Segments

The Company identifies its reporting segments based on the organizational units used by management to monitor performance and make operating decisions. The Company currently has five operating segments: Applebee's franchise operations, Applebee's company-operated restaurant operations, IHOP franchise operations, rental operations and financing operations. The Company has four reportable segments: franchise operations, (an aggregation of Applebee's and IHOP franchise operations), company-operated restaurant operations, rental operations and financing operations. The Company considers these to be its reportable segments, regardless of whether any segment exceeds 10% of consolidated revenues, income before income tax provision or total assets.

As of March 31, 2019, the franchise operations segment consisted of (i) 1,761 restaurants operated by Applebee’s franchisees in the United States, two U.S. territories and 13 countries outside the United States and (ii) 1,822 restaurants operated by IHOP franchisees and area licensees in the United States, three U.S. territories and 12 countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, franchise advertising revenue, sales of proprietary products to franchisees (primarily pancake and waffle dry mixes for the IHOP restaurants), and franchise fees. Franchise operations expenses include advertising expenses, the cost of IHOP proprietary products, bad debt expense, franchisor contributions to marketing funds, pre-opening training expenses and other franchise-related costs.

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 is as follows:



		Three months ended March 31,
		2019			2018
	(In millions)
Revenues from external customers:
Franchise operations		$	168.9		$	155.3
Rental operations		30.7			30.9
Company restaurants		35.8			—
Financing operations		1.8			2.0
Total		$	237.2		$	188.2

Interest expense:
Rental operations		$	2.5		$	2.4
Company restaurants		0.5			—
Corporate		15.4			15.2
Total		$	18.4		$	17.6

Depreciation and amortization:
Franchise operations		$	2.6		$	2.7
Rental operations		3.5			$	2.9
Company restaurants		1.3			—
Corporate		2.8			2.3
Total		$	10.2		$	7.9

Gross profit, by segment:
Franchise operations		$	88.6		$	73.4
Rental operations		8.1			8.2
Company restaurants		4.2			—
Financing operations		1.7			1.9
Total gross profit		102.6			83.5
Corporate and unallocated expenses, net		(61.5		)	(60.8		)
Income before income tax provision		$	41.1		$	22.7