IHOP Franchise Costs Examined on Top Franchise Blog (2017 FDD)

This post was updated on September 14, 2017 to reflect information from IHOP’s 2017 FDD (Item 7).

Detailed Estimates of IHOP Franchise Costs Based on Item 7 (Estimated Initial Investment) of IHOP’s 2017 Franchise Disclosure Document

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 Location Fee paid)

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 $2,000,000

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. Site Approval Costs: $1,000 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.

12. Impact Study: $4,000 to $6,000

If you proposed 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.

13. Opening Training Support Fee: $5,500 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.

14. POS Setup, Training, and Support Fee: $2,500 to $5,700

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.

15. Initial Additional Training Expenses: $4,000 to $7,000

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

Membership in the cooperative is voluntary. If you choose to join, this fee must be paid.

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

18. 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.

19. Total: $1,118,500 to $5,441,550