/ihop.html>.
"Franchise." Merriam-Webster. Merriam-Webster Incorporated, n.d. Web. 1 Mar. 2016.
"IHOP Corp." Encyclopedia. International Directory of Company Histories, n.d. Web. 04 Feb.
2016. <http://www.encyclopedia.com/topic/IHOP_Corp.aspx>.
"IHOP History." IHOP. IHOP, n.d. Web. 04 Feb. 2016. <http://www.ihop.com/aboutihop/history>.
Ramos, Rachel Tobin. "IHOP's Recipe for Success." Franchise Opportunities Journal. N.p., n.d.
Web. 04 Feb. 2016.
<http://franchiseopportunitiesjournal.com/articles/franchise/ihop.htm>.