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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 September 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/fc3596873dd283be82068e53898962f0-Dine and APPB Logos.jpg Dine Brands Global, Inc. https://cdn.kscope.io/fc3596873dd283be82068e53898962f0-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 October 25, 2023, the Registrant had 15,443,006 shares of Common Stock outstanding.


Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Index

  Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1

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, particularly as it may impact our franchisees directly, particularly as it may impact our franchisees directly; 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; and the third fiscal quarter of 2023 ended October 1, 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; and the third fiscal quarter of 2022 ended on October 2, 2022.

2

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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)
September 30, 2023December 31, 2022
Assets(Unaudited)
Current assets:  
Cash and cash equivalents
$98,197 $269,655 
   Receivables, net of allowance of $5,433 (2023) and $4,806 (2022)
85,742 119,981 
Restricted cash
41,932 38,929 
Prepaid gift card costs
23,550 30,235 
Prepaid income taxes
3,063 3,063 
Other current assets
11,317 17,901 
Total current assets
263,801 479,764 
Non-current restricted cash19,500 16,400 
Property and equipment, net162,055 145,277 
Operating lease right-of-use assets283,854 289,123 
Deferred rent receivable35,537 42,329 
Long-term receivables, net of allowance of $5,152 (2023) and $5,529 (2022)
35,678 39,697 
Goodwill254,057 253,956 
Other intangible assets, net588,692 597,028 
Other non-current assets, net16,407 17,917 
Total assets
$1,659,581 $1,881,491 
Liabilities and Stockholders’ Deficit  
Current liabilities:  
Current maturities of long-term debt
$100,000 $100,000 
Accounts payable
28,880 52,067 
Gift card liability
131,490 171,966 
Current maturities of operating lease obligations
58,764 59,071 
 Current maturities of finance lease and financing obligations6,922 7,542 
Accrued employee compensation and benefits
19,970 23,456 
Accrued advertising expenses14,407 24,157 
Dividends payable
 8,017 
Other accrued expenses
23,904 24,446 
Total current liabilities
384,337 470,722 
Long-term debt, net, less current maturities1,084,011 1,241,914 
Operating lease obligations, less current maturities276,817 275,120 
Finance lease obligations, less current maturities32,646 30,377 
Financing obligations, less current maturities27,342 28,358 
Deferred income taxes, net70,229 74,651 
Deferred franchise revenue, long-term40,143 42,343 
Other non-current liabilities17,762 19,090 
Total liabilities
1,933,287 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; September 30, 2023 - 24,883,740 issued, 15,484,512 outstanding; December 31, 2022 - 24,959,972 issued, 15,599,239 outstanding
249 250 
Additional paid-in-capital253,080 259,339 
Retained earnings124,806 84,538 
Accumulated other comprehensive loss(67)(65)
Treasury stock, at cost; shares: September 30, 2023 - 9,399,228; December 31, 2022 - 9,360,733
(651,774)(645,146)
Total stockholders’ deficit(273,706)(301,084)
Total liabilities and stockholders’ deficit
$1,659,581 $1,881,491 

 
See the accompanying Notes to Consolidated Financial Statements.
3

Table of Contents

Dine Brands Global, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedNine Months Ended
September 30,September 30,
 2023202220232022
Revenues: 
Franchise revenues:
Royalties, franchise fees and other$99,135 $93,215 $303,998 $277,712 
Advertising revenues73,385 71,692 226,401 216,686 
Total franchise revenues172,520 164,907 530,399 494,398 
Company restaurant sales308 38,248 1,839 117,175 
Rental revenues29,128 29,207 90,519 87,080 
Financing revenues628 858 2,009 2,784 
Total revenues202,584 233,220 624,766 701,437 
Cost of revenues:  
Franchise expenses:
Advertising expenses73,385 71,692 226,401 216,686 
Bad debt (credit) expense(51)(77)2,593 (523)
Other franchise expenses9,804 8,649 29,790 24,402 
Total franchise expenses83,138 80,264 258,784 240,565 
Company restaurant expenses323 36,513 1,833 111,802 
Rental expenses:
Interest expense from finance leases668 740 2,072 2,254 
Other rental expenses21,066 21,268 63,538 63,720 
Total rental expenses21,734 22,008 65,610 65,974 
Financing expenses91 104 283 317 
Total cost of revenues105,286 138,889 326,510 418,658 
Gross profit97,298 94,331 298,256 282,779 
General and administrative expenses48,618 46,335 147,545 131,946 
Interest expense, net19,059 15,300 51,549 46,192 
Closure and impairment charges1,774 1,636 3,088 3,093 
Amortization of intangible assets2,709 2,664 8,202 7,994 
Loss on extinguishment of debt 1,161 10 1,161 
Loss (gain) on disposition of assets191 (1,502)2,309 (3,032)
Income before income taxes24,947 28,737 85,553 95,425 
Income tax provision(6,468)(7,789)(21,416)(25,665)
Net income18,479 20,948 64,137 69,760 
Other comprehensive income net of tax:
Foreign currency translation adjustment(2)(5)(2)(9)
Total comprehensive income$18,477 $20,943 $64,135 $69,751 
Net income available to common stockholders:  
Net income$18,479 $20,948 $64,137 $69,760 
Less: Net income allocated to unvested participating restricted stock(431)(575)(1,551)(1,852)
Net income available to common stockholders$18,048 $20,373 $62,586 $67,908 
Net income available to common stockholders per share:  
Basic$1.19 $1.32 $4.10 $4.23 
Diluted$1.19 $1.32 $4.09 $4.22 
Weighted average shares outstanding:  
Basic15,217 15,377 15,275 16,049 
Diluted15,220 15,403 15,289 16,079 

See the accompanying Notes to Consolidated Financial Statements.
4

Table of Contents

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

Three Months Ended September 30, 2023
 Common Stock  Accumulated
Other
Comprehensive
Loss
Treasury Stock 
 Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at June 30, 202315,587,934 $249 $250,808 $114,226 $(65)9,302,265 $(646,219)$(281,001)
Net income— — — 18,479 — — — 18,479 
Other comprehensive expense— — — — (2)— — (2)
Purchase of Company common stock(105,864)— — — — 105,864 (6,000)(6,000)
Reissuance of treasury stock8,901 — (445)— — (8,901)445  
Net issuance of shares for stock plans(2,914)— — — — — — — 
Repurchase of restricted shares for taxes(3,545)— (198)— — — — (198)
Stock-based compensation— — 2,858 — — — — 2,858 
Dividends on common stock— — 57 (7,899)— — — (7,842)
Balance at September 30, 2023
15,484,512 $249 $253,080 $124,806 $(67)9,399,228 $(651,774)$(273,706)

Nine Months Ended September 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— — — 64,137 — — — 64,137 
Other comprehensive expense— — — — (2)— — (2)
Purchase of Company common stock(318,356)— — — — 318,356 (20,017)(20,017)
Reissuance of treasury stock279,861 (1)(9,576)— — (279,861)13,389 3,812 
Net issuance of shares for stock plans(19,329)— — — — — — — 
Repurchase of restricted shares for taxes(56,903)— (4,139)— — — — (4,139)
Stock-based compensation— — 8,167 — — — — 8,167 
Dividends on common stock— — 148 (23,869)— — — (23,721)
Tax payments for share settlement of restricted stock units— — (859)— — — — (859)
Balance at September 30, 2023
15,484,512 $249 $253,080 $124,806 $(67)9,399,228 $(651,774)$(273,706)

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

Three Months Ended September 30, 2022
Common StockAccumulated
Other
Comprehensive
Loss
Treasury Stock
Shares
Outstanding
AmountAdditional
Paid-in
Capital
Retained EarningsSharesCostTotal
Balance at June 30, 202215,823,390 $250 $253,213 $68,265 $(63)9,151,445 $(630,321)$(308,656)
Net income— — — 20,948 — — — 20,948 
Other comprehensive loss— — — — (5)— — (5)
Purchase of Company common stock(140,997)— — — — 140,997 (9,520)(9,520)
Reissuance of treasury stock8,051 — (378)— — (8,051)378  
Net issuance of shares for stock plans(4,831)— — — — — — — 
Repurchase of restricted shares for taxes(3,552)— (248)— — — — (248)
Stock-based compensation— — 3,801 — — — — 3,801 
Dividends on common stock— — 122 (8,034)— — — (7,912)
Tax payments for share settlement of restricted stock units— — (2)— — — — (2)
Balance at September 30, 2022
15,682,061 $250 $256,508 $81,179 $(68)9,284,391 $(639,463)$(301,594)

Nine Months Ended September 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— — — 69,760 — — — 69,760 
Other comprehensive loss— — — — (9)— — (9)
Purchase of Company common stock(1,642,097)— — — — 1,642,097 (113,573)(113,573)
Reissuance of treasury stock186,035 — (8,471)— — (186,035)8,712 241 
Net issuance of shares for stock plans9,496 — — — — — — — 
Repurchase of restricted shares for taxes(35,319)— (2,601)— — — — (2,601)
Stock-based compensation— — 12,128 — — — — 12,128 
Dividends on common stock— — 218 (23,996)— — — (23,778)
Tax payments for share settlement of restricted stock units— — (955)— — — — (955)
Balance at September 30, 2022
15,682,061 $250 $256,508 $81,179 $(68)9,284,391 $(639,463)$(301,594)

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)
Nine Months Ended
 September 30,
 20232022
Cash flows from operating activities: 
Net income$64,137 $69,760 
Adjustments to reconcile net income to cash flows provided by operating activities: 
Depreciation and amortization26,221 28,870 
Non-cash closure and impairment charges3,088 2,975 
Non-cash stock-based compensation expense8,167 12,128 
Non-cash interest expense2,714 2,210 
Loss on extinguishment of debt10 1,161 
Deferred income taxes(3,582)(1,376)
Deferred revenue(2,590)(3,773)
Loss (gain) on disposition of assets2,309 (3,032)
Other(1,577)(3,816)
Changes in operating assets and liabilities: 
Accounts receivable, net6,354 (734)
Deferred rent receivable6,792 5,951 
Current income tax receivables and payables(186)7,361 
Gift card receivables and payables(13,588)(16,752)
Other current assets6,358 (5,948)
Accounts payable(15,527)(6,855)
Operating lease assets and liabilities2,438 (8,286)
Accrued employee compensation and benefits(4,447)(18,738)
Accrued advertising(9,750)5,052 
Other current liabilities1,965 (2,668)
Cash flows provided by operating activities79,306 63,490 
Cash flows from investing activities:  
Principal receipts from notes, equipment contracts and other long-term receivables6,686 13,502 
Net additions to property and equipment(31,968)(19,495)
Proceeds from sale of property and equipment 3,908 
Additions to long-term receivables(1,237)(1,069)
Other(113)(255)
Cash flows used in investing activities(26,632)(3,409)
Cash flows from financing activities: 
Proceeds from issuance of long-term debt500,000  
Repayment of long-term debt(651,713) 
Borrowing from revolving credit facility30,000 100,000 
Repayment of revolving credit facility(30,000) 
Payment of debt issuance costs(8,044)(6,286)
Dividends paid on common stock(31,740)(30,765)
Repurchase of common stock(20,017)(113,862)
Principal payments on finance lease and financing obligations(5,329)(7,001)
Proceeds from stock options exercised3,812 241 
Repurchase of restricted stock for tax payments upon vesting(4,139)(2,601)
Tax payments for share settlement of restricted stock units(859)(955)
Cash flows used in financing activities(218,029)(61,229)
Net change in cash, cash equivalents and restricted cash(165,355)(1,148)
Cash, cash equivalents and restricted cash at beginning of period324,984 425,353 
Cash, cash equivalents and restricted cash at end of period$159,629 $424,205 
Supplemental disclosures:  
Interest paid in cash$54,032 $47,478 
Income taxes paid in cash$25,774 $20,832 
Non-cash conversion of accounts receivable to notes receivable$969 $84 

See the accompanying Notes to Consolidated Financial Statements.
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Table of Contents
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 nine months ended September 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; and the third fiscal quarter of 2023 ended on October 1, 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; and the third fiscal quarter of 2022 ended on October 2, 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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Table of Contents
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 nine months ended September 30, 2023 and 2022:
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
(In thousands)
Franchise Revenue:  
Royalties$79,426 $76,418 $245,632 $229,666 
Advertising fees73,385 71,692 226,401 216,686 
Proprietary product sales and other17,576 14,563 51,988 41,571 
Franchise and development fees2,133 2,234 6,378 6,475 
Total franchise revenue$172,520 $164,907 $530,399 $494,398 
Accounts and other receivables from franchisees as of September 30, 2023 and December 31, 2022 were $66.2 million (net of allowance of $3.6 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 nine months ended September 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 nine months ended September 30, 2023
(6,141)
Fees deferred during the nine months ended September 30, 2023
3,550 
Balance at September 30, 2023
$46,902 
The balance of deferred revenue as of September 30, 2023 is expected to be recognized as follows:
(In thousands)
2023 (remaining three months)
$2,402 
20246,538 
20255,781 
20264,950 
20274,056 
Thereafter23,175 
Total$46,902 

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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Table of Contents
Dine Brands Global, Inc. and Subsidiaries
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 $6.7 million as of September 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 3.4 years as of September 30, 2023.
Real Estate Leases Receivable
Real estate leases receivable primarily relate to IHOP franchise development activity prior to 2003 when IHOP provided the financing for leasing or subleasing the site. Real estate leases at September 30, 2023, comprised 29 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.
September 30, 2023December 31, 2022
(In millions)
Accounts receivable$66.1 $67.5 
Gift card receivables6.4 34.6 
Notes receivable16.0 17.2 
Financing receivables:
     Equipment leases receivable21.4 26.6 
     Real estate leases receivable16.9 18.5 
Other5.2 5.6 
132.0 170.0 
Less: allowance for credit losses and notes receivable(10.6)(10.3)
121.4 159.7 
Less: current portion(85.7)(120.0)
Long-term receivables$35.7 $39.7 
The Company's primary credit quality indicator for all portfolio segments is delinquency.
Changes in the allowance for credit losses during the nine months ended September 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 0.2 (0.0)(0.0)0.8 0.1 2.6 
Advertising provision adjustment0.7 (0.2)    0.5 
Write-offs (1.6)(0.4)(0.0)(0.8)(0.0)(2.8)
Balance, September 30, 2023
$3.4 $1.9 $4.9 $0.1 $0.1 $0.2 $10.6 
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Table of Contents
Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

5. Current Expected Credit Losses (Continued)


(1) Primarily distributor receivables, gift card receivables and credit card receivables.
The delinquency status of receivables (other than accounts receivable, gift card receivables and distributor receivables) at September 30, 2023 was as follows:
Notes receivable, short-termNotes receivable, long-termReal Estate Lease ReceivableEquipment Notes
Other (1)
Total
 (In millions)
Current$4.2 $11.7 $16.9 $21.4 $0.0 $54.2 
30-59 days0.0      
60-89 days0.0      
90-119 days0.0      
120+ days0.1     0.1 
Total$4.3 $11.7 $16.9 $21.4 $0.0 $54.3 
(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$5.6 $1.4 $1.0 $8.0 
20221.0 8.1  9.1 
20219.1 2.4  11.5 
20200.3 1.3  1.6 
2019 0.7  0.7 
Prior 3.0 20.4 23.4 
Total$16.0 $16.9 $21.4 $54.3 
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 nine months ended September 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 nine months ended September 30, 2023.
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6. Leases (Continued)




The Company's lease (income) cost for the three and nine months ended September 30, 2023 and 2022 was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In millions)
Finance lease cost:
Amortization of right-of-use assets
$0.6 $0.7 $1.9 $2.9 
Interest on lease liabilities
0.7 1.2 2.1 3.7 
Operating lease cost
18.5 21.5 56.7 63.8 
Variable lease cost1.8 2.1 5.9 5.7 
Short-term lease cost0.00.00.00.0
Sublease income(26.8)(26.8)(83.3)(79.9)
Lease income$(5.2)$(1.3)$(16.7)$(3.8)
Future minimum lease payments under noncancellable leases as lessee as of September 30, 2023 were as follows:
Finance
Leases
Operating
Leases
 (In millions)
2023 (remaining three months)
$1.5 $12.9 
20248.1 79.8 
20256.7 70.1 
20266.2 62.6 
20275.2 44.4 
Thereafter22.1 135.9 
Total minimum lease payments49.8 405.7 
Less: interest/imputed interest(11.5)(70.1)
Total obligations38.3 335.6 
Less: current portion(5.7)(58.8)
Long-term lease obligations$32.6 $276.8 
The weighted average remaining lease term as of September 30, 2023 was 6.1 years for finance leases and 6.1 years for operating leases. The weighted average discount rate as of September 30, 2023 was 9.3% for finance leases and 5.6% for operating leases.
During the three and nine months ended September 30, 2023 and 2022, the Company made the following cash payments for leases:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In millions)
Principal payments on finance lease obligations$1.7 $2.3 $5.3 $7.0 
Interest payments on finance lease obligations0.7 1.2 2.1 3.7 
Payments on operating leases20.1 23.7 61.3 70.0 
Variable lease payments1.9 1.8 6.0 5.7 
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Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)

6. Leases (Continued)




The Company's income from operating leases for the three and nine months ended September 30, 2023 and 2022 was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(In millions)
Minimum lease payments$24.6 $24.1 $76.3 $71.9 
Variable lease income4.1 4.0 13.0 12.5 
Total operating lease income$28.7 $28.1 $89.3 $84.4 
Minimum payments to be received as lessor under noncancellable operating leases as of September 30, 2023 were as follows:
 (In millions)
2023 (remaining three months)
$26.5 
202499.4 
202586.7 
202672.6 
202755.1 
Thereafter152.9 
Total minimum rents receivable$493.2 
The Company's income from real estate leases for the three and nine months ended September 30, 2023 and 2022 was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
 (In millions)
Interest income$0.3 $0.4 $0.8 $1.1 
Variable lease income0.1 0.1 0.3 0.5 
Selling (loss) profit 0.5  1.0 
Total real estate lease income$0.4 $1.0 $1.1 $2.6 
Minimum payments to be received as lessor under noncancellable real estate leases as of September 30, 2023 were as follows:
 (In millions)
2023 (remaining three months)
$0.9 
20242.8 
20252.0 
20262.0 
20272.0 
Thereafter13.7 
Total minimum rents receivable23.4 
Less: unearned income(6.4)
Total net investment in real estate leases17.0 
Less: current portion(2.2)
Long-term investment in real estate leases $14.8 

14

Table of Contents
Dine Brands Global, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)


7. Long-Term Debt 
At September 30, 2023 and December 31, 2022, long-term debt consisted of the following components:
September 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 7.94% and 7.29% at September 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(10.0)(5.1)
Long-term debt, net of debt issuance costs1,184.0 1,341.9 
Current portion of long-term debt(100.0)(100.0)
Long-term debt$1,084.0