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IHOP Franchises: Sales, Costs & Profits (2023)

With more than 1,800 locations, IHOP is undeniably one of the most popular pancake franchises. But IHOP’s wide menu offers far more than just pancakes: waffles, sandwiches, burgers and more. As such, IHOP is a popular business amongst franchisees.

Unfortunately, IHOP isn’t the most affordable franchise. With a $2 million price tag, the investment required to open a IHOP restaurant isn’t for everyone.

Are the profits worth the investment cost? How much profits can you make with such a business?

In this article we’re looking at IHOP from the perspective of its Franchise Disclosure Document. More importantly, we’ll see whether or not you should invest in a IHOP franchise and why. Let’s dive in!

IHOP franchises: key figures

Franchise fee$25,000
Royalty fee4.5%
Marketing fee4.5%
Investment (mid-point)$2,058,302
Average annual sales$1,553,311
Investment to sales ratio0.8x
Investment payback*8.8 years (mediocre)
Minimum net worth$1,500,000
Minimum liquid capital$500,000
* using 15% net profit margin

🔎 How does IHOP compare vs. other franchises? Check the ranking

What is IHOP?

IHOP (short for “International House of Pancakes”) is an American chain restaurant that focuses on pancakes. It has locations in the Americas, the Middle East, and South Asia.

It was founded in 1958 by Jerry Lapin, Al Lapin, and Albert Kallis, and its first location was in Los Angeles, California.

IHOP serves mainly breakfast foods such as pancakes, waffles, French toast, and omelets. Also, it offers lunch and dinner menu items such as sandwiches, salads, and burgers.

The IHOP franchising journey began in 1960. It is operated by the International House of Pancakes, LLC, and is owned by Dine Brands Global, headquartered in Glendale, California.

It now has over 1,800 locations in the United States and around the world. The vast majority of IHOP restaurants are franchises (99%).

IHOP franchises: pros and cons

The following are some of the pros and cons of operating an IHOP franchise:

Pros

  • Solid franchise support: IHOP provides its franchisees with all the support they need to grow and succeed in the operations of their restaurants. It gives franchisees support in site selection assistance, restaurant design planning assistance, restaurant opening assistance, ongoing operations, and marketing consulting.
  • Financial assistance: The franchisor may offer to finance a portion of the initial fee under the purchase program. Also, in some exceptional cases, the franchisor may finance the entire initial franchise fee for its franchisees.
  • Global presence: With more than 1,600 units worldwide, IHOP is one of the fastest-growing franchises. This gives new franchisees great growth opportunities. As it continues exploring new markets, would-be franchisees can easily penetrate existing and new markets since the parent company already enjoys a huge customer following.
  • Brand popularity: The IHOP brand is well known for its award-winning breakfast pancakes, dinner, and lunch items. It offers delicious food and warm friendly services that give customers a great dining experience. Franchisees can market easily with fewer efforts as customers already know what the brand offers.
  • Training support:  IHOP offers new franchisees extensive training to help them get started on the right foot. This includes restaurant operation skills training, brand standard operating practices, an IHOP-approved food safety certification program, ongoing training, and refresher courses.
  • Exclusive territory: In exceptional cases, the franchisor grants franchisees the right to operate a single restaurant at a specified location approved by the franchisor. The franchisor offers exclusive protection to franchisees who are committed to growth.

Cons

  • Competition: One drawback of IHOP is that it faces stiff competition from market leaders such as Waffle House and Denny’s. This gives customers many options and makes an IHOP franchise less attractive to investors.
  • Limited lunch and dinner menus: The brand has a great breakfast menu but not dinner or lunch. This means that its competitors can offer customers better lunch and dinner options. Therefore, new franchisees may not have a competitive advantage in this segment.
  • No absentee ownership: The franchisor requires the franchisee to be actively involved in the day-to-day operations of the restaurant. Franchisees must also attend and complete the training program together with the appointed certified leaders. The IHOP does not provide passive investment opportunities and is quite demanding.

How much does a IHOP franchise cost?

You must invest around $2,058,302 on average to open a IHOP franchised restaurant.

The investment amount varies depending on your situation: it ranges between $690,654 and $3,425,950.

As for the investment, what are you paying for exactly? Well you are paying for a number of  startup expenses. To be precise, you would pay:

  • Fees to IHOP: initial franchise fee, training expenses for you and your team, Mobile Device Management (MDM) fee for the hardware among others
  • Build-out costs: real estate, construction, equipment, signage, inventory, insurance, site approval costs, building, point of sale system, etc.
  • Preliminary operating expenses: opening training support fee, POS setup and software fees, pre-opening costs, additional funds for 3 months as working capital etc.
LowHigh
Fees to IHOP$25,262$83,780
Build-out costs$601,700$3,101,700
Preliminary operating expenses$63,692$240,470
Total investment$690,654$3,425,950
Source: 2022 FDD

What’s the turnover of a IHOP franchise?

On average, a IHOP franchise makes $1,553,311 in revenue per year. This is a +61% year-on-year increase vs. 2020 ($1,069,892) as the chain recovered from the COVID-19 pandemic.

We obtained this number by dividing the total franchisor (IHOP Franchisor LLC) revenue from royalty and franchise fees ($1.36 billion) by the number of franchise-owned restaurants it owns the rights of (876 as of 2021).

201920202021
Total franchisor revenue$1.36 billion$862 million$1.13 billion
Number of franchises*876806697
Revenue per franchise$1,553,311$1,069,892$1,625,251
* franchises that opened after Sept. 2014 as per the FDD

How profitable is a IHOP franchise?

We have identified that IHOP franchises make $464,725 in profits per year. This represents a 30% adjusted EBITDA margin.

To estimate this number we used industry benchmarks for certain costs (COGS, labor, rent) as the Franchise Disclosure Document doesn’t provide much information when it comes to costs, as for most franchises.

Keep in mind adjusted EBITDA doesn’t include non-operating expenses like debt interest, taxes and other costs. As such, to estimate franchisees’ profits we would need to deduct these expenses too (which we estimate at 15% of sales).

Profit-and-lossAmount ($)As % of sales
Sales$1,553,311100%
COGS$(388,328)25%*
Labor$(450,460)29%*
Rent$(110,000)7% as per FDD
Royalty + marketing fees$(139,798)9% as per FDD
Adjusted EBITDA$464,725~30%
* industry average

Is a IHOP franchise a good investment?

To assess whether opening a IHOP franchise is a good investment, we must compare the profits to the upfront investment of $2,058,302 (average).

For profits, we use net profits instead of EBITDA as it includes all costs you must pay for. If we were to estimate net profits at 15% of sales, this would represent $232,950 net profits per year.

Now, by comparing this to the investment cost, we obtain a payback period of 8.8 years. This means that, on average, you would need to wait 9 years before you can reimburse your initial investment. Unfortunately, 9 years is long and, as such, IHOP isn’t the best franchise investment from that perspective.

Yet, keep in mind this number is calculated based on the average performance of all IHOP franchises, and some costs are estimates. As such, your franchise may perform better vs. the average.

In order to find out how much you can make with your IHOP franchise and visualise metrics like breakeven, payback period and more, download our business plan below.

IHOP franchise

Download the IHOP business plan and get your franchise funded

Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers

How does it compare vs. other franchises?

FranchiseInvestment ($)Sales ($)S/I RatioPayback (years)Min. net worth ($)Min. liquid capital ($)
Chick-Fil-Ahttps://sharpsheets.io/blog/chick-fil-a-franchise-costs-profits/Chicken1,363,5104,227,4173.12.2--
Dunkin' Donutshttps://sharpsheets.io/blog/dunkin-donuts-franchise-costs-profits/Donuts779,0001,056,5211.44.9500,000250,000
Domino'shttps://sharpsheets.io/blog/dominos-franchise-profits-costs/Pizza398,7251,286,4283.23.9250,00075,000
Krispy Kremehttps://sharpsheets.io/blog/krispy-kreme-franchise-costs-profits/Donuts824,0003,400,0004.11.62,000,000300,000
Little Caesarshttps://sharpsheets.io/blog/little-caesars-franchise-costs-profits/Pizza1,022,850798,1130.88.5350,000150,000
Wingstophttps://sharpsheets.io/blog/wingstop-franchise-costs-profits/Chicken631,6951,460,4592.32.91,200,000600,000
Steak 'n Shakehttps://sharpsheets.io/blog/steak-n-shake-franchise-costs-profits/Burger, Milshakes815,6261,346,3321.74.01,500,000500,000
Crumbl Cookieshttps://sharpsheets.io/blog/crumbl-cookie-franchise-cost-profits/Sweets507,2241,582,0903.12.1300,000150,000
Taco Bellhttps://sharpsheets.io/blog/taco-bell-franchise-costs-profits/Mexican462,4131,650,0003.61.91,500,000750,000
Popeyeshttps://sharpsheets.io/blog/popeyes-franchise-costs-profits/Chicken1,095,7831,444,6171.35.11,000,000500,000
Smoothie Kinghttps://sharpsheets.io/blog/smoothie-king-franchise-costs-profits/Smoothie688,108573,2690.88.0300,000100,000
Jersey Mike'shttps://sharpsheets.io/blog/jersey-mikes-franchise-costs-profits/Sandwich574,3231,220,5862.14.7300,000100,000
Nothing Bundt Cakeshttps://sharpsheets.io/blog/nothing-bundt-cakes-franchise-costs-profits/Sweets538,6501,307,2802.42.7600,000150,000
Jimmy John'shttps://sharpsheets.io/blog/jimmy-johns-franchise-costs-profits/Sandwich513,650874,8451.73.9300,00080,000
Texas Roadhousehttps://sharpsheets.io/blog/texas-roadhouse-franchise-costs-profits/Steakhouse4,209,5002,955,5340.79.5n.a.200,000
Kung Fu Teahttps://sharpsheets.io/blog/kung-fu-tea-franchise-costs-profits/Bubble tea250,125353,2371.44.7n.a.25,000
Wendy’shttps://sharpsheets.io/blog/wendys-franchise-cost-profits/Burger1,374,8331,791,2311.35.11,000,000500,000
Burger Kinghttps://sharpsheets.io/blog/burger-king-franchise-costs-profits/Burger1,242,9501,215,9701.06.81,500,000500,000
Sonic Drive-Inhttps://sharpsheets.io/blog/sonic-drive-in-franchise-costs-profits/Burger1,467,0831,617,0001.16.01,000,000500,000
Panera Breadhttps://sharpsheets.io/blog/panera-bread-franchise-costs-profits/Sandwich2,290,5002,599,4321.15.97,500,0003,000,000
Pizza Huthttps://sharpsheets.io/blog/pizza-hut-franchise-costs-profits/Pizza935,575906,9111.06.9700,000350,000
KFChttps://sharpsheets.io/blog/kfc-franchise-costs-profits/Chicken1,802,0501,567,4740.97.71,500,000750,000
Arby’shttps://sharpsheets.io/blog/arbys-franchise-costs-profits/Sandwich1,184,9751,126,2631.07.01,000,000500,000
Dairy Queenhttps://sharpsheets.io/blog/dairy-queen-franchise-costs-profits/Ice Cream1,404,2201,143,1800.88.2750,000400,000
Jack in the Boxhttps://sharpsheets.io/blog/jack-in-the-box-franchise-costs-profits/Burger2,195,8001,755,5030.812.51,000,000250,000
Papa John’shttps://sharpsheets.io/blog/papa-johns-franchise-costs-profits/Pizza353,6951,101,1273.12.1750,000250,000
Zaxby’shttps://sharpsheets.io/blog/zaxbys-franchise-costs-profits/Chicken534,7502,229,1874.22.41,000,000500,000
Hardee’shttps://sharpsheets.io/blog/hardees-franchise-costs-profits/Burger1,759,0001,147,9750.710.21,000,000300,000
Culver’shttps://sharpsheets.io/blog/culvers-franchise-costs-profits/Burger4,044,5003,051,7620.88.82,000,000350,000
Five Guyshttps://sharpsheets.io/blog/five-guys-franchise-costs-profits/Burger511,2251,203,3662.42.8500,000250,000
Carl’s Jr.https://sharpsheets.io/blog/carls-jr-franchise-costs-profits/Burger1,860,3351,419,5160.88.71,000,000500,000
Baskin-Robbinshttps://sharpsheets.io/blog/baskin-robbins-franchise-costs-profits/Ice Cream465,100316,8150.79.8250,000125,000
IHOPhttps://sharpsheets.io/blog/ihop-franchise-costs-profits/Pancakes2,058,3021,553,3110.88.81,500,000500,000
Applebee’shttps://sharpsheets.io/blog/applebees-franchise-costs-profits/Casual American5,137,9662,356,9650.514.51,000,000500,000
Denny'shttps://sharpsheets.io/blog/dennys-franchise-costs-profits/Casual American3,785,4591,639,5490.415.41,000,000500,000
Papa Murphy'shttps://sharpsheets.io/blog/papa-murphys-franchise-costs-profits/Pizza433,174580,4411.35.0275,000125,000
Auntie Anne'shttps://sharpsheets.io/blog/auntie-annes-franchise-costs-profits/Pretzels229,692343,1351.55.6300,000100,000
Firehouse Subshttps://sharpsheets.io/blog/firehouse-subs-franchise-costs-profits/Sandwich613,186888,3561.44.6350,000100,000
Tropical Smoothie Cafehttps://sharpsheets.io/blog/tropical-smoothie-cafe-franchise-costs-profits/Smoothie430,500961,9692.23.0350,000125,000
Marco’s Pizzahttps://sharpsheets.io/blog/marcos-pizza-franchises-costs-profits/Pizza437,625895,5232.03.3400,000100,000
Cinnabonhttps://sharpsheets.io/blog/cinnabon-franchises-costs-profits/Sweets276,062394,8971.45.8300,000120,000
Cold Stone Creameryhttps://sharpsheets.io/blog/cold-stone-creamery-franchise-costs-profits/Ice Cream310,956417,5881.35.0250,000100,000
Jambahttps://sharpsheets.io/blog/jamba-franchise-costs-profits/Smoothie414,562597,0281.47.7300,000100,000
Church’s Chickenhttps://sharpsheets.io/blog/churchs-texas-chicken-fees-sales-costs/Chicken1,195,1471,395,0881.25.71,000,000300,000
Moe’s Southwest Grillhttps://sharpsheets.io/blog/moes-southwest-grill-franchises-costs-profits/Mexican792,3701,013,3611.35.21,000,000100,000
Tim Hortonshttps://sharpsheets.io/blog/tim-hortons-franchises-costs-profits/Coffee1,242,7501,188,2401.07.0500,000100,000
Checkers & Rally'shttps://sharpsheets.io/blog/checkers-franchises-profits-sales-costs/Burger837,8471,039,7731.25.4750,000250,000
Charleys Philly Steakshttps://sharpsheets.io/blog/charleys-philly-steaks-costs-profits/Sandwich509,806786,2331.54.3500,000100,000
Buffalo Wild Wingshttps://sharpsheets.io/blog/buffalo-wild-wings-costs-profits/Chicken3,546,9002,534,1480.79.31,500,000750,000
Rita's Icehttps://sharpsheets.io/blog/ritas-ice-franchise-costs-profits/Ice Cream215,839248,3401.25.8300,000100,000
A&W Restaurantshttps://sharpsheets.io/blog/aw-restaurants-franchises-costs-profits/Burger786,750851,2121.16.2350,000150,000
Hungry Howie’s Pizzahttps://sharpsheets.io/blog/hungry-howies-pizza-franchise-costs-profits/Pizza419,682806,8991.93.5750,000200,000
Bojangleshttps://sharpsheets.io/blog/bojangles-franchise-costs-profits/Chicken1,658,0001,801,0571.16.11,000,000500,000
McAlister’s Delihttps://sharpsheets.io/blog/mcalister-deli-franchise-costs-profits/Sandwich1,424,9631,865,8611.35.11,000,000500,000
Round Table Pizzahttps://sharpsheets.io/blog/round-table-pizza-franchise-costs-profits/Pizza783,2501,037,8161.35.0500,000200,000
Qdoba Mexican Eatshttps://sharpsheets.io/blog/qdoba-mexican-eats-franchise-costs-profits/Mexican659,250972,9621.54.5
Freddy’shttps://sharpsheets.io/blog/freddys-franchise-costs-profits/Burger1,453,0401,792,9291.25.41,000,000400,000
Taco John’shttps://sharpsheets.io/blog/taco-johns-franchise-costs-profits/Mexican1,119,0001,124,9801.06.61,000,000400,000
Scooter’s Coffeehttps://sharpsheets.io/blog/scooters-coffee-franchise-costs-profits/Coffee1,143,250797,1010.79.6500,000200,000
Einstein Bros. Bagelshttps://sharpsheets.io/blog/einstein-bros-bagels-franchise-costs-profits/Sandwich750,075885,0111.25.71,000,000536,500
Great American Cookieshttps://sharpsheets.io/blog/great-american-cookies-franchise-costs-profits/Sweets385,275452,7711.25.7250,000100,000
Wienerschnitzelhttps://sharpsheets.io/blog/wienerschnitzel-franchise-costs-profits/Hot dogs873,300880,9801.06.6600,000250,000
Blaze Pizzahttps://sharpsheets.io/blog/blaze-pizza-franchise-costs-profits/Pizza865,4501,096,4321.37.9500,000300,000
Wetzel's Pretzelshttps://sharpsheets.io/blog/wetzels-pretzels-franchise-costs-profits/Pretzels377,571748,8572.03.4300,00050,000
Pizza Ranchhttps://sharpsheets.io/blog/pizza-ranch-franchise-costs-profits/Pizza3,268,3001,174,0880.418.61,000,000297,000
Del Tacohttps://sharpsheets.io/blog/del-taco-franchise-costs-profits/Mexican1,406,8501,345,3411.07.02,000,000500,000
Schlotzsky’shttps://sharpsheets.io/blog/schlotzskys-franchises-costs-profits/Healthy, Salads1,102,9331,053,3330.322.21,000,000300,000
Captain D’shttps://sharpsheets.io/blog/captain-ds-franchise-profits-costs/Seafood982,7781,067,8160.419.01,000,000350,000
Biggby Coffeehttps://sharpsheets.io/blog/biggby-coffee-franchise-profits-costs/Coffee310,575648,3520.320.0300,000100,000
Which Wichhttps://sharpsheets.io/blog/which-wich-franchises-profits-costs/Sandwich330,375281,8860.322.2500,000150,000
Marble Slab Creameryhttps://sharpsheets.io/blog/marble-slab-franchises-costs-profits/Ice Cream407,360251,0520.416.7250,000100,000
Mountain Mike's Pizzahttps://sharpsheets.io/blog/mountain-mikes-franchise-profits-costs/Pizza410,900865,7130.320.0300,000100,000
Huddle Househttps://sharpsheets.io/blog/huddle-house-franchise-cost-profits/Diner988,743712,4280.513.3600,000300,000
L&L Hawaiian Barbecuehttps://sharpsheets.io/blog/ll-hawaiian-barbecue-franchises-costs-profits/BBQ334,350612,9210.333.3500,000150,000
Chicken Salad Chickhttps://sharpsheets.io/blog/chicken-salad-chick-franchises-costs-profits/Healthy, Salads651,0001,202,0200.320.0750,000250,000
Golden Chickhttps://sharpsheets.io/blog/golden-chick-franchises-costs-profits/Chicken362,975917,6092.52.62,000,000425,000
Perkinshttps://sharpsheets.io/blog/perkins-franchise-costs-profits/Diner1,922,7281,729,2460.97.41,500,000500,000
Waba Grillhttps://sharpsheets.io/blog/waba-grill-franchises-costs-profits/Teryaki454,000466,5361.06.51,000,000250,000
Bruster’s Ice Creamhttps://sharpsheets.io/blog/brusters-franchises-profits-costs/Ice Cream663,925466,6960.79.5375,000150,000