Segments

The Company has four operating segments: franchise operations (an aggregation of Applebee’s and IHOP franchise operations), rental operations, company-operated restaurant operations and financing operations. The Company views all operating segments as reportable segments regardless of whether any segment exceeds 10% of consolidated revenues, segment profit or total assets.

As of March 31, 2017, the franchise operations segment consisted of (i) 1,998 restaurants operated by Applebee’s franchisees in the United States, two U.S. territories and 15 countries outside the United States and (ii) 1,731 restaurants operated by IHOP franchisees and area licensees in the United States, three U.S. territories and ten 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), franchise advertising fees from domestic IHOP restaurants and international restaurants of both brands and franchise fees. Franchise operations expenses include advertising expenses from domestic IHOP restaurants and international restaurants of both brands, the cost of IHOP proprietary products, IHOP and Applebee's pre-opening training expenses and other franchise-related 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.

At March 31, 2017, the company restaurant operations segment consisted of 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. 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,
	2017			2016
	(In millions)
Revenues from external customers:
Franchise operations	$	119.5		$	125.0
Rental operations	30.5			31.4
Company restaurants	4.1			4.8
Financing operations	2.1			2.3
Total	$	156.2		$	163.5

Interest expense:
Rental operations	$	2.7		$	3.1
Company restaurants	0.1			0.1
Corporate	15.4			15.4
Total	$	18.2		$	18.6

Depreciation and amortization:
Franchise operations	$	2.7		$	2.6
Rental operations	3.0			3.2
Company restaurants	0.1			0.1
Corporate	1.9			2.2
Total	$	7.7		$	8.1

Gross profit, by segment:
Franchise operations	$	82.8		$	89.3
Rental operations	7.8			8.2
Company restaurants	(0.2		)	(0.4		)
Financing operations	2.1			2.3
Total gross profit	92.5			99.4
Corporate and unallocated expenses, net	(68.3		)	(58.3		)
Income before income tax provision	$	24.2		$	41.1