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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 (Mark One)
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2023
 OR
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                  to                
 
Commission File Number 001-15283
https://cdn.kscope.io/c54c756c13a5946f60a9c8a2423a0a5e-Dine and APPB Logos.jpg Dine Brands Global, Inc. https://cdn.kscope.io/c54c756c13a5946f60a9c8a2423a0a5e-IHOP and Fuzzy Logos.jpg
(Exact name of registrant as specified in its charter)
Delaware95-3038279
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
10 West Walnut Street, 5th Floor91103
PasadenaCA
(Address of principal executive offices) (Zip Code)
(818) 240-6055
(Registrant’s telephone number, including area code)
 ______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

 Title of each class Trading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueDINNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 Accelerated filer
Non-accelerated filer
Smaller reporting company 
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
  No  
 
As of July 25, 2023, the Registrant had 15,551,276 shares of Common Stock outstanding.


Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Index



  Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents

Cautionary Statement Regarding Forward-Looking Statements
Statements contained in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “goal” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the United States Securities and Exchange Commission. The forward-looking statements contained in this report are made as of the date hereof and Dine Brands Global, Inc. does not intend to, nor does it assume any obligation to, update or supplement any forward-looking statements after the date of this report to reflect actual results or future events or circumstances.
These statements involve known and unknown risks, uncertainties, and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: general economic conditions, including the impact of inflation; our level of indebtedness; compliance with the terms of our securitized debt; our ability to refinance our current indebtedness or obtain additional financing; our dependence on information technology; potential cyber incidents; the implementation of restaurant development plans; our dependence on our franchisees; the concentration of our Applebee’s franchised restaurants in a limited number of franchisees; the financial health of our franchisees, including any insolvency or bankruptcy; credit risks from our IHOP franchisees operating under our previous IHOP business model in which we built and equipped IHOP restaurants and then franchised them to franchisees; insufficient insurance coverage to cover potential risks associated with the ownership and operation of restaurants; our franchisees’ and other licensees’ compliance with our quality standards and trademark usage; general risks associated with the restaurant industry; potential harm to our brands’ reputation; risks of food-borne illness or food tampering; possible future impairment charges; trading volatility and fluctuations in the price of our stock; our ability to achieve the financial guidance we provide to investors; successful implementation of our business strategy; the availability of suitable locations for new restaurants; shortages or interruptions in the supply or delivery of products from third parties or availability of utilities; the management and forecasting of appropriate inventory levels; development and implementation of innovative marketing and use of social media; changing health or dietary preference of consumers; risks associated with doing business in international markets; the results of litigation and other legal proceedings; third-party claims with respect to intellectual property assets; delivery initiatives and use of third-party delivery vendors; our allocation of human capital and our ability to attract and retain management and other key employees; compliance with federal, state and local governmental regulations; risks associated with our self-insurance; natural disasters, pandemics, epidemics, or other serious incidents; our success with development initiatives outside of our core business; the adequacy of our internal controls over financial reporting and future changes in accounting standards; and other factors discussed from time to time in the "Risk Factors" section of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in the Corporation's other filings with the Securities and Exchange Commission, many of which are beyond our control.
Fiscal Quarter End
The Company’s fiscal quarters end on the Sunday closest to the last day of each calendar quarter. For convenience, the fiscal quarters of each year are referred to as ending on March 31, June 30, September 30 and December 31. The first fiscal quarter of 2023 began on January 2, 2023 and ended on April 2, 2023; the second fiscal quarter of 2023 ended on July 2, 2023. The first fiscal quarter of 2022 began on January 3, 2022 and ended on April 3, 2022; the second quarter of 2022 ended on July 3, 2022.

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.
Dine Brands Global, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
June 30, 2023December 31, 2022
Assets(Unaudited)
Current assets:  
Cash and cash equivalents
$97,953 $269,655 
   Receivables, net of allowance of $6,803 (2023) and $4,806 (2022)
90,596 119,981 
Restricted cash
39,365 38,929 
Prepaid gift card costs
23,623 30,235 
Prepaid income taxes
4,917 3,063 
Other current assets
13,352 17,901 
Total current assets
269,806 479,764 
Non-current restricted cash19,500 16,400 
Property and equipment, net157,508 145,277 
Operating lease right-of-use assets283,892 289,123 
Deferred rent receivable37,678 42,329 
Long-term receivables, net of allowance of $5,443 (2023) and $5,529 (2022)
35,984 39,697 
Goodwill254,057 253,956 
Other intangible assets, net591,437 597,028 
Other non-current assets, net16,691 17,917 
Total assets
$1,666,553 $1,881,491 
Liabilities and Stockholders’ Deficit  
Current liabilities:  
Current maturities of long-term debt
$100,000 $100,000 
Accounts payable
33,466 52,067 
Gift card liability
137,530 171,966 
Current maturities of operating lease obligations
58,687 59,071 
 Current maturities of finance lease and financing obligations7,090 7,542 
Accrued employee compensation and benefits
15,493 23,456 
Accrued advertising expenses10,980 24,157 
Dividends payable
7,980 8,017 
Other accrued expenses
28,956 24,446 
Total current liabilities
400,182 470,722 
Long-term debt, net, less current maturities1,083,527 1,241,914 
Operating lease obligations, less current maturities275,967 275,120 
Finance lease obligations, less current maturities31,759 30,377 
Financing obligations, less current maturities27,690 28,358 
Deferred income taxes, net70,036 74,651 
Deferred franchise revenue, long-term40,956 42,343 
Other non-current liabilities17,437 19,090 
Total liabilities
1,947,554 2,182,575 
Commitments and contingencies
Stockholders’ deficit:  
Preferred stock, $1 par value, 10,000,000 shares authorized; no shares issued and outstanding
  
Common stock, $0.01 par value; shares: 40,000,000 authorized; June 30, 2023 - 24,890,199 issued, 15,587,934 outstanding; December 31, 2022 - 24,959,972 issued, 15,599,239 outstanding
249 250 
Additional paid-in-capital250,808 259,339 
Retained earnings114,226 84,538 
Accumulated other comprehensive loss(65)(65)
Treasury stock, at cost; shares: June 30, 2023 - 9,302,265; December 31, 2022 - 9,360,733
(646,219)(645,146)
Total stockholders’ deficit(281,001)(301,084)
Total liabilities and stockholders’ deficit
$1,666,553 $1,881,491 

 
See the accompanying Notes to Consolidated Financial Statements.
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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedSix Months Ended
June 30,June 30,
 2023202220232022
Revenues: 
Franchise revenues:
Royalties, franchise fees and other$101,938 $94,148 $204,863 $184,497 
Advertising revenues75,979 74,111 153,016 144,994 
Total franchise revenues177,917 168,259 357,879 329,491 
Company restaurant sales474 39,511 1,531 78,927 
Rental revenues29,440 29,066 61,391 57,873 
Financing revenues584 958 1,381 1,926 
Total revenues208,415 237,794 422,182 468,217 
Cost of revenues:  
Franchise expenses:
Advertising expenses75,979 74,111 153,016 144,994 
Bad debt expense (credit)1,721 (147)2,644 (446)
Other franchise expenses10,580 8,305 19,986 15,753 
Total franchise expenses88,280 82,269 175,646 160,301 
Company restaurant expenses431 37,881 1,510 75,289 
Rental expenses:
Interest expense from finance leases695 746 1,404 1,514 
Other rental expenses21,573 21,097 42,472 42,452 
Total rental expenses22,268 21,843 43,876 43,966 
Financing expenses94 106 192 213 
Total cost of revenues111,073 142,099 221,224 279,769 
Gross profit97,342 95,695 200,958 188,448 
General and administrative expenses47,840 44,063 98,927 85,611 
Interest expense, net17,781 15,359 32,490 30,892 
Closure and impairment charges847 1,311 1,314 1,457 
Amortization of intangible assets2,719 2,665 5,493 5,330 
Loss on extinguishment of debt1,671  10  
Loss (gain) on disposition of assets2,047 (234)2,118 (1,530)
Income before income taxes24,437 32,531 60,606 66,688 
Income tax provision(6,189)(8,569)(14,948)(17,876)
Net income18,248 23,962 45,658 48,812 
Other comprehensive income net of tax:
Foreign currency translation adjustment(1)(3) (4)
Total comprehensive income$18,247 $23,959 $45,658 $48,808 
Net income available to common stockholders:  
Net income$18,248 $23,962 $45,658 $48,812 
Less: Net income allocated to unvested participating restricted stock(446)(673)(1,125)(1,273)
Net income available to common stockholders$17,802 $23,289 $44,533 $47,539 
Net income available to common stockholders per share:  
Basic$1.16 $1.45 $2.91 $2.90 
Diluted$1.16 $1.45 $2.91 $2.90 
Weighted average shares outstanding:  
Basic15,308 16,050 15,304 16,386 
Diluted15,317 16,080 15,324 16,418 

See the accompanying Notes to Consolidated Financial Statements.
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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
(In thousands except shares)
(Unaudited)

Three Months Ended June 30, 2023
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at March 31, 202315,674,739 $249 $248,187 $103,931 $(64)9,240,633 $(640,986)$(288,683)
Net income— — — 18,248 — — — 18,248 
Other comprehensive expense— — — — (1)— — (1)
Purchase of Company common stock(137,632)— — — — 137,632 (9,017)(9,017)
Reissuance of treasury stock76,000 — (556)— — (76,000)3,784 3,228 
Net issuance of shares for stock plans(18,445)— — — — — — — 
Repurchase of restricted shares for taxes(6,728)— (414)— — — — (414)
Stock-based compensation— — 3,591 — — — — 3,591 
Dividends on common stock— — — (7,953)— — — (7,953)
Balance at June 30, 2023
15,587,934 $249 $250,808 $114,226 $(65)9,302,265 $(646,219)$(281,001)

Six Months Ended June 30, 2023
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at December 31, 2022
15,599,239 $250 $259,339 $84,538 $(65)9,360,733 $(645,146)$(301,084)
Net income— — — 45,658 — — — 45,658 
Other comprehensive expense— — — — — — — — 
Purchase of Company common stock(212,492)— — — — 212,492 (14,017)(14,017)
Reissuance of treasury stock270,960 (1)(9,131)— — (270,960)12,944 3,812 
Net issuance of shares for stock plans(16,415)— — — — — — — 
Repurchase of restricted shares for taxes(53,358)— (3,941)— — — — (3,941)
Stock-based compensation— — 5,309 — — — — 5,309 
Dividends on common stock— — 91 (15,970)— — — (15,879)
Tax payments for share settlement of restricted stock units— — (859)— — — — (859)
Balance at June 30, 2023
15,587,934 $249 $250,808 $114,226 $(65)9,302,265 $(646,219)$(281,001)

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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit (Continued)
(In thousands except shares)
(Unaudited)

Three Months Ended June 30, 2022
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at March 31, 202216,746,028 $250 $250,150 $52,516 $(60)8,245,135 $(568,028)$(265,172)
Net income— — — 23,962 — — — 23,962 
Other comprehensive loss— — — — (3)— — (3)
Purchase of Company common stock(912,992)— — — — 912,992 (62,608)(62,608)
Reissuance of treasury stock6,682 — (315)— — (6,682)315  
Net issuance of shares for stock plans(7,533)— — — — — — — 
Repurchase of restricted shares for taxes(8,795)— (608)— — — — (608)
Stock-based compensation— — 3,986 — — — — 3,986 
Dividends on common stock— — — (8,213)— — — (8,213)
Balance at June 30, 2022
15,823,390 $250 $253,213 $68,265 $(63)9,151,445 $(630,321)$(308,656)

Six Months Ended June 30, 2022
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at December 31, 2021
17,163,946 $250 $256,189 $35,415 $(59)7,828,329 $(534,602)$(242,807)
Net income— — — 48,812 — — — 48,812 
Other comprehensive loss— — — — (4)— — (4)
Purchase of Company common stock(1,501,100)— — — — 1,501,100 (104,053)(104,053)
Reissuance of treasury stock177,984 — (8,093)— — (177,984)8,334 241 
Net issuance of shares for stock plans14,327 — — — — — — — 
Repurchase of restricted shares for taxes(31,767)— (2,353)— — — — (2,353)
Stock-based compensation— — 8,327 — — — — 8,327 
Dividends on common stock— — 96 (15,962)— — — (15,866)
Tax payments for share settlement of restricted stock units— $— $(953)$— $— — $— $(953)
Balance at June 30, 2022
15,823,390 $250 $253,213 $68,265 $(63)9,151,445 $(630,321)$(308,656)

See the accompanying Notes to Consolidated Financial Statements
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Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
 June 30,
 20232022
Cash flows from operating activities: 
Net income$45,658 $48,812 
Adjustments to reconcile net income to cash flows provided by operating activities: 
Depreciation and amortization17,651 19,969 
Non-cash closure and impairment charges1,296 1,348 
Non-cash stock-based compensation expense5,309 8,327 
Non-cash interest expense1,935 1,436 
Loss on extinguishment of debt10  
Deferred income taxes(2,939)(773)
Deferred revenue(1,730)(2,396)
Loss (gain) on disposition of assets2,118 (1,530)
Other88 (2,647)
Changes in operating assets and liabilities: 
Accounts receivable, net(285)(1,114)
Deferred rent receivable4,651 3,964 
Current income tax receivables and payables(3,006)3,715 
Gift card receivables and payables(6,204)(8,397)
Other current assets4,502 (5,983)
Accounts payable(13,307)(9,656)
Operating lease assets and liabilities3,806 (5,724)
Accrued employee compensation and benefits(10,170)(18,894)
Accrued advertising(13,177)(178)
Other current liabilities6,478 (400)
Cash flows provided by operating activities42,684 29,879 
Cash flows from investing activities:  
Principal receipts from notes, equipment contracts and other long-term receivables6,261 9,476 
Net additions to property and equipment(22,787)(12,749)
Proceeds from sale of property and equipment 3,658 
Additions to long-term receivables (1,069)
Other(46)(93)
Cash flows used in investing activities(16,572)(777)
Cash flows from financing activities: 
Proceeds from issuance of long-term debt500,000  
Repayment of long-term debt(651,713) 
Borrowing from revolving credit facility15,000  
Repayment of revolving credit facility(15,000) 
Payment of debt issuance costs(7,967) 
Dividends paid on common stock(15,970)(14,588)
Repurchase of common stock(14,017)(102,394)
Principal payments on finance lease obligations(3,623)(4,696)
Proceeds from stock options exercised3,812 241 
Repurchase of restricted stock for tax payments upon vesting(3,941)(2,353)
Tax payments for share settlement of restricted stock units(859)(953)
Cash flows used in financing activities(194,278)(124,743)
Net change in cash, cash equivalents and restricted cash(168,166)(95,641)
Cash, cash equivalents and restricted cash at beginning of period324,984 425,353 
Cash, cash equivalents and restricted cash at end of period$156,818 $329,712 
Supplemental disclosures:  
Interest paid in cash$34,818 $31,701 
Income taxes paid in cash$21,400 $16,065 

See the accompanying Notes to Consolidated Financial Statements.
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1. General
The accompanying unaudited consolidated financial statements of Dine Brands Global, Inc. (the “Company” or “Dine Brands Global”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2023.
The consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all of information and footnotes required by U.S. GAAP for complete financial statements.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

2. Basis of Presentation
The Company’s fiscal quarters end on the Sunday closest to the last day of each calendar quarter. For convenience, the fiscal quarters of each year are referred to as ending on March 31, June 30, September 30 and December 31. The first fiscal quarter of 2023 began on January 2, 2023 and ended on April 2, 2023; the second fiscal quarter of 2023 ended on July 2, 2023. The first fiscal quarter of 2022 began on January 3, 2022 and ended on April 3, 2022; the second fiscal quarter of 2022 ended on July 3, 2022.
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries that are consolidated in accordance with U.S. GAAP. All intercompany balances and transactions have been eliminated.
The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make assumptions and estimates that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, if any, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates may include the calculation and assessment of the following: impairment of goodwill, other intangible assets and tangible assets; income taxes; allowance for credit losses on accounts and notes receivables; lease accounting estimates; contingencies; and stock-based compensation. On an ongoing basis, the Company evaluates its estimates based on historical experience, current conditions and various other assumptions that are believed to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

3. Accounting Standards Adopted and Newly Issued Accounting Standards Not Yet Adopted
Accounting Standards Adopted in the Current Fiscal Year
Additional new accounting guidance became effective for the Company as of the beginning of fiscal 2023 that the Company reviewed and concluded was either not applicable to its operations or had no material effect on its consolidated financial statements in the current or future fiscal years.
Newly Issued Accounting Standards Not Yet Adopted
The Company reviewed all other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements when adoption is required in the future.

4. Revenue
Franchise revenue and revenue from company-operated restaurants are recognized in accordance with current guidance for revenue recognition as codified in Accounting Standards Topic 606 (“ASC 606”). Under ASC 606, revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration the Company expects to receive for those services or goods.
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Revenue (Continued)

Franchise Revenues
The Company franchises the Applebee's Neighborhood Grill & Bar® (“Applebee's”) concept in the American full-service restaurant segment within the casual dining category of the restaurant industry, the International House of Pancakes® (“IHOP”) concept in the family dining mid-scale full-service category of the restaurant industry, and the Fuzzy's Taco Shop® (“Fuzzy's”) concept in the Mexican food segment within the fast-casual dining category of the restaurant industry. The franchise arrangement for the brands is documented in the form of a franchise agreement and, in most cases, a development agreement. The franchise arrangement between the Company as the franchisor and the franchisee as the customer requires the Company to perform various activities to support the brands that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the franchise license is to provide the franchisee with access to the respective brand’s symbolic intellectual property over the term of the license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.
The transaction price in a standard franchise arrangement for the brands primarily consists of (a) initial franchise/development fees; (b) continuing franchise fees (royalties); and (c) advertising fees. Since the Company considers the licensing of the franchising right to be a single performance obligation, no allocation of the transaction price is required. Additionally, all domestic IHOP franchise agreements require franchisees to purchase proprietary pancake and waffle dry mix from the Company.
The Company recognizes the primary components of the transaction price as follows:
Franchise and development fees are recognized as revenue ratably on a straight-line basis over the term of the franchise agreement commencing with the restaurant opening date. As these fees are typically received in cash at or near the beginning of the franchise term, the cash received is initially recorded as a contract liability until recognized as revenue over time;
The Company is entitled to royalties and advertising fees based on a percentage of the franchisee's gross sales as defined in the franchise agreement. Royalty and advertising revenue are recognized when the franchisee's reported sales occur. Depending on timing within a fiscal period, the recognition of revenue results in either what is considered a contract asset (unbilled receivable) or once billed, accounts receivable, and are included in “receivables, net” on the balance sheet;
Revenue from the sale of proprietary pancake and waffle dry mix and other proprietary products is recognized in the period in which distributors ship the franchisee's order; recognition of revenue results in an accounts receivable included in “receivables, net” on the balance sheet.
In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectability of the amount; however, the timing of recognition does not require significant judgments as it is based on either the term of the franchise agreement, the month of reported sales by the franchisee or the date of product shipment, none of which require estimation.
The Company does not incur a significant amount of contract acquisition costs in conducting franchising activities. The Company believes its franchising arrangements do not contain a significant financing component.
Company Restaurant Revenues
Company restaurant revenues comprise retail sales at company-operated restaurants. Sales by company-operated restaurants are recognized when food and beverage items are sold. Company restaurant sales are reported net of sales taxes collected from guests that are remitted to the appropriate taxing authorities, with no significant judgements required.
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

4. Revenue (Continued)

The following table disaggregates franchise revenue by major type for the three and six months ended June 30, 2023 and 2022:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
(In thousands)
Franchise Revenue:
  
Royalties$82,768 $78,006 $166,206 $153,248 
Advertising fees75,979 74,111 153,016 144,994 
Pancake and waffle dry mix sales and other17,150 14,077 34,412 27,008 
Franchise and development fees2,020 2,065 4,245 4,241 
Total franchise revenue
$177,917 $168,259 $357,879 $329,491 
Accounts and other receivables from franchisees as of June 30, 2023 and December 31, 2022 were $71.0 million (net of allowance of $3.4 million) and $69.0 million (net of allowance of $1.3 million), respectively, and were included in receivables, net in the Consolidated Balance Sheets.
Changes in the Company's contract liability for deferred franchise and development fees during the six months ended June 30, 2023 were as follows:
 Deferred Franchise Revenue
(short- and long-term)
(In thousands)
Balance at December 31, 2022
$49,493 
Recognized as revenue during the six months ended June 30, 2023
(4,102)
Fees deferred during the six months ended June 30, 2023
2,371 
Balance at June 30, 2023
$47,762 
The balance of deferred revenue as of June 30, 2023 is expected to be recognized as follows:
(In thousands)
2023 (remaining six months)
$4,199 
20246,471 
20255,712 
20264,876 
20273,969 
Thereafter22,535 
Total$47,762 

5. Current Expected Credit Losses (“CECL”)
The CECL reserve methodology requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Under the CECL model, reserves may be established against financial asset balances even if the risk of loss is remote or has not yet manifested itself. The Company records specific reserves against account balances of franchisees deemed at-risk when a potential loss is likely or imminent as a result of prolonged payment delinquency (greater than 90 days past due) and where notable credit deterioration has become evident. For financial assets that are not currently deemed at-risk, an allowance is recorded based on expected loss rates derived pursuant to the Company's CECL methodology that assesses four components - historical losses, current conditions, reasonable and supportable forecasts, and a reversion to history, if applicable.
The Company considers its portfolio segments to be the following:
Accounts Receivable (Franchise-Related)
Most of the Company’s short-term receivables due from franchisees are derived from royalty, advertising and other franchise-related fees.
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Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)


Gift Card Receivables
Gift card receivables consist primarily of amounts due from third-party vendors. Receivables related to gift card sales are subject to seasonality and usually peak around year-end as a result of the December holiday season.
Notes Receivable
Notes receivable balances primarily relate to the conversion of certain past due Applebee's franchisee accounts receivable to notes receivable, cash loans to franchisees for working capital purposes, a note receivable in connection with the sale of IHOP company restaurants, and IHOP franchise fee and other notes. The notes are typically collateralized by the franchise. A significant portion of these notes have specific reserves recorded against them amounting to $8.6 million as of June 30, 2023.
Equipment Leases Receivable
Equipment leases receivable primarily relate to IHOP franchise development activity prior to 2003 when IHOP typically leased or purchased the restaurant site, built and equipped the restaurant, then franchised the restaurant to a franchisee. Equipment lease contracts are collateralized by the equipment in the restaurant. The estimated fair value of the equipment collateralizing these lease contracts are not deemed to be significant given the very seasoned and mature nature of this portfolio. The weighted average remaining life of the Company’s equipment leases is 3.5 years as of June 30, 2023.
Real Estate Leases Receivable
Real estate leases receivable relate to IHOP franchise development activity prior to 2003. IHOP provided the financing for leasing or subleasing the site. Real estate leases at June 30, 2023, comprised 32 leases with a weighted average remaining life of 10.8 years, and relate to locations that IHOP is leasing from third parties and subleasing to franchisees.
Distributor Receivables
Receivables due from distributors are related to the sale of IHOP’s proprietary pancake and waffle dry mix to franchisees through the Company’s network of suppliers and distributors and are included as part of Other receivables.
June 30, 2023December 31, 2022
(In millions)
Accounts receivable$69.4 $67.5 
Gift card receivables7.1 34.6 
Notes receivable16.3 17.2 
Financing receivables:
     Equipment leases receivable23.4 26.6 
     Real estate leases receivable16.2 18.5 
Other6.4 5.6 
138.8 170.0 
Less: allowance for credit losses and notes receivable(12.2)(10.3)
126.6 159.7 
Less: current portion(90.6)(120.0)
Long-term receivables$36.0 $39.7 
The Company's primary credit quality indicator for all portfolio segments is delinquency.
Changes in the allowance for credit losses during the six months ended June 30, 2023 were as follows:
Accounts ReceivableNotes receivable, short-termNotes receivable, long-termLease ReceivablesEquipment Notes
Other (1)
Total
 (In millions)
Balance, December 31, 2022
$1.2 $3.5 $5.3 $0.1 $0.1 $0.1 $10.3 
Bad debt (credit) expense1.5 1.2 (0.1)(0.0)(0.0)0.0 2.6 
Advertising provision adjustment0.6 (0.0)    0.6 
Write-offs (1.3) (0.0) (0.0)(1.3)
Balance, June 30, 2023
$3.3 $3.4 $5.2 $0.1 $0.1 $0.1 $12.2 
(1) Primarily distributor receivables, gift card receivables and credit card receivables.
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Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)


The delinquency status of receivables (other than accounts receivable, gift card receivables and distributor receivables) at June 30, 2023 was as follows:
Notes receivable, short-termNotes receivable, long-termReal Estate Lease ReceivableEquipment Notes
Other (1)
Total
 (In millions)
Current$4.3 $11.9 $16.2 $23.4 $0.0 $55.8 
30-59 days0.0      
60-89 days0.0      
90-119 days0.0      
120+ days0.1     0.1 
Total$4.4 $11.9 $16.2 $23.4 $0.0 $55.9 
(1) Primarily credit card receivables.
The year of origination of the Company's notes receivable and financing receivables is as follows:
 
Notes receivable, short and long-termLease ReceivablesEquipment NotesTotal
 (In millions)
2023$4.7 $ $0.5 $5.2 
20221.4 8.2  9.6 
20219.9 2.4  12.3 
20200.3 1.3  1.6 
2019 0.7  0.7 
Prior 3.6 22.9 26.5 
Total$16.3 $16.2 $23.4 $55.9 
The Company does not place its financing receivables in non-accrual status.

6. Leases
The Company engages in leasing activity as both a lessee and a lessor. The Company currently leases from third parties the real property on which approximately 520 IHOP franchisee-operated restaurants and one Applebee's franchisee-operated restaurant are located; the Company (as lessor) subleases the property to the franchisees that operate those restaurants. The Company also leases property it owns to the franchisees that operate approximately 50 IHOP restaurants and one Applebee's restaurant. The Company leases from a third party the real property on which one Fuzzy's company-operated restaurant is located. The Company also leases office space for its principal corporate office in Pasadena, California and restaurant support centers in Leawood, Kansas, and Irving, Texas. The Company does not have a significant amount of non-real estate leases.
The Company's existing leases/subleases related to IHOP restaurants generally provide for an initial term of 20 to 25 years, with most having one or more five-year renewal options. Leases related to Applebee's restaurants generally have an initial term of 10 to 20 years, with renewal terms of five to 20 years. Option periods were not included in determining liabilities and right-of-use assets related to operating leases. Approximately 290 of the Company's leases met the sales levels that required variable rent payments to the Company (as lessor), based on a percentage of restaurant sales during the six months ended June 30, 2023. Approximately 40 of the leases met the sales levels that required variable rent payments by the Company (as lessee), based on a percentage of restaurant sales during the six months ended June 30, 2023.
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Notes to Consolidated Financial Statements (Continued)

6. Leases (Continued)




The Company's lease (income) cost for the three and six months ended June 30, 2023 and 2022 was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
Finance lease cost:
Amortization of right-of-use assets
$0.6 $1.1 $1.2 $2.2 
Interest on lease liabilities
0.7 1.2 1.4 2.5 
Operating lease cost
18.9 21.2 38.1 42.3 
Variable lease cost2.2 1.9 4.1 3.6 
Short-term lease cost0.00.00.00.0
Sublease income(27.0)(26.6)(56.5)(53.1)
Lease income$(4.6)$(1.2)$(11.7)$(2.5)
Future minimum lease payments under noncancellable leases as lessee as of June 30, 2023 were as follows:
Finance
Leases
Operating
Leases
 (In millions)
2023 (remaining six months)
$3.8 $31.6 
20247.8 77.9 
20256.4 67.4 
20266.0 59.7 
20274.9 41.4 
Thereafter20.3 126.5 
Total minimum lease payments49.2 404.5 
Less: interest/imputed interest(11.5)(69.8)
Total obligations37.7 334.7 
Less: current portion(5.9)(58.7)
Long-term lease obligations$31.8 $276.0 
The weighted average remaining lease term as of June 30, 2023 was 6.1 years for finance leases and 6.1 years for operating leases. The weighted average discount rate as of June 30, 2023 was 9.3% for finance leases and 5.6% for operating leases.
During the three and six months ended June 30, 2023 and 2022, the Company made the following cash payments for leases:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
Principal payments on finance lease obligations$1.7 $2.4 $3.6 $4.7 
Interest payments on finance lease obligations0.7 1.2 1.4 2.5 
Payments on operating leases20.4 22.8 41.3 45.8 
Variable lease payments2.1 1.8 4.2 3.9 
The Company's income from operating leases for the three and six months ended June 30, 2023 and 2022 was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(In millions)
Minimum lease payments$24.4 $24.0 $51.7 $47.8 
Variable lease income4.6 4.6 8.9 8.5 
Total operating lease income$29.0 $28.6 $60.6 $56.3 
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6. Leases (Continued)




Minimum payments to be received as lessor under noncancellable operating leases as of June 30, 2023 were as follows:
 (In millions)
2023 (remaining six months)
$52.5 
202497.6 
202585.1 
202670.9 
202753.2 
Thereafter141.3 
Total minimum rents receivable$500.6 
The Company's income from real estate leases for the three and six months ended June 30, 2023 and 2022 was as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
 (In millions)
Interest income$0.3 $0.4 $0.6 $0.8 
Variable lease income0.1 0.2 0.2 0.4 
Selling (loss) profit (0.1) 0.4 
Total real estate lease income$0.4 $0.5 $0.8 $1.6 
Minimum payments to be received as lessor under noncancellable real estate leases as of June 30, 2023 were as follows:
 (In millions)
2023 (remaining six months)
$1.9 
20242.6 
20251.8 
20261.8 
20271.7 
Thereafter12.4 
Total minimum rents receivable22.2 
Less: unearned income(6.0)
Total net investment in real estate leases16.2 
Less: current portion(2.5)
Long-term investment in real estate leases $13.7 

7. Long-Term Debt 
At June 30, 2023 and December 31, 2022, long-term debt consisted of the following components:
June 30, 2023December 31, 2022
 (In millions)
Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I
$ $653.0 
Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II
594.0 594.0 
Series 2022-1 Variable Funding Senior Secured Notes, Class A-1, variable interest rate of 7.70% and 7.29% at June 30, 2023 and December 31, 2022, respectively
100.0 100.0 
Series 2023-1 7.824% Fixed Rate Senior Secured Notes, Class A-2
500.0  
Debt issuance costs(10.5)(5.1)
Long-term debt, net of debt issuance costs1,183.5 1,341.9 
Current portion of long-term debt(100.0)(100.0)
Long-term debt$1,083.5 $1,241.9 
On June 5, 2019, Applebee’s Funding LLC and IHOP Funding LLC (the “Co-Issuers”), each a special purpose, wholly-owned indirect subsidiary of the Company, issued two tranches of fixed rate senior secured notes, the Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I (“2019 Class A-2-I Notes”) in an initial aggregate principal amount of $700
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Notes to Consolidated Financial Statements (Continued)

7. Long-Term Debt (Continued)
million and the Series 2019-1 4.723% Fixed Rate Senior Secured Notes, Class A-2-II (“2019 Class A-2-II Notes”) in an initial aggregate principal amount of $600 million (the “2019 Class A-2-II Notes” and, together with the 2019 Class A-2-I Notes, the “2019 Class A-2 Notes”). The 2019 Class A-2 Notes were issued pursuant to an offering exempt from registration under the Securities Act of 1933, as amended.
On August 12, 2022, the Co-Issuers established a new revolving financing facility, the 2022-1 Variable Funding Senior Secured Notes, Class A-1 (the “Credit Facility”), that allows for drawings up to $325 million of variable funding notes on a revolving basis and the issuance of letters of credit. In connection with this transaction, the Co-Issuers terminated their $225 million revolving financing facility, the 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Previous Credit Facility”).
On April 17, 2023, the Co-Issuers completed a refinancing transaction and issued $500 million of Series 2023-1 7.824% Fixed Rate Senior Secured Notes, Class A-2 (the “2023 Class A-2 Notes”). The 2023 Class A-2 Notes were issued pursuant to an offering exempt from registration under the Securities Act of 1933, as amended. The Company used the net proceeds of the 2023 Class A-2 Notes to repay the entire outstanding balance of approximately $585 million of the 2019 Class A-2-I Notes and to pay fees and expenses incurred in connection with the issuance of the 2023 Class A-2 Notes. The remaining 2019 Class A-2-II Notes and the Credit Facility, together with the 2023 Class A-2 Notes are referred to collectively herein as the “Notes.” The Notes were issued in securitization transactions pursuant to which substantially all the domestic revenue-generating assets and domestic intellectual property held by the Co-Issuers and certain other special-purpose, wholly-owned indirect subsidiaries of the Company (the “Guarantors”) were pledged as collateral to secure the Notes.
The Notes were issued under a Base Indenture, dated as of September 30, 2014, amended and restated as of June 5, 2019 and further amended and restated as of April 17, 2023 (the “Base Indenture”). In addition, the 2019 Class A-2-II Notes were issued under the related Series 2019-1 Supplement to the Base Indenture, dated June 5, 2019 (the “Series 2019-1 Supplement”), among the Co-Issuers and Citibank, N.A., as the trustee (in such capacity, the “Trustee”) and securities intermediary, the Credit Facility was issued under the related Series 2022-1 Supplement to the Base Indenture, dated August 12, 2022 (“Series 2022-1 Supplement”), among the Co-Issuers and Citibank, N.A., as Trustee and securities intermediary, and the 2023 Class A-2 Notes were issued under the related Series 2023-1 Supplement to the Base Indenture, dated April 17, 2023 (the “Series 2023-1 Supplement”), among the Co-Issuers and Citibank, N.A., as Trustee and securities intermediary. The Base Indenture, Series 2019-1 Supplement, Series 2022-1 Supplement, and Series 2023-1 Supplement (collectively, the “Indenture”) will allow the Co-Issuers to issue additional series of notes in the future subject to certain conditions set forth therein.
2019 Class A-2 Notes
The 2019 Class A-2-I Notes were voluntarily repaid in full on April 17, 2023, while the 2019 Class A-2-II Notes remain outstanding as of June 30, 2023. For a description of the 2019 Class A-2-I Notes, refer to Note 8 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The legal final maturity of the 2019 Class A-2-II Notes is June 2049, but rapid amortization will apply if the 2019 Class A-2-II Notes are not repaid by June 2026 (the “2019 Class A-2-II Anticipated Repayment Date