Considering an IHOP Franchise? Don’t Overlook These 26 Important Franchise Fees

Updated July 6, 2020.

If you are considering an IHOP franchise, don’t get blindsided by these 26 important franchise fees (from the initial franchise fee, to the royalty fee, to 24 other fees found in Items 5 and 6 of IHOP’s 2020 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 into 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:  $0 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 $0 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, if overtime is requested, or if travel expenses exceed original projections.

4.  Point-of-Sale (“POS”) Setup, Training, and Support:  $7,980 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 $7,980 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 $3,500.

5.  Payments for Goods Received from IHOP:  $15,000 to $30,00

• 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, if it sells such items.

• 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:  Billed weekly and due 16 days after invoice date.

• 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.

• Commencing on January 1, 2023, the National Advertising Fee will be the greater of (i) 2.25% of total Gross Sales or (ii) the National Advertising Fee set forth in at least 88% of the 2023 Franchise Agreements.

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

• Due Date:  Same as Royalty Fee.

• This fee is optional until December 31, 2022.

• 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:  varies depending on your decision to participate

• Due Date:  Same as Royalty Fee.

• This fee is optional.

• 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.  Additional Training Fee:  $5,000 per person per Restaurant

• Due Date:  Prior to training.

• Payable if your manager is replaced, requiring the new manager to complete Initial Training.

11.  Additional Assistance Fee:  $375 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.

12.  Compliance Audit Fee and Interest:  interest on the understated or unpaid amounts due to IHOP at the highest rate allowed by law, plus cost of audit

• Due Date:  On demand.

• Interest is due on any understated or unpaid amounts due to IHOP.

• Audit fee is payable if audit shows an understatement of at least 2% of Gross Sales for any period, or if you fail to produce records.

13.  Delayed Approval Fee:  $170 per day

• Due Date:  Upon your request for additional time.

• For Single Store Development Program.

14.  Delayed Development Fee:  $350 per day

• Due Date:  Upon your request for additional time.

• For Multi-Store Development and Single Store Development Program only.

15.  Dine Brands Restaurant Technology Support Center (Help Desk):  $1,600 to $1,800 per year, subject to change

• Due Date:  30 days after billing.

• This service is optional.

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

• Due Date:  30 days after billing (billed annually).

• 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.

17.  Implementation Fees:  $250 to $500

• Due Date:  Upon demand.

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

18.  Customer Relationship Management (“CRM”) Fee:  $125 to $150 per month per Restaurant

• Due Date:  Upon demand.

• 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.

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.  Late Fee:  highest rate permitted by law or 1.5% per month, whichever is less

• Due Date:  Continues to accrue until paid.

• Payable if you are late paying any amount due to IHOP or an IHOP affiliate.

21.  National Gift Card Program Charges:  15% of the redeemed portion of gift cards sold in the national program, but the amount may change

• Due Date:  Cost is recovered as part of the periodic electronic settlement process for sales and redemptions of gift cards.

• Permits IHOP or its affiliate to recover cost incurred to operate the national gift card program (i.e. gift cards sold through channels other than the Restaurant).

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

• Due Date:  30 days after billing.

• Only if requested by you.

• The amount may vary depending upon number of trainers and hours worked.

23.  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 IHOP negotiates the Initial Franchise Fee in two-tiered installments.

24.  Supplier/Distributor Approval:  costs of sample testing, plus other actual costs, such as facility inspection

• Due Date:  30 days after billing.

• Payable if you want IHOP to approve a new supplier, and IHOP requires a test of the supplier’s products and/or inspection of the supplier/distributor. IHOP’s testing may include sensory panels, audits, consumer panels, and nutritional testing.

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

26.  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.