Franchise Costs: Detailed Estimates of IHOP Franchise Costs (2020 FDD)

Updated July 6, 2020.

Detailed Estimates of IHOP Franchise Costs Based on Item 7 (Estimated Initial Investment) of IHOP’s 2020 Franchise Disclosure Document

Single Store Development Program

1.  Location Fee:  $15,000

• This figure assumes the franchisor will view only one proposed site. If the franchisor views a second site, you will reimburse IHOP for its costs, including transportation, meals, and lodging. The cost will range from approximately $200 to $3,000.

2.  Initial Franchise Fee:  $50,000 (less $15,000 Location Fee paid, for a total of $35,000)

• If you have paid the Location Fee, it will be applied to the Initial Franchise Fee, in which case you will only pay the balance of $35,000 upon execution of the Franchise Agreement.

• The franchisor reserves the right in its discretion to reduce or waive the Initial Franchise Fee in certain circumstances.

3.  Real Estate:  $300,000 to $2,500,000

• The above figures assume that you will purchase the Franchised Location from a third party and convert or construct a Restaurant. The typical Restaurant is approximately 4,000 to 6,000 square feet on a lot of approximately 30,000 to 60,000 square feet.

• If you wish and are able to lease the real estate and/or building from a third party, you must make lease payments typically on a monthly basis. Also, you may need to make security deposits with the landlord.

• Unusual site preparation and utility connection costs and fees could increase costs.

4.  Construction:  $450,000 to $2,300,000

5.  Major Equipment and Fixtures:  $200,000 to $600,000

6.  Smallware Package/Opening Order:  $15,000 to $30,000

7.  Signage:  $15,000 to $100,000

8.  Inventory:  $10,000 to $30,000

9.  Working Capital:  $10,000 to $60,000

10.  Insurance:  $30,000 to $75,000

• These figures assume that you will pay the entire insurance premiums for the first year on or before opening the franchise. Most franchisees, however, pay the premiums in installments, which may be monthly, quarterly, or semi-annually, and the actual initial investment would be lower.

11.  On-Location Assistance:  $0 to $16,000

12.  Site Approval Costs:  $0 to $50,000

• You must obtain various photographs, surveys, demographic information packages, and similar items for submission to the franchisor in connection with the approval of your proposed location.

13.  Impact Study:  $4,000 to $6,000

• If you propose a site for your Restaurant which is within a 5 mile radius or a 10 minute drive of a Restaurant that is subject to the Development Impact Assistance Program, you must have an impact study conducted by an independent third party before IHOP can evaluate your proposed site. You must pay the cost of the impact study for each study conducted.

• The number of studies to be conducted will depend upon the number of existing franchised locations that are subject to the Development Impact Assistance Program and which IHOP determines are affected by your proposed site.

14.  Opening Training Support Fee:  $0 to $16,500

• The amount of the fee will be based on the number of trainers deemed necessary by IHOP, in its sole discretion, unless waived by it. The fee is subject to increase if the opening schedule changes or if overtime is requested and/or approved by IHOP.

15.  POS Setup, Training, and Support Fee:  $3,500 to $7,980

• The amount of the fee will be based on whether the POS support is onsite or remote. The support must be onsite for the first 3 Restaurants you open and will cost $5,700 plus airfare. After you open your 4th Restaurant, you may opt for remote support at the fee of $2,500.

16.  Transaction Services/Oracle Hospitality eCommerce Integration Cloud Services (“OHEICS”):  $300 to $500 per year

• You must sign an Authorized Operator Agreement for Dispatch Services for access and use of an approved provider’s on-line ordering system. Transaction Services/OHEICS is an application program interface that is required in connection with on-line ordering.

17.  Europay, Mastercard, and Visa (“EMV”) Point to Point Encryption (“P2P”) Services:  $1,000 to $2,500

• You must purchase equipment and procure services from Shift4 Payments (formerly known as Merchant-Link, LLC) for credit card processing services. These figures include the estimated cost to purchase the equipment and a monthly fee of $66.

18.  Wi-Fi Services:  $90 to $400 per month

• You must have Wi-Fi connection in your Restaurant with sufficient bandwidth to support restaurant operations and guests’ needs. Wi-Fi connection is required in order to utilize DinePlate and other technology platforms.

19.  Kitchen Display System:  $15,000 to $20,000

• You must have a kitchen display system (“KDS”) to monitor and organize orders received at your Restaurant.

20.  Server Tablets:  $0 to $20,000

• You currently have the option regarding whether to purchase server tablets for tableside conversational ordering that allows a server and a customer to have a dialogue when such customer places an order. The franchisor may in the future require you to purchase one or more server tablets for your Restaurant.

• These figures include the estimated cost to purchase the approximately 7-10 tablets, chargers, batteries, and skins.

21.  On-Line Ordering:  $91 per month

• You must sign an Authorized Operator Agreement for Dispatch Services for access and use of an approved provider’s on-line ordering system. These figures include the estimated cost for services provided by Mobo Systems, Inc. and Shift4 Payments (formerly known as Merchant-Link, LLC) related to on-line ordering.

22.  Gateway Processing Fees:  $66 per month

• This fee is required and covers transaction processing costs to route transactions from the POS to the credit or gift card provider. These fees are in addition to any processing fees charged by your credit card and gift card processor.

23.  Digital Products Service Fee:  $0 to $350 per month

• Digital products are currently not available, but IHOP may require “I’ve Arrived,” guest payment and ordering from their own device (“Bring Your Own Device”), and other digital products in the future. The current fees reflect software as a service pricing, but IHOP may charge you transaction pricing in the future.

24.  Implementation Fees:  $250 to $500

• These fees relate to deployment and support for hardware and software upgrades, as well as other products.

25.  POS System:  $20,000 to $30,000

• Subject to some exceptions, you must purchase or lease, depending on the program, an IHOP-approved POS computer system. All newly-developed Restaurants are required to have a MICROS POS computer system, unless another IHOP-approved system is agreed to in writing by IHOP in its sole discretion.

• The current cost of purchasing the POS computer system is between $20,000 and $30,000 and includes the software license and hardware. All Restaurants must have a POS computer system that meets IHOP’s specifications.

• This describes IHOP’s current POS system and provider; however, IHOP may, from time to time, evaluate and approve other systems and/or vendors as an additional POS provider. IHOP reserves the right to increase these fees.

26.  No Wait:  $0 to $69 per month

• Waitlist enables restaurants to seat more guests, more efficiently through a service provided by NoWait. Waitlist is currently optional but may be required by IHOP in the future.

27.  Customer Relationship Management (CRM) Fee:  $0 to $150 per month

• This fee may be funded by the National Advertising Fund or there could be all or a portion of the fees required to be paid directly by the franchisee.

28.  Catering:  $0 to $30 per month

• Catering is currently optional but may be required in the future. The current approved supplier for catering is Mobo Systems, Inc.; however, IHOP may, from time to time, evaluate and approve other vendors as an approved supplier.

29.  Initial Additional Training Expenses:  $4,000 to $7,000 per person

30.  Supply Chain Co-op Stock Purchase:  $0 to $100

• Membership in the Pancake Supply Chain Co-Op, Inc. is voluntary. If you choose to join, this fee must be paid.

31.  Food Safety Evaluation Reaudit Fee:  $0 to $1,220

• If your Restaurant fails a routine food safety evaluation (“FSE”), it will receive an automatic unannounced FSE reaudit prior to the next routine FSE. You will be billed (either by IHOP or the third party) and must promptly pay the approximately $305 cost of the reaudit, which amount is subject to change from time to time.

• If your Restaurant fails the FSE reaudit, additional FSE reaudits will be conducted at your sole cost and expense until your Restaurant passes. If you have any unpaid FSE reaudit invoices, all pending reaudits for the franchisee may be put on hold.

• The $1,220 figure represents a Restaurant that requires 4 FSE reaudits but note that you must pay for the costs of all reaudits until your Restaurant passes, unless otherwise agreed to in writing by IHOP.

32.  Additional Funds – 3 Months:  $16,500 to $85,250

33.  Miscellaneous:  $5,000 to $26,000

• The amount includes such items as promotional programs, tax deposits, license fees, utility deposits, and other costs as may be applicable to each location.

34.  Total:  $1,150,066 to $6,037,673