IHOP Unveils New Franchising Strategy

Glendale, California--IHOP Corp. recently said it would abandon the financing of turnkey franchises and embrace a traditional franchise development model, using cash flow generated from the new strategy to pay a dividend to shareholders on a regular quarterly basis. The new model should raise the return to franchisees as well. Under the new model, a franchisee who put up $300,000 in equity--20 percent of a $1.5 million unit, for example--could earn about $150,000 or more a year, which would be at least a 50 percent return on equity. Under the old model, the typical restaurant made $30,000 a year on a $50,000 investment, with the rest of the franchise free, plus other expenditures, financed by IHOP. The franchise fee will also be reduced to $50,000 from $250,000. -Nation's Restaurant News