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IHOP Taps Growing Fast-Casual Dining Demand by Launching a Speedier Chain

IHOP is launching a new restaurant with faster service and pancake bowls!

Photo Courtesy of CoStar News.

A franchise chain known for its pancakes is flipping its business model to add a fast-casual concept, tapping growing demand for food prepared in shorter time.

The International House of Pancakes, better known as IHOP, said it is launching a fast-casual concept named Flip’d by IHOP to expand on the brand’s traditional full-service casual dining restaurants.

Flip’d locations will be roughly 2,000 square feet, about half the size of the more than 1,700 IHOPs in the United States. The menu is expected to draw inspiration from IHOP’s offerings, but with twists such as pancake and breakfast burrito bowls that can be served up in minutes.

The company chose Atlanta for its first Flip’d location next April with additional locations in New York City, D.C., Denver and San Francisco.

Photo Courtesy of CoStar News.

Fast-casual dining is a smaller component of the restaurant industry, but growing faster than fast food. A report from research firm NPD shows fast-casual customers increased their visits 3% between February 2018 and February 2019.

Fast casual is considered part of the quick-service category. Fast food remains king, however, representing about 75% of foot traffic compared to 8%, according to NPD.

Jay Johns, IHOP’s president, noted on the company’s latest quarterly earnings call that IHOP had slightly positive comparable sales for seven consecutive quarters.

A big part of that is a focus on take-out business, which was up 24% in the third quarter. That makes up 9% of sales, but Johns said the goal is to reach 15%.

For real estate investors, Flip’d may offer another IHOP investment opportunity if it focuses on standalone sites. Most IHOP locations are standalone and owned by investors who have a net lease that puts most or all property expenses on IHOP or the franchisee.

There are about two dozen IHOPs on the market now across the United States.

Barry Wolfe, a net lease broker with Marcus & Millichap, said buyers like the brand because it has been around a long time and has a value-based menu that makes it resistant to economic downturns.

Flip’d gives IHOP a quicker and cheaper way to expand the brand, Wolfe said. The smaller footprint means lower rent, construction costs and labor expense.

He said, “The smaller stores with less seating could go into urban areas where it’s difficult and expensive to build. You can’t open a full-size IHOP in Manhattan.”

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