Earnings Claims of Top Franchises Revealed

Earnings Claims of Top Franchises Revealed

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Considering an IHOP Franchise? Don’t Overlook These 24 Important Franchise Fees

by Franchise Chatter on September 16, 2017

in Breakfast Franchise, Casual-Dining Restaurant Franchise, Diner Franchise, Franchise Fees



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Don't Invest in a Franchise Until You Check Out This List

If you are considering an IHOP franchise, don’t get blindsided by these 24 important franchise fees (from the initial franchise fee, to the royalty fee, to 22 other fees found in Items 5 and 6 of IHOP’s 2017 FDD).

1.  Initial Franchise Fee – Single Store:  $50,000

  • Under the Single Store Development Program, you must sign a Single Store Development Agreement and pay a Location Fee of $15,000 to hold either one site or one trade area pending IHOP’s approval of a site.
  • If you enter a Franchise Agreement, you must construct and equip the Restaurant, acquire and convert an existing building, or acquire an existing IHOP Restaurant, and pay an Initial Franchise Fee of $50,000.
  • If you first sign a Single Store Development Agreement and pay IHOP a Location Fee of $15,000 and then sign a Franchise Agreement for the site, the Location Fee will be applied to the Initial Franchise Fee.

2.  Development Fee – Multi-Store:  $20,000 times the number of Restaurants that you agree to develop; Initial Franchise Fee – Multi-Store:  $40,000

  • Under the Multi-Store Development Program, you must develop a specified number of IHOP Restaurants within your exclusive area per a negotiated schedule. Like the Single Store Development Program, you would be responsible for acquiring or constructing and equipping the Restaurants.
  • On signing the Multi-Store Development Agreement, you must pay a non-refundable “Development Fee” equal to $20,000 times the number of Restaurants that you agree to develop.
  • For each Restaurant you develop, you must sign a separate Franchise Agreement and pay an Initial Franchise Fee equal to $40,000, and IHOP will credit the Development Fee (at the rate of $20,000 per Restaurant until exhausted) toward the Initial Franchise Fee for each Franchise Agreement that you sign.

3.  Opening Training Support Fees:  $5,500 and $16,500



  • If you are participating in the Single Store Development or Multi-Store Development Programs, and IHOP determines you will need training support and/or operational assistance to open your Restaurant, you may pay an Opening Training Support Fee of between $5,500 and $16,500 upon execution of your Franchise Agreement, based upon the number of trainers deemed necessary by IHOP.
  • This fee is subject to increase if the opening schedule changes or if overtime is requested.

4.  Point-of-Sale (“POS”) Setup, Training, and Support:  $5,700 plus airfare for onsite implementation support

  • If IHOP determines you will need POS setup, training, and support for a new Restaurant opening, you will pay IHOP $5,700 plus airfare for onsite implementation support for each of your first three Restaurant openings.
  • Beginning with your fourth Restaurant, you may opt for remote POS setup, training, and support for the cost of $2,500.

5.  Payments for Goods Received from IHOP:  $200,000 to $600,00

  • If you are participating in the Single Store Development or Multi-Store Development Program, you must purchase and cause to be delivered and installed before the opening of the Restaurant(s), certain items of equipment and an inventory of smallwares.
  • You may purchase these items of equipment and smallwares from any supplier that is approved by IHOP or from IHOP or an IHOP Affiliate.
  • During IHOP’s fiscal year ended January 1, 2017, the cost to purchase these items of equipment and inventory and to have them installed and delivered ranged from $200,000 to $600,000.
  • If you elect to order and purchase any items from IHOP or an IHOP Affiliate, if it sells the items, the cost will be between approximately $15,000 and $30,000, depending on the items purchased.

6.  Royalty:  4.5% of total Gross Sales

  • Due Date:  Payable weekly on the Wednesday of the next week.
  • Gross Sales include all revenue from the Restaurant except sales or use tax.

7.  National Advertising Fee:  3.5% of total Gross Sales

  • Due Date:  Same as Royalty Fee.
  • IHOP pools these funds with payments from all U.S. franchisees.

8.  Local Advertising Fee:  there is currently no Local Advertising Fee

  • Due Date:  Same as Royalty Fee.
  • Commencing on January 1, 2023, the Local Advertising Fee will be (i) .75% of total Gross Sales or (ii) if the National Advertising Fee is at least 3.5%, the Local Advertising Fee set forth in at least 88% of the 2023 Franchise Agreements.

9.  Cooperative Advertising:  same as Local Advertising Fee

  • Due Date:  Same as Royalty Fee.
  • Payments to co-op will be credited against your Local Advertising Fee, and an agreed upon percentage of Gross Sales may be utilized to fund media.

10.  DineEquity Restaurant Technology Support Center (Help Desk):  $1,200 to $1,700 per year, subject to change

  • Due Date:  30 days after billing.
  • This service is optional.

11.  Opening Training Support Fee:  $5,500 to $16,500, depending on number of trainers provided by you

  • Due Date:  Upon execution of Franchise Agreement.
  • Only for Single Store Development and Multi-Store Development Program, as deemed necessary by IHOP, unless waived by IHOP.
  • Fee subject to increase if opening schedule changes or if overtime is requested.

12.  On-Location Assistance Fee:  $0 to $7,500

  • Due Date:  30 days after billing.
  • For Purchase Program only and only if requested by you. The amount may vary depending upon number of trainers and hours worked.

13.  Additional Training Fee:  $5,000



  • Due Date:  Prior to training.
  • Payable if your manager is replaced, requiring the new manager to complete Initial Training.

14.  Additional Assistance Fee:  $350 per day per person, plus reasonable transportation and living
expenses

  • Due Date:  Upon demand.
  • Payable if you request additional assistance from IHOP’s or an IHOP Affiliate’s training staff, or if IHOP requires if you do not have an approved manager.

15.  Transfer Fee (Franchise Agreement):  $7,500, plus $5,000 Training Fee per Restaurant

  • Due Date:  50% of Transfer Fee payable at the time you notify IHOP of the proposed transfer, and the balance payable by the effective date of transfer. Training Fee payable prior to commencement of training, prior to transfer.
  • Payable if you are approved to sell your franchise. Includes Training Fee for two people for one year. All or part of the Training Fee may be waived to the extent that, in IHOP’s judgment, training is not required.

16.  Transfer Fee (Multi-Store Development Agreement):  $2,500

  • Due Date:  50% of Transfer Fee payable at the time you notify IHOP of the proposed transfer, and the balance payable by the effective date of the transfer.
  • Payable if you are approved to sell your Multi-Store Development Agreement.

17.  Audit Fee:  cost of audit and any additional audit required, plus interest on underpayment at the highest rate allowed by law. Cost of re-audit is $285.

  • Due Date:  On demand.
  • Payable if audit shows an understatement of at least 2% of Gross Sales for any period, or if you fail to produce records.

18.  Late Fee:  highest rate permitted by law or 1 1/2% per month, whichever is less. Continues to accrue until paid.

  • Due Date:  Payable if you are late paying any amount due IHOP or an IHOP Affiliate.

19.  Insurance:  amount of Unpaid Premiums

  • Due Date:  Upon demand.
  • Payable only if IHOP elects to obtain coverage upon your failure to do so.

20.  Renewal Fee:  $10,000 for General Renewal Term; amount to be negotiated for Special Renewal Term

  • Due Date:  For General Renewal Term, upon execution of new Franchise Agreement. For Special Renewal Term, if any, weekly during extended term.
  • Special Renewal Fee only if less than 10 years remain in the lease term and you and IHOP negotiate the Initial Franchise Fee in two-tiered installments.

21.  Impact Fee Reimbursement:  Development Impact Assistant Program

  • Due Date:  Upon demand.
  • Payable if your Restaurant impacts an existing franchisee’s sales and other requirements in program are met.
  • For Single and Multi-Store Development Programs only.

22.  Delayed Development Fee:  $350 per day

  • Due Date:  Upon your request for additional time.
  • For Multi-Store Development and Single Store Development Program only.

23.  Delayed Approval Fee:  $170 per day

  • Due Date:  Upon your request for additional time.
  • For Single Store Development Program only.

24.  On-Line Ordering:  $91 a month

  • Due Date:  Upon demand


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