DINE BRANDS GLOBAL, INC.
You should read the following Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") in conjunction with the
consolidated financial statements and the related notes that appear elsewhere in
this report. Statements contained in this report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Please refer to the section of this report under the heading "Cautionary
Statement Regarding Forward-Looking Statements" for more information.
Overview
The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and the MD&A contained in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 . Except where the context indicates otherwise, the words "we," "us," "our," "Dine Brands Global" and the "Company" refer toDine Brands Global, Inc. , together with its subsidiaries that are consolidated in accordance withUnited States generally accepted accounting principles ("U.S. GAAP"). The financial tables appearing in Management's Discussion and Analysis present amounts in millions of dollars that are rounded from our consolidated financial statements presented in thousands of dollars. As a result, the tables may not foot or crossfoot due to rounding. Through various subsidiaries, we own, franchise and operate the Applebee's Neighborhood Grill & Bar® ("Applebee's") concept in the bar and grill segment within the casual dining category of the restaurant industry and we own and franchise theInternational House of Pancakes® ("IHOP") concept in the family dining category of the restaurant industry. References herein to Applebee's® and IHOP® restaurants are to these two restaurant concepts, whether operated by franchisees, area licensees and their sub-licensees (collectively, "area licensees") or by us. With over 3,500 restaurants combined, the substantial majority of which are franchised, we believe we are one of the largest full-service restaurant companies in the world. TheJune 15, 2020 issue of Nation'sRestaurant News reported that IHOP and Applebee's were the largest restaurant systems in the family dining and casual dining categories, respectively, in terms ofUnited States system-wide sales during 2019. We identify our business segments based on the organizational units used by management to monitor performance and make operating decisions. We currently have five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. We have four reportable segments: franchise operations (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations and financing operations. We consider these to be our reportable segments, regardless of whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.
Ongoing Impact of COVID-19
The global pandemic declared inMarch 2020 by theWorld Health Organization related to the outbreak of a novel strain of coronavirus, designated "COVID-19," continued to have a significant adverse impact on our operations throughout the second fiscal quarter and remains ongoing. Initially, international, federal, state and local governments reacted to the COVID-19 pandemic by encouraging or requiring "social distancing," instituting shelter-in-place orders, and requiring, in varying degrees, reduced operating hours, restaurant dine-in limitations, capacity limitations or other restrictions that largely limited restaurants to take-out and delivery sales. While shelter-in-place directives largely have been removed as ofJune 30, 2020 , most international, federal, state and local governments have maintained protocols that limit restaurant dine-in occupancy levels to 50% capacity or less at most of our restaurants. We and our franchisees have instituted operational procedures to comply with applicable regulatory requirements and to monitor developing health authority recommendations in order to protect the health and foster the confidence of employees and guests at the restaurants. We have taken several actions to mitigate the effects of the COVID-19 pandemic on the Company, its operations and its franchisees, as discussed below, some of which were initiated inMarch 2020 : •We drew down a total of$220 million from our revolving credit facility. Including approximately$3 million in letters of credit,$223 million of the total$225 million available under our revolving facility has been utilized. We had no immediate need for additional liquidity, but in light of then-current market conditions and uncertainty related to the COVID-19 pandemic, we drew on the revolving facility to maximize our financial flexibility. 29 -------------------------------------------------------------------------------- Table of Contents •We ceased repurchasing our common stock for the foreseeable future and our Board of Directors has decided not to declare a dividend for the second and third quarters of 2020. We will reevaluate our capital allocation strategy as industry conditions improve and normal restaurant operations resume. •We voluntarily increased the interest reserve set aside for our securitized debt, from the required$16.4 million to$34.8 million . •We voluntarily accelerated the funding of interest on our securitized debt with the redirection of cash receipts within the securitization structure. As ofJuly 27, 2020 , the interest payments on long-term debt dueSeptember 8, 2020 andDecember 7, 2020 have been fully funded, in addition to the$32.8 million of interest reserve noted above. •We have reduced discretionary costs, limited new hiring and significantly reduced the use of independent contractors. As ofJune 30, 2020 , approximately one-third of the team members across various functional groups in our restaurant support centers remain furloughed, while most of the hourly restaurant associates at our company-operated restaurants have returned to work following the re-opening of those restaurants. Our General & Administrative ("G&A") expenses for the three and six months endedJune 30, 2020 were lower than the same periods of the prior year by$8.5 million and$13.7 million , respectively. •We offered Applebee's franchisees the opportunity to defer payment of their royalty, advertising and IT support fees, primarily amounts due for the months of March and April. A total of 30 franchisees representing 94% of Applebee's restaurants have deferred payments totaling$33.4 million . Amounts deferred are scheduled to be repaid over nine months, beginning in the third quarter of 2020, and are not subject to any interest charges or other fees. •We offered IHOP franchisees the opportunity to defer their royalty, advertising, equipment rent and sublease rent payments, primarily amounts due for the months of March and April. A total of 193 franchisees representing 58% of IHOP restaurants have deferred payments totaling$22.3 million . Amounts deferred are scheduled to be repaid over 36 weeks, beginning in the third quarter of 2020, and are not subject to any interest charge or other fees. •We received rent deferrals and abatements on properties we lease of approximately$11 million , primarily related to properties on which IHOP restaurants are located, of which approximately$8 million relates to amounts scheduled to paid as ofJune 30, 2020 and$3 million relates to deferrals to be received over the last six months of 2020. •We allowed franchisees to defer their 2020 unit remodel and development obligations for up to 12 months. •We have worked with our franchisees to offer a limited menu and to modify their operating hours in the way they feel can optimize the functionality of their restaurants. OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the COVID-19 pandemic. Among the various provisions in the CARES Act, the Company is utilizing the payroll tax deferrals offered and has claimed an Employee Retention Credit. As ofJune 30, 2020 , the Company has deferred the payment of$0.7 million of payroll taxes, of which 50% will be paid byDecember 31, 2021 and the remaining 50% will be paid byDecember 31, 2022 . The Company also has claimed an Employee Retention Credit of$0.5 million as ofJune 30 , 2020.The Company did not receive any form of loan pursuant to the Paycheck Protection Program established under the CARES Act. Other than the deferrals and credits noted above, the Company did not receive financial aid pursuant to assistance programs offered by the federal government related to the COVID-19 pandemic.
Our total cash balances as of
December 31, 2019 March 31, 2020
(In millions)
Cash and cash equivalents $ 116.0
278.5
Restricted cash, current 40.7 34.2
31.2
Restricted cash, non-current 15.7 16.4 32.8 Total $ 172.4$ 395.2 $ 342.5 The increase in total cash balances fromDecember 31, 2019 toMarch 31, 2020 is primarily due to the draw-down of$220 million from our revolving credit facility inMarch 2020 . The decrease in total cash balances fromMarch 31, 2020 toJune 30, 2020 is primarily due the impact on our operations of the COVID-19 pandemic as discussed under "Consolidated Results of Operations - Comparison of the Three and Six Months endedJune 30, 2020 andJune 30, 2019 " as well as to our offering franchisees the opportunity to defer payments due to us as noted above. Operating activities used cash of$10.4 million for the six months endedJune 30, 2020 , while operating activities generated cash of$69.3 million for the six months endedJune 30, 2019 . The decrease primarily was due a significant decline in customer traffic at our restaurants that adversely impacted our segment operations and to payment deferrals we offered to our franchisees, partially offset by reduced G&A expenses and rent deferrals and abatements we received from our landlords. Franchisees are scheduled to begin repaying the deferrals noted above in the third quarter of 2020. Based on current forecasts, we believe we will return to generating cash from operations for the remainder of 2020. 30 -------------------------------------------------------------------------------- Table of Contents Based on projected positive operating cash flows, required interest and debt payments and other forecast expenditures, we believe we have adequate cash for at least the next 12 months to fund our operations and meet all of our financial commitments. As international, federal, state and local governments began to remove or modify existing restrictions on dine-in restaurant operations in certain jurisdictions, we and our franchisees have been able to increase dine-in services at Applebee's and IHOP restaurants in compliance with jurisdictional requirements. As a result, the operating status of IHOP and Applebee's restaurants changed during the second quarter of 2020 as follows:
Status as of 2020 Fiscal Month Ended
March April May June
Applebee's Domestic
Restaurants with dining rooms open* 4 46 815 1,522
Restaurants limited to off-premise sales 1,402 1,397 761 70
Restaurants temporarily closed 251 208 71 41
Total 1,657 1,651 1,647 1,633
% of total operating in some capacity 85 % 87 % 96 % 97 %
IHOP Domestic
Restaurants with dining rooms open* 204 3 925 1,485
Restaurants limited to off-premise sales 1,158 1,334 593 76
Restaurants temporarily closed 347 366 182 134
Total 1,709 1,703 1,700 1,695
% of total operating in some capacity 80 % 79 % 89 % 92 %
International
Restaurants with dining rooms open* 63 36 68 131 Restaurants limited to off-premise sales 55 89 75 56 Restaurants temporarily closed 131 124 102 57 Total 249 249 245 244 % of total operating in some capacity 47 % 50 % 58 % 77 %
* In most instances, limited to 50% capacity or less and/or reduced operating hours
The operating status of our restaurant remains fluid and subject to change. There can be no assurance the favorable trend in operating status noted above will continue or will not reverse as government authorities modify existing restrictions or implement new restrictions on dine-in restaurant operations in responses to changes in the number of COVID-19 infections in their respective jurisdictions, such as the increase in the number of infections experienced inJuly 2020 in various states.
As the number of restaurants with dining rooms open increased over the second quarter, our average weekly sales per restaurant increased as well:
Three Three
Average weekly unit sales (in months months
thousands) Fiscal Month of 2020 Ended ended ended
June 30, June 30,
April May June 2020 2019
Applebee's domestic $14.6 $22.8 $34.1 $25.0 $48.4 IHOP$8.7 $13.7 $22.2 $15.8 $36.8 Despite the improvement noted over the course of the second quarter, average weekly restaurant sales for the three months endedJune 30, 2020 decreased 48% at Applebee's restaurants and 57% at IHOP restaurants compared to the same period of the prior year. The decrease primarily was due to a substantial decline in customer traffic at our restaurants which had a significant unfavorable impact on the Key Financial Results presented below. Further, the significance of the impacts of the COVID-19 pandemic resulted in our performing impairment assessments of our long-lived assets, goodwill and other intangible assets. As a result of these assessments, we recorded impairment charges of approximately$124 million in during the three months endedJune 30, 2020 . See Consolidated Results of Operations - Comparison of the Three and Six Months endedJune 30, 2020 andJune 30, 2019 - Impairment and Closure Costs" for further discussion of the impairments. 31
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We cannot predict how long the COVID-19 pandemic and its impact on our
operations will last, whether or when recurrences of the virus may arise, what
restrictions on in-restaurant dining may be enacted or re-enacted, the timing
and extent of customer re-engagement with our brands and, in general, what the
short- and long-term impact on consumer discretionary spending the COVID-19
pandemic might have on us and the restaurant industry as a whole.
Key Financial Results
Three months ended June 30, Favorable Six months ended June 30,
(Unfavorable) Favorable
2020 2019 Variance 2020 2019 (Unfavorable) Variance
(In millions, except per share data)
(Loss) income before income taxes$ (146.8) $ 29.1 $ (175.8) $ (117.7) $ 70.2 $
(187.9)
Income tax benefit (provision) 12.0 (7.7) 19.7 5.3 (17.2) 22.5 Net (loss) income$ (134.8) $ 21.4 $ (156.1) $ (112.5) $ 53.0 $ (165.5) Effective tax rate 8.2 % 26.4 % 18.2 % 4.5 % 24.5 % 20.0 % Net (loss) income per diluted share$ (8.04) $ 1.18 $ (9.22) $ (6.69) $ 2.91 $ (9.60) % (decrease) % (decrease) Weighted average diluted shares 16.2 17.6 (7.9) % 16.2 17.6 (8.0) %
The following table highlights the primary components of the decrease in our
income before income taxes for the three and six months ended
Favorable
(Unfavorable) Variance
Three months ended Six months ended
June 30, 2020 June 30, 2020
(In millions)
Impairment and closure charges $ (124.1) $ (123.9)
Decrease in gross profit:
Applebee's franchise operations (23.8) (30.0)
IHOP franchise operations (29.2) (36.0)
Company restaurant operations (6.9) (10.1)
Rental and financing operations (4.7) (6.8)
Total decrease in gross profit (64.6) (82.9)
Decrease in G&A expenses 8.5 13.7
Loss on extinguishment of debt 8.3 8.3
Other income and expense items (3.8) (3.1)
Decrease in income before income taxes $ (175.8) $ (187.9)
The significant impacts of the COVID-19 pandemic resulted in our performing
impairment assessments of our long-lived assets, goodwill and other intangible
assets. As a result of these assessments, we recorded an impairment to
Applebee's goodwill of $92.2 million , an impairment to Applebee's intangible
assets of $14.3 million and impairments to long-lived assets of both brands
totaling approximately $17.2 million in the second quarter of 2020.
Gross profit for the three and six months ended June 30, 2020 decreased compared
to the same periods of the prior year, primarily due to a significant decrease
in customer traffic resulting from the measures undertaken to stem the spread of
COVID-19 discussed above and an increase in bad debt expense during the three
months ended June 30, 2020 .
See "Consolidated Results of Operations - Comparison of the Three and Six Months
ended June 30, 2020 and June 30, 2019 " for additional discussion of the changes
presented above.
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Key Performance Indicators
In evaluating the performance of each restaurant concept, we consider the key
performance indicators to be the system-wide sales percentage change, the
percentage change in domestic system-wide same-restaurant sales ("domestic
same-restaurant sales"), net franchise restaurant development and the change in
effective restaurants. Changes in both domestic same-restaurant sales and in the
number of Applebee's and IHOP restaurants will impact our system-wide retail
sales that drive franchise royalty revenues. Restaurant development also impacts
franchise revenues in the form of initial franchise fees and, in the case of
IHOP restaurants, sales of proprietary pancake and waffle dry mix.
Our key performance indicators for the three and six months ended June 30, 2020
were as follows:
Six months ended
Three months ended June 30, 2020 June 30, 2020
Applebee's IHOP Applebee's IHOP
Sales percentage decrease (53.5) % (64.3) % (32.5) % (39.1) %% decrease in domestic system-wide same-restaurant sales
(49.4) % (59.1) % (29.1) % (35.6) %
Net franchise restaurant reduction (1) (26) (17) (38) (18)
Net decrease in total effective restaurants (2) (228) (292) (147) (149)
________________________________________________
(1) Franchise and area license restaurant closings, net of openings, during the three and six months endedJune 30, 2020 . (2) Change in the weighted average number of franchise, area license and company-operated restaurants open during the three and months endedJune 30, 2020 , compared to the weighted average number of those open during the same period of 2019. The Applebee's and IHOP sales percentage decreases for the three and six months endedJune 30, 2020 were due to a decrease in domestic same-restaurant sales primarily as a result of the effects of COVID-19, as well as a decrease in total effective restaurants. The decrease in total effective restaurants for each brand reflects both permanent closures and the weighted effect of restaurants temporarily closed during the three and six months endedJune 30, 2020 .
Domestic Same-Restaurant Sales
[[Image Removed: din-20200630_g3.jpg]]
Applebee's system-wide domestic same-restaurant sales decreased 49.4% for the three months endedJune 30, 2020 and 29.1% for six months endedJune 30, 2020 from the same periods of the prior year. The decreases primarily were due to a significant decline in customer traffic as a result of the effects of COVID-19 that began to impact our restaurants around the middle ofMarch 2020 , partially offset by an increase in average check. 33 -------------------------------------------------------------------------------- Table of Contents As discussed above under Ongoing impact of COVID-19, as governments began to remove or lessen restrictions on dine-in restaurant operations in certain jurisdictions, we and our franchisees were able to increase dine-in services at Applebee's restaurants in compliance with jurisdictional requirements. After reaching a low point inApril 2020 , Applebee's experienced progressive improvement in same-restaurant sales, as shown below on a monthly basis for the six months endedJune 30, 2020 . Applebee's comparable same-restaurant sales improved 11 out of 13 weeks through the week endedJune 28, 2020 for the three months endedJune 30, 2020 . Off-premise activity as a percentage of sales also varied over the six months endedJune 30, 2020 .
[[Image Removed: din-20200630_g4.jpg]]
2020 Fiscal Month Ended
Jan Feb March April May June
Applebee's off-premise sales as %
total 13.1 % 14.4 % 22.2 % 99.8 % 76.4 % 40.2 %
[[Image Removed: din-20200630_g5.jpg]]
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Based on data from Black Box Intelligence, a restaurant sales reporting firm
("Black Box"), Applebee's 49.4% decrease in same-restaurant sales was larger
compared to the casual dining segment of the restaurant industry during the
three months ended June 30, 2020 . During that period, the casual dining segment
also experienced a decrease in same-restaurant sales that was due to a
significant decline in customer traffic as well as a slight decrease in average
customer check. Applebee's decrease in traffic for the three months ended June
30, 2020 was larger than that of the casual dining segment.
Applebee's 29.1% decrease in same-restaurant sales for the six months ended June
30, 2020 was larger compared to casual dining segment of the restaurant industry
during the six months ended June 30, 2020 . During that period, the casual dining
segment also experienced a decrease in same-restaurant sales that was due to a
significant decline in customer traffic. Applebee's decrease in traffic for the
six months ended June 30, 2020 was larger than that of the casual dining
segment.
[[Image Removed: din-20200630_g6.jpg]]
IHOP's system-wide domestic same-restaurant sales decreased 59.1% for the three months endedJune 30, 2020 and 35.6% for the six months endedJune 30, 2020 from the same periods of the prior year. The decreases primarily were due to a significant decline in customer traffic as a result of the effects of COVID-19 that began to impact our restaurants around the middle ofMarch 2020 , as well as a decrease in average check. As discussed above under Ongoing impact of COVID-19, as governments began to remove or lessen restrictions on dine-in restaurant operations in certain jurisdictions, our franchisees were able to increase dine-in services at IHOP restaurants in compliance with jurisdictional requirements. After reaching a low point inApril 2020 , IHOP experienced progressive improvement in same-restaurant sales, as shown below on a monthly basis for the six months endedJune 30, 2020 . IHOP's comparable same-restaurant sales improved sequentially for 12 consecutive weeks out of 13 through the week endedJune 28, 2020 for the three months endedJune 30, 2020 . Off-premise activity as a percentage of sales also varied over the six months endedJune 30, 2020 . 35
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[[Image Removed: din-20200630_g7.jpg]]
2020 Fiscal Month Ended
Jan Feb March April May June
IHOP off-premise sales as % total 9.7 % 10.4 % 17.0 % 94.7 % 68.8 % 35.8 %
[[Image Removed: din-20200630_g8.jpg]]
Based on data from Black Box, IHOP's 59.1% decrease in same-restaurant sales was larger compared to the family dining segment of the restaurant industry during the three months endedJune 30, 2020 . During that period, the family dining segment also experienced a decrease in same-restaurant sales that was due to a significant decline in customer traffic, partially offset by a small increase in average customer check. IHOP's decrease in traffic for the three months endedJune 30, 2020 was larger than that of the family dining segment. IHOP's 35.6% decrease in same-restaurant sales for the six months endedJune 30, 2020 was larger compared to the family dining segment of the restaurant industry during the six months endedJune 30, 2020 . During that period, the family dining segment also experienced a decrease in same-restaurant sales that was due to a significant decline in customer traffic, partially offset by an increase in average customer check. IHOP's decrease in traffic for the six months endedJune 30, 2020 was larger that of the family dining segment. 36 -------------------------------------------------------------------------------- Table of Contents Restaurant Data The following table sets forth the number of "Effective Restaurants " in the Applebee's and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same period of the prior year. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company and, as such, the percentage change in sales atEffective Restaurants is based on non-GAAP sales data. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about plans for future development of additional restaurants as well as evaluation of current operations. Six months ended June Three months ended June 30, 30, 2020 2019 2020 2019 Applebee's Restaurant Data (Unaudited)Effective Restaurants (a) Franchise 1,527 1,753 1,612 1,758 Company 67 69 68 69 Total 1,594 1,822 1,680 1,827 System-wide(b) Domestic sales percentage change(c) (53.5) % (3.0) % (32.5) % (2.2) % Domestic same-restaurant sales percentage change(d) (49.4) % (0.5) % (29.1) % 0.6 %
Franchise(b)
Domestic sales percentage change(c) (e) (53.6) % (6.1) % (32.5) % (5.4) % Domestic same-restaurant sales percentage change(d) (49.4) % (0.6) % (29.0) % 0.5 % Average weekly domestic unit sales (in thousands)$ 25.0
IHOP Restaurant Data
Effective Restaurants (a) Franchise 1,375 1,656 1,510 1,656 Area license 144 155 153 156 Total 1,519 1,811 1,663 1,812 System-wide(b) Sales percentage change(c) (64.3) % 3.2 % (39.1) % 2.8 % Domestic same-restaurant sales percentage change, including area license restaurants(d) (59.1) % 2.0 % (35.6) % 1.7 %
Franchise(b)
Sales percentage change(c) (64.4) % 3.3 % (39.2) % 2.8 % Domestic same-restaurant sales percentage change(d) (58.9) % 1.9 % (35.4) % 1.5 % Average weekly unit sales (in thousands)$ 15.8
Area License(b) Sales percentage change(c) (63.3) % 2.0 % (38.1) % 2.3 % (a) "Effective Restaurants " are the weighted average number of restaurants open in each fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for allEffective Restaurants in the Applebee's and IHOP systems, which consist of restaurants owned by franchisees and area licensees as well as those owned by theCompany. (b) "System-wide sales" are retail sales at Applebee's restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated Applebee's restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase in franchisees' reported sales will result in a corresponding increase in our royalty revenue, while a decrease in franchisees' reported sales will result in a corresponding decrease in our royalty revenue. Unaudited reported sales for Applebee's domestic franchise restaurants, Applebee's company-operated restaurants, IHOP franchise restaurants and IHOP area license restaurants were as follows: 37
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Six months ended June
Three months ended June 30, 30,
2020 2019 2020 2019
Reported sales (in millions) (Unaudited)
Applebee's domestic franchise restaurant sales $ 472.0 Applebee's company-operated restaurants 16.8 33.7 48.1 69.5 IHOP franchise restaurant sales 282.1 791.6 966.9 1,590.4 IHOP area license restaurant sales 26.4 71.8 90.4 146.1 Total$ 797.3 $ 1,913.6 $ 2,495.6 $ 3,866.7 (c) "Sales percentage change" reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category. (d) "Domestic same-restaurant sales percentage change" reflects the percentage change in sales in any given fiscal period, compared to the same weeks in the prior fiscal period, for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new restaurant openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. (e) The Applebee's franchise sales percentage change for the six months endedJune 30, 2019 was impacted by the acquisition of 69 franchise restaurants inDecember 2018 that became reported as company-operated. Restaurant Development Activity Six months ended June Three months ended June 30, 30, 2020 2019 2020 2019 Applebee's (Unaudited) Summary - beginning of period: Franchise 1,706 1,761 1,718 1,768 Company restaurants 69 69 69 69 Beginning of period 1,775 1,830 1,787 1,837 Franchise restaurants opened: Domestic - - - - International - 1 - 1 Total franchise restaurants opened - 1 - 1 Franchise restaurants permanently closed: Domestic (24) (13) (32) (17) International (2) (3) (6) (6) Total franchise restaurants permanently closed (26) (16) (38) (23) Net franchise restaurant reduction (26) (15) (38) (22) Summary - end of period: Franchise 1,680 1,746 1,680 1,746 Company restaurants 69 69 69 69 Total Applebee's restaurants, end of period 1,749 1,815 1,749 1,815 Domestic 1,633 1,676 1,633 1,676 International 116 139 116 139 38
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Restaurant Development Activity Six months ended June
Three months ended June 30, 30,
2020 2019 2020 2019
IHOP
Summary - beginning of period:
Franchise 1,680 1,663 1,680 1,669
Area license 160 159 161 162
Total IHOP restaurants, beginning of period 1,840 1,822 1,841 1,831
Franchise/area license restaurants opened:
Domestic franchise 1 9 7 15
Domestic area license - 2 1 2
International franchise - 2 2 2
Total franchise/area license restaurants opened 1 13 10 19
Franchise/area license restaurants permanently
closed:
Domestic franchise (13) (1) (19) (12)
Domestic area license (1) (2) (3) (5)
International franchise (2) (4) (4) (5)
International area license (2) - (2) -
Total franchise/area license restaurants
permanently closed (18) (7) (28) (22)
Net franchise/area license restaurant
(reduction) addition (17) 6 (18) (3)
Summary - end of period:
Franchise 1,666 1,669 1,666 1,669
Area license 157 159 157 159
Total IHOP restaurants, end of period 1,823 1,828 1,823 1,828
Domestic 1,696 1,705 1,696 1,705
International 127 123 127 123
The closures presented in the tables above represent permanent closures of
restaurants. Temporary closures, which can occur for a variety of reasons, are
not reflected as a reduction in this table and temporarily closed restaurants
are included in the summary counts at the beginning and end of each period
shown. Temporary closures are reflected in the weighted calculation of Effective
Restaurants presented in the preceding Restaurant Data table. Our franchisees
are independent businesses and decisions to close restaurants can be impacted by
numerous factors that are outside of our control, including but not limited to,
franchisees' agreements with their landlords and lenders.
As previously disclosed, in April 2020 , an IHOP franchisee that operated 49
locations initiated an assignment for the benefit of creditors and subsequently
filed for bankruptcy. In July 2020 , that franchisee completed the sale of 41 of
the 49 temporarily closed locations to a new franchisee approved by us. The
eight restaurants that were not sold are reflected as domestic franchise
closures in the restaurant development table above. As part of the transaction,
we received $4.6 million that included amounts owed to us under the franchise
documents.
For the full year of 2020, we believe our expectations regarding net restaurant
development and closures by our Applebee's franchisees and IHOP franchisees and
area licensees could be materially impacted by the continuing impact of COVID-19
and our temporary suspension of franchisee development obligations in response
thereto. Given the significant uncertainties related to the COVID-19 pandemic,
including the timing of lifting of dine-in operating restrictions on
restaurants, customer re-engagement with our brands and the short- and long-term
impact on consumer discretionary spending, we have withdrawn our 2020 net
restaurant development and closure guidance issued on February 24, 2020 .
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