Segments

The Company has four reporting segments: franchise operations, company restaurant operations, rental operations and financing operations.

As of March 31, 2014, the franchise operations segment consisted of (i) 1,988 restaurants operated by Applebee’s franchisees in the United States, one U.S. territory and 14 countries outside the United States; and (ii) 1,617 restaurants operated by IHOP franchisees and area licensees in the United States, two U.S. territories and nine countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, sales of proprietary products to franchisees (primarily pancake and waffle dry mixes for the IHOP restaurants), IHOP franchise advertising fees and the portion of the franchise fees allocated to IHOP and Applebee's intellectual property. Franchise operations expenses include IHOP advertising expenses, the cost of IHOP proprietary products, IHOP and Applebee's pre-opening training expenses and other franchise-related costs.

At March 31, 2014, the company restaurant operations segment consisted of 23 Applebee’s company-operated restaurants and 10 IHOP company-operated restaurants, all of which are located in the United States. Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, labor, utilities, rent and other restaurant operating costs.

Rental operations revenue includes revenue from operating leases and interest income from direct financing leases. Rental operations expenses are costs of operating leases and interest expense from capital leases on franchisee-operated restaurants.

Financing operations revenue primarily consists of interest income from the financing of franchise fees and equipment leases and sales of equipment associated with refranchised IHOP restaurants. Financing expenses are primarily the cost of restaurant equipment associated with refranchised IHOP restaurants.

Information on segments and a reconciliation to net income before income taxes for the three months ended March 31, 2014 and 2013 were as follows:



		Three Months Ended
		March 31,
		2014			2013
	(In millions)
Revenues (all from external customers)
Franchise operations		$	115.5		$	111.9
Company restaurants		16.3			16.5
Rental operations		30.7			31.0
Financing operations		4.7			3.8
Total		$	167.2		$	163.2
Interest expense
Company restaurants		$	0.1		$	0.1
Rental operations		3.9			4.1
Corporate		25.0			25.3
Total		$	29.0		$	29.5
Depreciation and amortization
Franchise operations		$	2.6		$	2.8
Company restaurants		0.5			0.5
Rental operations		3.4			3.4
Corporate		2.3			2.1
Total		$	8.8		$	8.8
Income before income taxes
Franchise operations		$	86.1		$	83.7
Company restaurants		(0.0		)	0.2
Rental operations		6.9			6.7
Financing operations		4.1			3.8
Corporate		(63.4		)	(64.2		)
Total		$	33.7		$	30.2