IHOP heads to Middle East
Glendale-based IHOP on Monday announced its largest international expansion ever, unveiling plans to open 40 restaurants over the next five years in nine Middle Eastern countries.
DineEquity Inc., the Glendale-based corporate parent of IHOP and Applebee’s, said the restaurants would open in Egypt, Lebanon, Saudi Arabia, Kuwait, Qatar and elsewhere, adding to chain’s international portfolio, which includes 33 restaurants in Canada, Mexico and the Caribbean.
Applebee’s already has several restaurants in the Middle East.
The IHOP stores will be operated by an affiliate of M.H. Alshaya Co., a regional franchisor for dozens of Western food and retail brands including Starbucks, Cheesecake Factory, Pottery Barn and Estee Lauder.
IHOP officials said the Middle Eastern expansion is the biggest move into the international marketplace in the chain’s 52-year history.
“The Alshaya agreement marks a major milestone in IHOP’s international development strategy and reflects our commitment to make the brand accessible to more guests,” IHOP President Jean Birch said in a statement.
The chain is only the latest to enter what analysts say is an exploding Middle Eastern market for American and European goods. Meanwhile, prospects at home for IHOP and others in the casual dining sector are flat.
Last week, the parent company of the Marie Callender’s chain filed for bankruptcy and closed 31 of its 120 stores.
Earlier this year, DineEquity reported a dip in customers at IHOP and Applebee’s and a 16% drop in revenue in the fourth quarter of 2010 compared to the same period in 2009. DineEquity Chief Executive Julia Stewart said in March she expects IHOP revenues to be flat this year, with a 1% to 3% increase at Applebee’s.
Aaron Allen, a Florida-based restaurant consultant who has worked with dozens of restaurant chains, said he was not surprised by the move.
“The Middle East is mind-boggling in terms of growth and opportunity, and people there are very hungry for American brands,” Allen said. “It’s almost like Las Vegas in terms of the increase in volume on a per-store basis.”
Allen also said labor and construction costs are considerably lower in the Middle East than in the United States.
“The math works very well in the Middle East right now,” Allen said.
IHOP is making other efforts to tap new markets. Earlier this year it introduced a line of frozen breakfast foods at Wal-Mart, with plans to expand to other supermarkets. On Monday, company officials said they are also developing “express concepts” for military bases, airports and universities.