IHOP Franchise FDD, Profits, Costs & Fees (2024)
IHOP, originally founded as the International House of Pancakes in 1958, began in Los Angeles, California. Today, its headquarters are in Glendale, California. The brand started franchising in 1960 and now operates over 1,750 locations globally. This includes the USA, Puerto Rico, Guam, and countries like Mexico, Canada, India, and Peru.
IHOP is famous for its wide-ranging menu, offering breakfast, lunch, and dinner. Beyond pancakes, its focus on high-quality service and affordable prices has helped maintain its reputation. The brand consistently evolves, keeping a strong presence through recognizable marketing and brand identity.
Owning an IHOP franchise comes with numerous benefits. Franchisees receive professional training, ongoing support, and marketing assistance. Additionally, they gain access to a loyal customer base and the credibility of a well-established brand.
IHOP Franchise Stats
IHOP
Number of units: 1,658 franchises
Initial investment: $381,000 - $4,376,000
Average revenue (AUV): $1,972,000
Initial Investment
How much does it cost to start a IHOP franchise? It costs on average between $381,000 – $4,376,000 to start a IHOP franchised restaurant.
This includes costs for construction, equipment, inventory, and initial operating expenses. The exact amount depends on various factors, including the type of restaurant you choose, the location, and whether the franchisee chooses to lease or purchase the property. Indeed, IHOP offers 4 types of franchises:
| IHOP Program Type | Initial Investment Range |
|---|---|
| Purchase Program | $380,550 to $3,735,850 |
| Inline/Endcap/Conversion | $1,766,072 to $3,161,997 |
| 2700 Prototype | $2,157,072 to $3,506,997 |
| Large Format Prototype | $2,646,072 to $4,375,997 |
We are summarizing below the main costs associated with opening a IHOP Large Format Prototype franchised restaurant. For more information on costs required to start a IHOP franchise, refer to the Franchise Disclosure Document (Item 7).
| Type of Expenditure | Amount (Low – High) |
|---|---|
| Location Fee | $15,000 – $15,000 |
| Initial Franchise Fee | $50,000 (less $15,000 Location Fee) |
| Real Estate | As arranged |
| Construction | $1,780,000 – $2,800,000 |
| Major Equipment and Fixtures | $532,000 – $664,000 |
| Signage | $40,000 – $60,000 |
| Smallware Package/Opening Order | $15,000 – $30,000 |
| Inventory | $50,000 – $100,000 |
| Working Capital | $50,000 – $200,000 |
| Insurance | $35,000 – $100,000 |
| On-Location Assistance | $0 – $16,000 |
| Site Approval Costs | $0 – $50,000 |
| Impact Study | $4,000 – $6,000 |
| Opening Training Support Fee | $0 – $55,000 |
| POS Setup, Training and Support | $3,500 – $7,980 |
| Tray POS Software Fees | $1,100 per year – $3,400 per year |
| Kitchen Display System | $15,000 – $30,000 |
| Server Tablets with Payment Device | $7,500 – $30,000 |
| On-Line Ordering | $65 per month – $200 per month |
| Mobile Device Management Fee | $12 per year – $480 per year |
| Digital Products Service Fee | $0 per month – $350 per month |
| Implementation Fees | $250 – $1,500 |
| POS System Hardware | $20,000 – $30,000 |
| Additional Funds – 3 months | $16,500 – $85,250 |
| Miscellaneous | $5,000 – $26,000 |
| TOTAL | $2,646,072 – $4,375,997 |
Average Revenue (AUV)
How much revenue can you make with a IHOP franchise? A IHOP franchised restaurant makes on average $1,972,000 in revenue (AUV) per year.
Here is the extract from the Franchise Disclosure Document:
This compares to $1,812,000 yearly revenue for similar breakfast-style restaurant franchises. Below are 10 IHOP competitors as a comparison:
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IHOP Franchise Disclosure Document
Recent Legal Disputes and Litigation
IHOP franchisees have been involved in several legal disputes in recent years, particularly concerning wage violations and employee rights.
In 2024, a major case was filed by the U.S. Department of Labor against Khalid Ramadan, who operates IHOP franchises in Illinois. The complaint alleged that Ramadan’s franchises withheld servers’ tips, failed to pay overtime, and manipulated time records to avoid paying employees for their full hours.
The investigation found that the franchises owed nearly $367,890 in back wages and damages to 179 employees. This case highlights ongoing issues with wage violations within IHOP franchise operations.
Additionally, in 2022, Koerner Management Group, which operates IHOP locations in Maryland and Virginia, settled a sexual harassment lawsuit for $125,000.
The lawsuit, filed by the Equal Employment Opportunity Commission (EEOC), involved accusations that a male manager harassed female employees, including minors. As part of the settlement, the company agreed to implement corrective actions, including training and policy changes.
These legal disputes underscore the challenges that some IHOP franchisees face in maintaining compliance with federal labor laws and protecting employee rights.
Frequently Asked Questions
How many IHOP locations are there?
As of the latest data, IHOP has over 1,750 locations worldwide, and 100% of these locations are franchise-owned. This means that all IHOP restaurants are operated by independent franchisees, with none being company-owned.
These locations span across the United States, Puerto Rico, Guam, and several international markets including Mexico, Canada, and the UAE.
What is the total investment required to open a IHOP franchise?
The total investment required to open a IHOP franchise ranges from $381,000 – $4,376,000.
What are the ongoing fees for a IHOP franchise?
For an IHOP franchise, the ongoing fees consist of a royalty fee of 4.5% of gross sales and a marketing/advertising fee of 3.5% of gross sales. These fees help cover the costs of brand support and national advertising, ensuring consistency across all franchise locations.
What are the financial requirements to become a IHOP franchisee?
To become an IHOP franchisee, you must meet specific financial requirements to ensure you can handle the startup and operational costs. The minimum net worth required is $1.5 million, and franchisees must have at least $500,000 in liquid assets.
These financial criteria are set to ensure that potential franchisees are well-positioned to succeed in the restaurant business and manage the associated expenses.
How much can a IHOP franchise owner expect to earn?
The average gross sales for a IHOP franchise are approximately $1.97 million per location. Assuming a 15% operating profit margin, $1.97 million yearly revenue can result in $295,500 EBITDA annually.
Who owns IHOP?
IHOP is owned by Dine Brands Global, Inc., which is one of the largest full-service dining companies in the world. Dine Brands Global also owns Applebee’s Neighborhood Grill & Bar.
The company was formed in 2007 when IHOP acquired Applebee’s and rebranded as Dine Brands Global to manage both restaurant chains under one umbrella. IHOP itself was founded in 1958 and has grown into a globally recognized brand for its breakfast and casual dining offerings.
Disclaimer
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