Do you want to open a fast food business by buying an iHop Franchise? If YES, here is how much it costs to open an iHop Franchise successfully. If you are looking towards opening an IHOP Franchise, it will be nice for you to have a preview of what the company represents before going ahead to make enquiries about the total cost of opening the franchise in your location.
IHOP Franchisor LLC. was founded in 1958 and they began franchising in 1960, about 60 years ago. The company has her corporate head office at 450 North Brand Boulevard, Glendale, CA 91203, USA. IHOP also provides franchising opportunities and currently they have 1,840 franchise units in the United States of America.
The franchisor is IHOP Franchisor LLC. The parent company is Dine Brands Global, Inc. The franchisor offers different franchise programs for full-service restaurants which feature “IHOP” pancakes as well as a diverse menu of other breakfast, lunch and dinner items.
Traditional IHOP Restaurants feature a range of “signature” “IHOP” pancakes, crepes, coffee and other offerings, as well as a diverse menu of other breakfast, lunch and dinner items. These restaurants are in free-standing buildings or an in-line center or other traditional commercial space (a traditional venue).
The franchisor also offers franchises for “IHOP” full-service restaurants and new IHOP concepts being developed under the name “IHOP Express” for fast-casual and/or quick-serve restaurants to be located at another primary business or in conjunction with other businesses or at institutional settings such:
as schools, colleges and universities, military and other governmental facilities, hospitals, airports, highway rest stops, toll roads, hotels, motels, arenas, travel plazas, office or in-plant food facilities, supermarkets, grocery stores or convenience stores, casinos, stadiums, shopping malls and any other site, venue or location operated by a master concessionaire or contract food service provider (non-traditional venues).
Please note that IHOP has a franchise fee of up to $40,000, with total initial investment range of $90,000 to $200,000. Here are areas where you are expected to spend money and the costs associated with it;
Financial Investment Required to Open iHop Franchise
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.
Please note that 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.
Development Fee – Multi-Store
Under the Multi-Store Development Program, you must develop a specified number of IHOP Restaurants within your exclusive area as per 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.
Please note that 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.
Opening Training Support Fees:
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.
Please note that this fee is subject to increase if the opening schedule changes, if overtime is requested, or if travel expenses exceed original projections.
Point-of-Sale (“POS”) Setup, Training, and Support:
Please note that 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.
Payments for Goods Received from IHOP:
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. Please note that 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.
4.5% of total Gross Sales and the Due Date for this fee is Billed weekly and due 16 days after invoice date. Please note that Gross Sales include all revenue from the Restaurant except sales or use tax.
National Advertising Fee:
3.5% of total Gross Sales and the Due Date for this fee is Same as Royalty Fee. IHOP pools these funds with payments from all U.S. franchisees. Please note that 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.
- Local Advertising Fee: There is currently no required Local Advertising Fee and the Due Date is Same as Royalty Fee. This fee is optional until December 31, 2022.
Please note that 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.
- Cooperative Advertising: This fee varies depending on your decision to participate but the Due Date is Same as Royalty Fee. This fee is optional.
Please note that 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.
Additional Training Fee:
$5,000 per person per Restaurant and the Due Date for this fee is prior to training. Please note that this fee is payable if your manager is replaced, requiring the new manager to complete Initial Training.
- Additional Assistance Fee: $375 per day per person, plus reasonable transportation and living expenses and the Due Date for this fee is upon demand.
Please note that this fee is 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.
- 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 and the Due Date for this fee is On demand. Interest is due on any understated or unpaid amounts due to IHOP.
Please note that 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.
- Delayed Approval Fee: $170 per day and the Due Date for this fee is Upon your request for additional time and it is For Single Store Development Program.
- Delayed Development Fee: $350 per day and the Due Date for this fee is Upon your request for additional time and it is for Multi-Store Development and Single Store Development Program only.
- Dine Brands Restaurant Technology Support Center (Help Desk): $1,600 to $1,800 per year, subject to change and the Due Date for this fee is 30 days after billing, but this service is optional.
- Digital Products Service Fee: $0 to $350 per month and the Due Date for this fee is 30 days after billing (billed annually).
Please note that 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.
- Implementation Fees: $250 to $500 and the Due Date for this fee is Upon demand.
Please note that these fees relate to deployment and support for hardware and software upgrades, as well as other products.
- Customer Relationship Management (“CRM”) Fee: $125 to $150 per month per Restaurant and the Due Date for this fee is Upon demand.
Please note that 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.
- Insurance: Amount of unpaid premiums and the Due Date for this fee is Upon demand.
Please note that it is payable only if IHOP elects to obtain coverage upon your failure to do so.
- Late Fee: Highest rate permitted by law or 1.5% per month, whichever is less and the Due Date this fee Continues to accrue until paid.
Payable if you are late paying any amount due to IHOP or an IHOP affiliate.
- National Gift Card Program Charges: 15% of the redeemed portion of gift cards sold in the national program, but the amount may change
The Due Date: Cost is recovered as part of the periodic electronic settlement process for sales and redemptions of gift cards.
Please note that 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).
- On-Location Assistance Fee: $0 to $16,000 and the Due Date for this fee is 30 days after billing and it is based only if requested by you.
Please note that the amount may vary depending upon number of trainers and hours worked.
- Renewal Fee: $10,000 for General Renewal Term; amount to be negotiated for Special Renewal Term
The Due Date: For General Renewal Term, upon execution of new Franchise Agreement. For Special Renewal Term, if any, weekly during extended term.
Please note that 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.
- Supplier/ Distributor Approval: Costs of sample testing, plus other actual costs, such as facility inspection and the Due Date for this fee is 30 days after billing.
Please note that 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.
- Transfer Fee (Franchise Agreement): $7,500, plus $5,000 Training Fee per person per Restaurant and the Due Date is 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.
Please note that it is 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.
- Transfer Fee (Multi-Store Development Agreement): $2,500 and the Due Date for this fee is 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.
Please note that it is Payable if you are approved to sell your Multi-Store Development Agreement.
- Veteran Incentives: This is open for negotiation with the company.
- Term of Agreement and Renewal: The length of the initial franchise term for traditional restaurants is equal to the term of the lease and is typically 20 years. If franchisees are compliant, they can add a renewal term of not more than 10 years. If franchisees are compliant, and the Initial Term was for less than 10 years, they can add a Special Renewal Term; the Initial Term plus the Special Renewal Term cannot exceed 25 years.
- Financial Assistance: Under the Purchase Program only, the franchisor may finance a portion of the Initial Franchise Fee. In exceptional cases, in its sole, subjective discretion, the franchisor may agree to finance the entire Initial Franchise Fee.
- Initial investments: $90,000 – $200,000
- Net-worth Requirement: $10,000
- Liquid Cash Requirement: $60,000
- Ongoing Initial Franchise Fee: $40,000
- Ongoing Royalty Fee: 4.5%
- Ad Royalty Fee: 3.5%.
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