Julia A. Stewart, DineEquity's chairman and chief executive officer, said, "The creation of this purchasing coop, and the benefits associated with it, are made possible as a direct result of the Applebee's acquisition and is an example of efficiencies DineEquity intends to create for its franchisees. This coop is the first of its kind in both casual and family dining and reflects the culmination of a collaborative effort by these two leading restaurant brands, its franchisees and DineEquity to leverage the immense buying power of the Applebee's and IHOP systems. We believe that expected reductions in food cost and increased supply chain efficiencies made possible by the coop will create a significant competitive advantage for our brands and present one of the greatest opportunities for improved franchisee profitability in the coming years."
A primary benefit from the formation of the coop is the expected price advantage resulting from the combined $1.6 billion in annual purchasing power of the Applebee's and IHOP systems. Secondary benefits include an opportunity for the streamlining and consolidation of products as well as the potential to consolidate the brands' network of third-party product distribution centers, among other factors.
CSCS is an independent company owned by restaurant operating members primarily comprised of Applebee's and IHOP franchisees, with additional participation in proportion to the number of DineEquity's company-operated Applebee's and IHOP restaurants. While the coop will now be responsible for the procurement of items on behalf of franchisees and company-operated restaurants, DineEquity and its brands retain the sole authority to define product specifications of items secured by the coop and ensure quality assurance standards are met at all times. Additionally, the coop is now the only approved buyer of products for both restaurant systems.
David Parsley, DineEquity's former senior vice president, supply chain management, has been named president and ceo of CSCS. He notes that IHOP and Applebee’s currently use various distributors and a mix of operating companies. “For example, IHOP has 36 domestic distribution centers representing eight operating companies, and Applebee’s has 19 distribution centers served by eight operating companies,” he says. “There’s no single primary distributor, per se. With Applebee’s, we’ve been more regionally opportunistic but given that IHOP is a newer acquisition that’s not been done yet. What the coop will allow us to do is to evaluate our systemwide distribution network and optimize efficiencies.”
CSCS, which becomes operational on February 16, 2009, is headquartered in Lenexa, Kansas, with an additional presence in Glendale, California.