10. Segments

The Company’s revenues and expenses are recorded in four segments: franchise operations, company restaurant operations, rental operations and financing operations.

As of September 30, 2011, the franchise operations segment consisted of (i) 1,767 restaurants operated by Applebee’s franchisees in the United States, one U.S. territory and 14 countries outside the United States; and (ii) 1,519 restaurants operated by IHOP franchisees and area licensees in the United States, two U.S. territories and three countries outside the United States. Franchise operations revenue consists primarily of franchise royalty revenues, sales of proprietary products, certain franchise advertising fees and the portion of the franchise fees allocated to intellectual property. Franchise operations expenses include advertising expense, the cost of proprietary products, pre-opening training expenses and costs related to intellectual property provided to certain franchisees.

As of September 30, 2011, the company restaurant operations segment consisted of 243 Applebee’s company-operated restaurants and 13 IHOP company-operated restaurants, all 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, benefits, 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 on capital leases on franchisee-operated restaurants.

Financing operations revenue consists of interest income from the financing of franchise fees and equipment leases, as well as sales of equipment and the portion of franchise fees not allocated to intellectual property. Financing expenses are primarily the costs of restaurant equipment.

Information on segments is as follows:



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
	(In millions)
Revenues from External Customers
Franchise operations	$	97.7		$	92.2		$	300.8		$	280.9
Company restaurants	131.6			206.9			420.9			642.2
Rental operations	31.2			32.2			95.0			98.3
Financing operations	4.0			4.2			16.3			12.3
Total	$	264.5		$	335.5		$	833.0		$	1,033.7
Interest Expense
Company restaurants	$	0.1		$	0.2		$	0.4		$	0.6
Rental operations	4.4			4.6			13.6			14.3
Corporate	32.2			42.8			101.3			131.5
Total	$	36.7		$	47.6		$	115.3		$	146.4
Depreciation and amortization
Franchise operations	$	2.3		$	2.5		$	7.4		$	7.5
Company restaurants	4.0			7.2			13.5			22.1
Rental operations	3.5			3.5			10.5			10.4
Corporate	2.5			3.0			7.2			7.6
Total	$	12.3		$	16.2		$	38.6		$	47.6
Income (loss) before income taxes
Franchise operations	$	72.7		$	66.9		$	222.1		$	204.7
Company restaurants	17.7			29.7			57.9			90.3
Rental operations	6.6			7.5			21.3			24.0
Financing operations	3.6			3.5			10.3			11.1
Corporate	(75.4		)	(87.4		)	(243.4		)	(257.8		)
Total	$	25.2		$	20.2		$	68.2		$	72.3