IHOP to Flip Flapjacks, Serve Beef Bacon in the Middle East

IHOP soon will be serving up its flapjacks Middle Eastern-style: with a side of turkey bacon and a sweet danish. DineEquity Inc., a Glendale-based restaurant operator of brands such as IHOP and Applebee’s Neighborhood Grill and Bar Restaurants, announced late last month plans to open 40 IHOP restaurants in nine Middle Eastern countries. The deal was part of an agreement between DineEquity’ s wholly-owned subsidiary IHOP Franchise Co. and an affiliate of Kuwait-based M.H. Alshaya Co. The move is significant for the IHOP brand, known for its pancakes and breakfast fare, as it marks the first major expansion outside of North America. IHOP’s expansion announcement follows that of The Cheesecake Factory, headquartered in Calabasas, which partnered with Alshaya Co. in January to open 22 restaurants in a five-year span. International expansion is a part of IHOP’s overall strategy to make the brand more visible, said IHOP spokeswoman Jennifer Pendergrass. Currently, there are 17 IHOP restaurants in Canada, 11 in Mexico, and in the past few months, two restaurants have opened in Guatemala, she said. “There is a strong demand for quality and value and certainly the American taste,” Pendergrass said. Taking the IHOP brand overseas presents huge opportunities in a market that is relatively untapped, said Joe Pawlak, vice president of Technomic, a Chicago-based research firm specializing in food retail trends. “Looking at countries like Dubai, that are such a luxury resort area with a lot of international travelers, it makes very good sense to expand,” he said. Alshaya’s history points to success in bringing American brands overseas, Pawlak said. Starbucks, P.F. Changs and Office Depot are a few of the retail brands the company operates. Financial terms of the deal were not disclosed. IHOP restaurants will be developed over a five-year-span in Kuwait, Saudi Arabia, Jordan, Lebanon, Qatar, the United Arab Emirates, Oman, Bahrain and Eqypt. The restaurants will start to open over the next 12 months. The menu, which is a work in progress, will be adapted to meet the taste and dietary needs of the restaurant-goers, Pendergrass said. To keep with the dietary restrictions of Muslim patrons, IHOP will not serve pork products, for example. “We will provide alternative protein such as beef, turkey sausage and (turkey) bacon,” Pendergrass said. The company will offer pastries during breakfast hours, as they are a popular piece of the region’s breakfast tradition, she said. Pawlak said the local franchisee has a lot of knowledge about the local market, including local taste and flavors. “That can help smooth potential hurdles,” he said. But foreign relations could pose potential problems, Pawlak said. The U.S. doesn’t have the greatest reputation within some of those countries, he noted. “If U.S. starts getting a worse rap, then you can see a lot of backlash,” Pawlak said. IHOP is confident that its partnership with Alshaya will prove beneficial for the restaurant’s growth, Pendergrass said. Applebee’s has already expanded its reach into the Middle East, she said. DineEquity reported 2011 first quarter net income of $28.1 million, or $1.53 per diluted share, on revenues of $300.2 million, compared to $12.8 million, or $0.75 per diluted share, on revenues of $358.1 million for the same quarter last year. This year, DineEquity plans to open between 55-65 new IHOP restaurants, the majority of which are expected to open in the U.S. The company also recently developed IHOP express-style restaurants on university campuses, military bases and airports, and licensed the brand for select retail products. In May, “IHOP at Home,” a line of frozen breakfast foods hit the frozen-food aisle at nearly 3,000 Walmart stores in the U.S. Among the options: French Toast Stuffed Pastries, Omelet Crispers and Griddle ‘n Sausage Wraps.