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Financing

IHOP unit growth stunted by permitting, construction delays

The pancake chain will push as many as 30 unit openings into next year but said its pipeline is still in good shape.
IHOP exterior
IHOP now expects to open as many as 45 net new units in 2022, down from a max of 65. / Photograph: Shutterstock

Construction and permitting delays are slowing down IHOP’s ambitious development plans.

The breakfast chain lowered its outlook for net new unit openings this year to 35 to 45, from 50 to 65. Some of those openings will be moved to next year, executives said.

“We did have quite a few issues,” IHOP President Jay Johns said during an earnings call Wednesday. “A lot of our pipeline was back-loaded this year, and we started getting into some permitting issues that seem to be persisting post-COVID.” He said it has also taken longer to get equipment.

Development holdups have become common due to permitting and supply chain backlogs and construction labor shortages. The Cheesecake Factory downgraded its development forecast earlier this week, and BJ’s Restaurants said it was wading through similar issues going into next year.

For Dine Brands-owned IHOP, the hurdles comes just as it was returning to growth mode following two years of shrinking unit counts. The 1,759-unit pancake chain planned to double its historic unit growth rate by 2023, going from its typical 40 new openings to 80. 

Despite the hiccups, Johns said the chain will still open 50 restaurants this year, which would be one of the strongest years in its history. And he added that franchisees remain excited about opening new stores. 

“I think the pipeline is still looking very good,” he said. “A lot of those will move into next year, which will help us out in future years.”

IHOP’s same-store sales rose 1.9% during the period ended Sept. 30, though menu prices were about 11% higher than last year. Johns said customers responded well to a “Minions” promotion and a $5 2x2x2 value offer during the quarter. He also noted that an additional 4% of IHOP locations had returned to 24/7 service.

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