IHOP Corp.

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International Guild of Hospitality & Restaurant Managers

IHOP Corp., incorporated in 1976, develops, operates and franchises International House of Pancakes restaurants, a national, family restaurant chain. As of March 31, 2002, there were 1,028 IHOP restaurants in 41 states and Canada. Franchisees operated 823 of these restaurants, area licensees operated 122 restaurants and IHOP operated 72 restaurants. Franchisees and area licensees are independent third parties that operate their restaurants under legal agreements with IHOP. IHOP restaurants feature table service and moderately priced food and beverage items. Although the restaurants are best known for their pancakes, omelets and other breakfast specialties, IHOP restaurants also offer a broad array of lunch, dinner and snack items. They are open throughout the day and evening hours, and some operate 24 hours a day.

Franchisees and area licensees operate more than 90% of IHOP restaurants. IHOP develops most new restaurants prior to franchising them. When the restaurant is franchised, the Company then becomes the franchisee's landlord. This landlord/tenant relationship provides the Company with enhanced profits and greater control over its franchise system. Some franchisees develop their own IHOP restaurants under the Company's Investor and Conversion Programs for franchisees. In those instances, IHOP approves the site for development, but does not contribute capital, or becomes the franchisee's landlord. Area licensees located in Canada and Florida operate 12% of IHOP restaurants. The Company provides support to these area licensees, but it is not actively involved in developing new restaurants in these areas.

New restaurants are developed after a stringent site selection process supervised by the Company's senior management. In 2001, the Company developed 76 new restaurants and its franchisees and area licensees developed an additional 17 new restaurants. In 2001, the Company built two general types of new restaurant buildings. The larger format restaurant is approximately 4,900 square feet in size and contains 176 seats. The second building type is designed for use in smaller, high-potential markets. It is approximately 4,000 square feet in size and seats approximately 132 people. The Company also purchased and converted existing buildings into IHOP restaurants. The square footage and number of seats in a restaurant conversion vary by location. In 2001, restaurant conversions averaged 163 seats per restaurant. The Company's older A-Frame style restaurants, which have not been built since 1985, contain approximately 3,000 square feet and approximately 100 seats. Of the 76 new IHOP restaurants the Company developed in 2001, 17 were the larger format building, 46 were the smaller format building and 13 were restaurant conversions or leased spaces in multi-tenant buildings.

IHOP has entered into long-term area licensing agreements covering the state of Florida, the southern-most counties of Georgia and the province of British Columbia, Canada. These agreements provide for royalties ranging from 0.5% to 2% of sales and advertising fees of 0.25% of sales. The Company also derives revenue from the sale of proprietary products to these area licensees. Area licensing arrangements may be used in the future for domestic and/or international expansion.

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