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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

The following discussion provides analyses of our results of operations and reasons for material changes for 2023 as compared to 2022 and should be read together with the financial statements included in this Annual Report on Form 10-K. For a detailed discussion of year-to-year comparisons between fiscal 2022 and fiscal 2021, please refer to the applicable portion of “Management's Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023, which is hereby incorporated by reference.

The financial tables appearing in Management's Discussion and Analysis present amounts in millions of dollars that are rounded from our consolidated financial statements presented in thousands of dollars. As a result, the tables may not foot or cross foot due to rounding.

The first International House of Pancakes restaurant opened in 1958 in Toluca Lake, California. Shortly thereafter, the Company's predecessor began developing and franchising additional restaurants. The Company was incorporated under the laws of the State of Delaware in 1976 with the name IHOP Corp. In November 2007, the Company completed the acquisition of Applebee's International, Inc., which became a wholly-owned subsidiary of the Company. Effective June 2, 2008, the name of the Company was changed to DineEquity, Inc. and on February 20, 2018, the name of the Company was changed to Dine Brands Global, Inc.®(“Dine Brands Global,” “we” or “our”). Through various subsidiaries (see Exhibit 21, Subsidiaries of Dine Brands Global, Inc.), we own and franchise 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 and we own and franchise the International House of Pancakes® (“IHOP”) concept in the midscale full-service restaurant segment within the family dining category of the restaurant industry. In December 2022, we acquired the Fuzzy's Taco Shop® (“Fuzzy's”) concept in the Mexican limited-service restaurant segment within the fast-casual dining category of the restaurant industry and as such, Fuzzy's did not have a comparative period to report. References herein to Applebee's® and IHOP® restaurants are to these two concepts, whether operated by franchisees, area licensees or us.

Domestically, IHOP restaurants are in all 50 states and the District of Columbia, while Applebee's restaurants are located in every state except Hawaii and Fuzzy's restaurants are located in 18 states. Internationally, IHOP restaurants are in two United States territories and 13 countries, while Applebee's restaurants are in two United States territories and 12 countries. With over 3,500 franchised restaurants combined, we believe we are one of the largest full-service restaurant companies in the world. The June 2023 issue of Nation's Restaurant News reported that IHOP was the largest restaurant system in the midscale full-service restaurant segment and Applebee's was the largest restaurant system in the American full-service restaurant segment, in terms of United States system-wide sales during 2022.

We have a 52/53 week fiscal year ending on the Sunday nearest to December 31 of each year. For convenience, in this Annual Report on Form 10-K, we refer to all fiscal years as ending on December 31 and all interim fiscal quarters as ending on March 31, June 30 and September 30 of the respective fiscal year. There were 52 calendar weeks in our 2023, 2022, and 2021 fiscal year that ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

Executive Summary of 2023 Results

Highlights

•We reported net income of $97.2 million, or $6.22 per diluted share, in 2023 compared to $81.1 million, or $4.96 per diluted share, in 2022;

•Applebee's reported system-wide sales were slightly lower by 0.1% in 2023 driven by a 0.8% decrease in domestic effective restaurants offset by a 0.6% increase in domestic same-restaurant sales;

•IHOP's reported system-wide sales grew 6.0% in 2023 driven by a 3.5% increase in domestic same-restaurant sales and an increase in franchise restaurants due to development;

•We generated cash from operating activities of $131.1 million;

•We returned over $57.8 million to our stockholders, comprised of $31.7 million in cash dividends and $26.1 million in the form of stock repurchases; and

•We completed a refinancing transaction and issued $500 million of Senior Secured Notes (see Note 8 - Long-Term Debt, of the Notes to the Consolidated Financial Statements), representing a $151.7 million reduction in our long-term debt.

Overview of 2023 Performance

Key Performance Indicators

In evaluating the performance of each restaurant concept, we consider the key performance indicators to be the system-wide sales percentage change, the percentage change in domestic system-wide same-restaurant sales (“domestic same-restaurant sales”), net franchise restaurant development/reduction and the change in total effective restaurants. Changes in both domestic same-restaurant sales and in the number of Applebee's and IHOP restaurants will impact our reported retail sales that drive franchise royalty revenues and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Net franchise restaurant development/reduction also impacts franchise revenues in the form of initial franchise fees and, in the case of IHOP restaurants, sales of proprietary pancake and waffle dry mix.

Our key performance indicators for the year ended December 31, 2023 were as follows:

Applebee's IHOP

System-wide sales percentage increase (0.1) % 6.0 %

Domestic system-wide same-restaurant sales percentage increase 0.6 % 3.5 %

Net (decrease) increase in franchise restaurant development(1) (36) 33

Net (decrease) increase in global effective restaurants(2) (14) 32

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(1) Franchise and area license restaurant openings, net of closings.

(2) Change in the weighted average number of franchise, area license and company-operated restaurants open during the year ended December 31, 2023, compared to the weighted average number of those open during the prior year referenced.

A summary of our financial summary for the years ended December 31, 2023 and 2022 is as follows:

Financial Summary Favorable(Unfavorable)

(In thousands, except per share amounts)

Net income per diluted share $ 6.22 $ 1.26 $ 4.96

Weighted average diluted shares (in millions) 15.2 (0.7) 15.9

The primary reasons for the variances in income before income taxes are summarized as follows:

(In millions)

Increase (decrease) in gross profit:

Franchise operations $ 21.4

Company operations (5.2)

Rental and Financing operations 3.1

Total gross profit increase 19.3

Increase in closure and impairment charges (0.5)

Increase in General & Administrative (“G&A”) expenses (7.3)

Change in (gain) loss on disposition of assets (4.9)

Increase in interest expense (9.1)

All other (0.6)

Decrease in income before income taxes $ (3.1)

The decrease in income before income taxes in fiscal 2023 compared to fiscal 2022 was due to higher interest and G&A expenses and a loss on disposition of assets, partially offset by the increase in gross profit. The increase in interest expense primarily related to higher-rate securitized notes and borrowings from our revolving line of credit. The increase in G&A expenses primarily related to the inclusion of Fuzzy's operations that was acquired in December 2022 and the stopping of our

IHOP Flip'd initiative, offset by the refranchising of the 69 Applebee's company-operated restaurants in October 2022. The change in the loss on disposition of assets related to the stopping of the IHOP Flip'd initiative and disposal of related assets. The increase in gross profit in fiscal 2023 compared to fiscal 2022 was primarily due to the increases in IHOP domestic same-restaurant sales and the number of IHOP effective restaurants impacting sales of proprietary products and royalty revenue and the acquisition of Fuzzy's franchise operations in December 2022, partially offset by the decrease in company operations impacted by the sale of Applebee's company-operated restaurants in October 2022.

Our 2023 effective tax rate of 13.0% applied to pretax book income was different than the statutory Federal income tax rate of 21% primarily due to the conclusion of a state income tax audit settlement, resulting in an income tax benefit of $15.1 million. See Note 16 - Income Taxes, of the Notes to the Consolidated Financial Statements included in this report, for reconciliations between our effective rate and the statutory Federal income tax rate.

Domestic Same-Restaurant Sales

Restaurant Data - System-wide Sales and Domestic Same-Restaurant Sales

The following table sets forth for each of the past three years the number of Global Effective Restaurants in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior two years. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company and, as such, the percentage changes in sales presented below are based on non-GAAP internal sales data. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, and, where applicable, rental payments under leases that partially may be based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

Applebee's

Year Ended December 31,

System-wide:(b)

Domestic sales percentage change(c) (0.1) % 4.7 % 34.4 %

Domestic same-restaurant sales percentage change(d) 0.6 % 5.1 % 38.2 %

Franchise:(b)

Domestic sales percentage change(c)(e) 2.9 % 5.3 % 34.4 %

Domestic same-restaurant sales percentage change(d) 0.6 % 5.1 % 38.2 %

Domestic average weekly unit sales (in thousands) $ 54.0 $ 53.7 $ 50.9

IHOP Year Ended December 31,

System-wide:(b)

Sales percentage change(c) 6.0 % 7.7 % 38.5 %

Domestic same-restaurant sales percentage change(d) 3.5 % 5.8 % 40.2 %

Franchise:(b)

Sales percentage change(c) 6.1 % 7.7 % 38.1 %

Domestic same-restaurant sales percentage change(d) 3.6 % 5.7 % 39.7 %

Average weekly unit sales (in thousands) $ 38.5 $ 37.0 $ 34.9

Area License:(b)

IHOP sales percentage change(c) 4.3 % 7.9 % 42.4 %

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(a)“Global Effective Restaurants” are the weighted average number of restaurants open in a given fiscal period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all Effective Restaurants in the Applebee’s and IHOP systems, domestic and international, which includes restaurants owned by franchisees and area licensees as well as those owned by the Company.

(b)“System-wide sales” are retail sales at Applebee’s domestic restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. An increase or decrease in franchisees' reported sales will result in a corresponding increase or decrease in our royalty revenue. Sales at company-operated restaurants and unaudited reported sales for Applebee's domestic franchise restaurants, IHOP franchise restaurants and IHOP area license restaurants for the years ended December 31, 2023, 2022 and 2021 were as follows:

Year Ended December 31,

(In millions)

Applebee's domestic franchise restaurant sales $ 4,356.6 $ 4,235.3 $ 4,021.7

Applebee's company-operated restaurants — 126.7 146.0

(c)“Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal year compared to the prior fiscal year for all restaurants in that category.

(d)“Domestic same-restaurant sales change” reflects the percentage change in sales in any given fiscal year, compared to the same weeks in the prior year, for domestic restaurants that have been operated throughout both fiscal years that are being compared and have been open for at least 18 months. Because of new restaurant openings and restaurant closures, the domestic restaurants open throughout the fiscal years being compared may be different from year to year.

(e)Applebee's franchise sales percentage change for 2022 was impacted by the refranchising of 69 company-operated restaurants in October 2022 now reported as franchised.

Domestic Same-Restaurant Sales Trends

Applebee’s system-wide domestic same-restaurant sales decreased 0.5% for the three months ended December 31, 2023 and increased 0.6% for the year ended December 31, 2023, as compared to the same respective periods of 2022. The decrease for the three months ended December 31, 2023 was primarily due to a decrease in traffic, offset by an increase in average check. The increase for the year ended December 31, 2023 was primarily due to an increase in average check resulting from the successful promotional food and beverage offerings and menu price increases by franchisees, offset by a decrease in traffic.

Based on data from Black Box Intelligence, a restaurant sales reporting firm (“Black Box”), Applebee's same-restaurant sales during the three and twelve months ended December 31, 2023 underperformed the casual dining segment of the restaurant industry (excluding Applebee's) as compared with the same respective periods of 2022. The casual dining segment also experienced an increase in average customer check, partially offset by a decline in customer traffic.

(1) Primarily to-go, delivery and catering sales.

Applebee's off-premise sales dollars and percentage of sales mix for the three and twelve months ended December 31, 2023 decreased as compared with the same respective periods of 2022, primarily due to changing guest behavior.

IHOP’s domestic same-restaurant sales increased 1.6% for the three months ended December 31, 2023 and increased 3.5% for the year ended December 31, 2023, as compared to the same respective periods of 2022. Most of the improvement in both periods was due to an increase in average check. The increase in average check was primarily due to an increase in menu prices, as well as a general increase in consumer spending due to larger party sizes and greater spending per person.

Based on data from Black Box, IHOP underperformed the family dining segment of the restaurant industry (excluding IHOP) for the three and twelve months ended December 31, 2023, as compared with the same respective periods of 2022. According to Black Box, the family dining segment also experienced increases in same-restaurant sales resulting from an increase in average customer check, partially offset by a decline in customer traffic.

(1) Primarily to-go, delivery and catering sales.

IHOP's off-premise sales dollars for the three and twelve months ended December 31, 2023 decreased as compared to the same respective periods of 2022, primarily due to changing guest behavior.

Restaurant Development

Restaurant closures can occur for a variety of reasons that may differ for each restaurant and for each franchisee. Closures generally fall into one of two categories: restaurants in older locations whose retail, residential and traffic demographics have changed unfavorably over time, and restaurants with non-viable unit economics. Our franchisees are independent businesses and their decisions to close restaurants, both temporarily and permanently, can be impacted by numerous factors that are outside of our control, including but not limited to, franchisees' agreements with their lenders and landlords.

The total number of Applebee's restaurants (domestic and international) open at December 31, 2023 declined 2.1% from the number open at December 31, 2022, as franchisees opened 10 new restaurants but closed 46 restaurants. The total number of IHOP restaurants (domestic and international) open at December 31, 2023 increased 1.9% from the number open at December 31, 2022, as IHOP franchisees and area licensees opened 62 restaurants and closed 29 restaurants, resulting in net development of 33 restaurants. The total number of Fuzzy's restaurants (domestic only) open at December 31, 2023 declined 3.8% from the number open at December 31, 2022, as franchisees opened 4 new restaurants and closed 9 restaurants.

Internationally, the number of Applebee's and IHOP restaurants increased 6.2% from the number open at December 31, 2022. Franchisees of both brands opened 23 restaurants and closed 12, a net increase of 11 international restaurants. The international development activity is included in the total activity for each brand cited above.

The following tables present Applebee's and IHOP net restaurant development activity over the past three years:

Year Ended December 31,

Applebee's Restaurant Development Activity

Summary - beginning of period:

Company restaurants — 69 69

Total Applebee's restaurants, beginning of period 1,678 1,680 1,709

Franchise restaurants opened:

Total franchise restaurants opened 10 16 6

Franchise restaurants closed:

International (10) (5) (10)

Total franchise restaurants closed (46) (18) (35)

Net franchise restaurant reduction (36) (2) (29)

Refranchised from Company restaurants — 69 —

Net franchise restaurant additions/(reductions) (36) 67 (29)

Summary - end of period:

Company restaurants — — 69

Total Applebee's restaurants, end of period 1,642 1,678 1,680

Year Ended December 31,

IHOP Restaurant Development Activity

Summary - beginning of period:

Company — — 3

Total IHOP restaurants, beginning of period 1,781 1,751 1,772

Franchise/area license restaurants opened:

Domestic area license 3 3 2

International franchise 16 14 3

Total franchise/area license restaurants opened 62 51 40

Franchise/area license restaurants closed:

Domestic franchise (25) (14) (47)

Domestic area license (2) (3) (3)

International franchise (2) (4) (10)

International area license — — (1)

Total franchise/area license restaurants closed (29) (21) (61)

Net franchise/area license restaurant development (reduction) 33 30 (21)

Refranchised from Company restaurants — — 4

Franchise restaurants reacquired by the Company — — (1)

Net franchise/area license restaurant additions (reductions) 33 30 (18)

Summary - end of period:

Company — — —

As of December 31, 2023, 44 franchise groups operated 131 Fuzzy's restaurants in 18 states within the United States and we had one company-owned restaurant in Texas, totaling 132 restaurants. Fuzzy's average weekly sales for the three and twelve months ended December 31, 2023 were $27,406 and $30,547, respectively.

The restaurant counts and activity presented above do not include ghost kitchens (small kitchens with no store-front presence, used to fill off-premise orders). As of December 31, 2023, there was a total of 44 ghost kitchens which include one domestic Applebee's ghost kitchen, 10 international Applebee's ghost kitchens and 33 international IHOP ghost kitchens. There were seven domestic and 15 international Applebee's ghost kitchens and 42 international IHOP ghost kitchens at December 31, 2022.

The closures presented in the tables above represent permanent closures of restaurants. Temporary closures, which can occur for a variety of reasons, are not reflected as reductions in these tables and temporarily closed restaurants are included in the summary counts at the beginning and end of each period shown. However, temporary closures are reflected in the weighted calculation of Global Effective Restaurants presented in the preceding Restaurant Data tables.

Closures of Applebee's, Fuzzy's, and IHOP restaurants adversely impact our system-wide retail sales that drive our franchise royalty revenues as well as, in the case of IHOP and Fuzzy's restaurants, sales of each brand's proprietary products. Further, with certain restaurants, we own or lease the underlying property and sublease it to the applicable franchisee. Thus, our rental income also could be adversely affected due to our obligation to make rental or other payments for such properties.

Consolidated Results of Operations - Fiscal2023, 2022 and 2021

The tables in the following section of this Form 10-K present information from our Consolidated Statements of Comprehensive Income for our 2023, 2022 and 2021 fiscal years. The discussion of year-to-year comparisons between fiscal 2023 and fiscal 2022 can be found below.

For a detailed discussion of year-to-year comparisons between fiscal 2022 and fiscal 2021 as well as between fiscal 2021 and fiscal 2020, please refer to the applicable portion of “Management's Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is hereby incorporated by reference.

Financial Review

Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

% Increase (8.6) % 1.5 %

Our 2023 total revenue decreased $78.3 million compared to 2022, primarily due to the decrease in company restaurant operations revenue, partially offset by the increase in franchise operations revenue. Company restaurant operations revenue decreased primarily due to the sale of our 69 Applebee's company-operated restaurants to a franchisee in October 2022. Franchise operations revenue primarily increased due to the increases in IHOP and Applebee's domestic same-restaurant sales, the increase in the number of IHOP effective restaurants and the acquisition of Fuzzy's franchise operations in December 2022.

Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Company restaurant operations 0.0 (5.1) 5.1 (4.2) 9.3

% Increase 5.1 % 0.6 %

Our 2023 total gross profit grew by $19.4 million compared to 2022, primarily due to the franchise operations gross profit increases cited above, partially offset by a decrease in company restaurant gross profit due to the sale of our Applebee's company-operated restaurants as noted above. Rental operations gross profit increased primarily due to a $3.5 million increase in rental income.

Franchise Operations Favorable(Unfavorable) Favorable(Unfavorable)

(In millions, except number of restaurants)

Global Effective Franchise Restaurants:(1)

Franchise Revenue:

Franchise Expenses:

Franchise Gross Profit:

Gross profit as % of total revenue 51.3 % 51.4 % 53.2 %

Gross profit as % of franchise fees(2) 89.3 % 90.7 % 93.4 %

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(1) Effective Franchise Restaurants are the weighted average number of franchise and area license restaurants open in a given fiscal period, adjusted to account for franchise and area license restaurants open for only a portion of the period.

(2) Total franchise revenue excluding advertising.

Our total franchise revenue increased $44.0 million in 2023 compared to 2022, due to the following changes:

•IHOP franchise revenue increased $19.2 million, or 9.6%, compared to 2022, primarily due to the favorable impact by a 3.5% increase in domestic franchise same-restaurant sales and an increase in the number of effective franchise restaurants, and an increase in international franchise revenue.

•Fuzzy's franchise revenue increased $13.0 million compared to 2022 due to the acquisition of Fuzzy's in December 2022.

•Advertising revenue increased $11.5 million compared to 2022, due to the increases in domestic same-restaurant sales and development activity as noted above.

Our 2023 total franchise expenses increased $22.5 million compared to 2022 due to changes in the following components:

•Advertising expenses increased $13.9 million, primarily due to a corresponding increase in advertising revenue and the 2022 recovery of an advertising fund deficit that had been recognized in prior years.

•IHOP franchise expenses increased $7.1 million, primarily due to an increase in the cost of proprietary products (primarily pancake and waffle dry mix), an increase in bad debt expense and an increase in franchisee technology support. IHOP's increase in bad debt expense resulted from the recognition of bad debt expense in 2023 compared to a bad debt recovery in 2022.

Advertising revenue and expense by brand for fiscal 2023, 2022 and 2021 were as follows:

Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Advertising Revenues

Advertising Expenses

Applebee's advertising revenue for 2023 increased 1.5% compared to 2022, primarily due to an increase in the number of effective franchise restaurants (note that advertising contributions to the NAF by company-operated restaurants are not reflected in this financial statement line item) and the increase of 0.6% in domestic franchise same-restaurant sales, partially offset by a $2.6 million decrease due to unfavorable collectability. The increase in Applebee's advertising expenses was greater than the increase in advertising revenue primarily because of the 2022 recovery of an advertising fund deficit that had been recognized in prior years. IHOP's advertising revenue for 2023 increased by 4.8%, compared to 2022, primarily due to the increase of 3.5% in domestic franchise same-restaurant sales and an increase in the number of effective franchise restaurants. The increase in IHOP advertising expenses was less than the increase in advertising revenue due to recognition of a smaller deficit in the international advertising fund compared to prior year.

It is our accounting policy to recognize any deficiency in advertising fee revenue compared to advertising expenditure, or recovery of a previously recognized deficiency in advertising fee revenue compared to advertising expenditures, in the fourth quarter of our fiscal year.

Rental Operations Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Gross profit as % of revenue(1) 27.1 % 24.5 % 22.9 %

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(1)Percentages calculated on actual amounts, not rounded amounts shown above.

Rental operations relate primarily to IHOP franchise restaurants that were developed under the Previous IHOP Business Model described under Item 1. - Business. Rental income includes revenue from operating leases and interest income from real estate leases. Rental expenses are costs of prime operating leases and interest expense on prime finance leases on certain franchise restaurants.

Rental operations segment profit for the year ended December 31, 2023 increased compared to the same period of the prior year primarily due to lease buyouts and operating lease renewals and extensions.

Financing Operations Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Financing revenues $ 2.6 $ (1.0) $ 3.6 $ (0.7) $ 4.3

Financing operations segment profit $ 2.2 $ (1.0) $ 3.2 $ (0.6) $ 3.8

Gross profit as % of revenue(1) 85.8 % 88.4 % 89.2 %

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(1) Percentages calculated on actual amounts, not rounded amounts shown above.

Financing operations relate primarily to IHOP franchise restaurants that were developed under the Previous IHOP Business Model described under Item 1. - Business. Financing operations revenue primarily consists of interest income from the financing of IHOP equipment leases and franchise fees, as well as from notes receivable from franchisees. Financing expenses are the cost of taxes related to IHOP equipment leases.

Financing revenues decreased $1.0 million in 2023 compared to 2022. The decrease was primarily attributable to the continued amortization of the IHOP franchise fees and equipment lease portfolios.

Company Operations Favorable(Unfavorable) Favorable(Unfavorable)

Effective Company Restaurants 1 (55) 56 (13) 69

Average weekly unit sales (in thousands) $ 25.7 $ (17.9) $ 43.6 $ 3.0 $ 40.6

(In millions)

Fuzzy's company restaurant sales 2.1 1.9 0.2 0.2 —

Fuzzy's company restaurant expenses 2.1 (1.9) 0.2 (0.2) —

IHOP restaurant expenses(2) — — — 0.9 0.9

Company restaurant segment profit (loss) $ (0.0) $ (5.1) $ 5.1 $ (4.2) $ 9.3

Gross profit (loss) as % of revenue(3) (0.3) % 4.0 % 6.4 %

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(1) Related to the 69 Applebee's company-operated restaurants that were refranchised in October 2022. Company restaurant sales are retail sales at company-operated restaurants. Company restaurant expenses are operating expenses at company-operated restaurants and include food, beverage, labor, benefits, utilities, rent, depreciation and other operating costs.

(2) Costs associated with IHOP restaurants in the process of being refranchised.

(3) Calculated for Applebee's company-operated restaurants only for 2022 and 2021, and for Fuzzy's company-operated restaurants only for 2023. Percentages calculated on actual amounts, not rounded amounts shown above.

From time to time, we may reacquire restaurants from franchisees that we subsequently refranchise. These restaurants may or may not be operated by us on a temporary basis until refranchised.

For the year ended December 31, 2023, company restaurant operations included three Fuzzy's restaurants, following the acquisition of Fuzzy's in December 2022, of which two out of three restaurants were refranchised in April 2023. Applebee's company restaurant sales for the year ended December 31, 2023 decreased compared to the same period of 2022 due to the sale of the 69 Applebee's company-operated restaurants in North Carolina and South Carolina to an Applebee's franchisee in October 2022.

Company segment restaurant expenses for the year ended December 31, 2021 included $0.9 million of costs associated with certain IHOP restaurants incurred while the restaurants were being refranchised. None of the reacquired IHOP restaurants were operated during the years ended December 31, 2022 and 2021, and IHOP recorded no restaurant revenues in this period. We held no reacquired restaurants at or during the year ended December 31, 2023.

(In millions)

G&A expenses for 2023 increased 3.8% compared to 2022, primarily due to the inclusion of Fuzzy's operations that was acquired in December 2022, the stopping of the IHOP Flip'd initiative, and increases in professional services fees, software maintenance, and personnel-related expenses. This was partially offset by the refranchising of the 69 Applebee's company-operated restaurants in October 2022 and transaction costs related to the acquisition of Fuzzy's in December 2022.

Closure and Impairment Charges Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Closure Charges

The closure charges of $1.6 million for the year ended December 31, 2023 primarily comprised of revisions to existing closure reserves, including accretion for approximately 40 IHOP restaurants closed prior to 2023. The closure charges of $1.7 million for the year ended December 31, 2022 comprised of $1.3 million for revisions to existing closure reserves, including accretion for approximately 40 IHOP restaurants closed prior to 2022 and $0.4 million related to three IHOP restaurants closed in 2022.

Impairment Charges

The Company evaluates its goodwill and the indefinite-lived Applebee's tradename for impairment annually in the fourth quarter of each year or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Definite-lived intangible assets and long-lived tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on estimated undiscounted future cash flows.

The long-lived asset impairment of $2.0 million for the year ended December 31, 2023 was comprised of $1.7 million related to four IHOP subleased restaurants for which the carrying amount exceeded the undiscounted cash flows, $0.2 million related to the stopping of IHOP Flip'd initiative, and $0.1 million related to two Fuzzy's company-owned restaurants in Texas that were sold in April 2023. The long-lived asset impairment of $1.4 million for the year ended December 31, 2022 was comprised of $1.1 million related to the 69 Applebee's company-owned restaurants in North Carolina and South Carolina that were sold in October 2022 and $0.3 million related to two IHOP subleased restaurants. The impairment recorded represented the difference between the carrying value and the estimated fair value.

Other Income and Expense Items Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

Loss (gain) on disposition of assets 2.4 (4.9) (2.5) 4.5 2.0

Loss (gain) on extinguishment of debt 0.0 (0.2) (0.2) 0.2 0.0

Loss on Extinguishment of Debt and Interest Expense, Net

On August 12, 2022, the Company established a new revolving financing facility and the debt financing costs related to the previous credit facility were expensed for the year ended December 31, 2022. For additional details, please refer to Note 7, Long-Term Debt, in the Notes to the Consolidated Financial Statements.

The Company repaid the entire outstanding balance of approximately $585.1 million of its 2019 Class A-2-I Notes during the year ended December 31, 2023 and recognized a $1.7 million loss on extinguishment of debt from the write-off of the related remaining issuance costs. This loss was offset by a $1.7 million gain on extinguishment of debt from the purchase of $67.9 million of its 2019 Class A-2-I Notes under par value during the year ended December 31, 2023.

Interest expense, net, increased $9.3 million in 2023 compared to 2022, primarily due to the higher interest rate on our refinanced securitized notes as well as borrowings from and the increase in interest rate on our revolving credit facility (the "Credit Facility"), partially offset by the increase in interest income from improved yields. See the “Liquidity and Capital Resources of the Company” section for additional discussion related to borrowings under our Credit Facility.

Amortization of Intangible Assets

Amortizationof intangible assets primarily relates to franchising rights arising from the November 2007 acquisition of Applebee's, reacquired franchise rights arising from the December 2018 acquisition of 69 Applebee's restaurants from a former franchisee, and franchising rights arising from the December 2022 acquisition of Fuzzy's. The increase in amortization expense in 2023 as compared to 2022 was due to the Fuzzy's acquisition offset by the refranchising of the Applebee's company-operated restaurants in October 2022.

Loss (Gain) on Disposition of Assets

The loss on disposition of assets for the year ended December 31, 2023 primarily related to the disposition of certain IHOP Flip'd assets. The gain on disposition of assets for the year ended December 31, 2022 primarily related to the gain on sales of the land and buildings on which three IHOP restaurants were located, the 69 Applebee's company-operated restaurants and the termination of two IHOP restaurant leases.

Income Taxes Favorable(Unfavorable) Favorable(Unfavorable)

(In millions)

The income tax provision will vary from period to period for two primary reasons: a change in pretax book income and a change in the effective tax rate. Changes in our pretax book income between 2023 and 2022 and are addressed in the preceding sections of “Consolidated Results of Operations - Fiscal 2023, 2022 and 2021.”

The fiscal year 2023 effective tax rate of 13.0% applied to pretax book income was different than the statutory Federal income tax rate of 21% primarily due to the conclusion of a state income tax audit settlement, resulting in an income tax benefit of $15.1 million.

The fiscal year 2022 effective tax rate of 29.3% applied to pretax book income was different than the statutory Federal income tax rate of 21% due to the state and local income taxes and the non-deductibility of executive compensation. The effective tax rate further increased due to the increase in the effective state tax rate applied to revaluing deferred tax balances. The increase in the effective state tax rate was due to the non-recurring refranchising of 69 Applebee’s company-operated restaurants in the fourth quarter of 2022 and various state legislative changes.

As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regards to future realization of deferred tax assets. We believe that the future realizability of benefits arising from foreign tax credit carryforwards and certain state net operating loss carryforwards does not meet the more-likely-than-not threshold. In recognition of this risk, there is a valuation allowance of $4.4 million as of December 31, 2023.

Liquidity and Capital Resources of the Company

Our total cash balances, net of revolving credit facility borrowings, at December 31, 2023, 2022 and 2021 were as follows:

(In millions)

Total cash, restricted cash and cash equivalents 200.6 325.0 425.3

Less: Revolving credit facility borrowing (100.0) (100.0) —

Total cash, restricted cash and cash equivalents, net $ 100.6 $ 225.0 $ 425.3

At December 31, 2023, we had contractual obligations to repay debt, make payments under operating leases, finance leases and financing obligations, and to purchase certain goods and services. Material cash requirements to satisfy these obligations were as follows:

Obligation Due in Fiscal 2024 Due Thereafter Total Reference(1)

(in millions)

Long-term debt (principal) $ 100.0 $ 1,094.0 $ 1,194.0 Note 8 - Long-term Debt

Long-term debt (interest) 72.8 218.1 290.9 Note 8 - Long-term Debt

Financing obligations 4.6 36.5 41.1 Note 9 - Financing Obligations

Purchase commitments 117.6 0.0 117.6 Note 11 - Commitments and Contingencies

_________________________________

(1)See referenced note of Notes to the Consolidated Financial Statements for additional information about the obligation.

See Note 11 - Commitments and Contingencies, of the Notes to the Consolidated Financial Statements, for a description of the Company's lease guarantees.

We believe that our unrestricted cash and cash equivalents on hand, cash flow from operations and the borrowing capacity available under our Credit Facility will provide us with adequate liquidity for at least the next twelve months.

Long-Term Debt

Key provisions of our long-term debt potentially impacting liquidity are summarized below. See Note 8 - Long-term Debt, of the Notes to the Consolidated Financial Statements, for additional detail on long-term debt, including the balances outstanding at December 31, 2023 and 2022.

Instruments

Our long-term debt includes two series of fixed rate senior secured notes, the Series 2019-1 4.723% Fixed Rate Senior Secured Notes in an initial aggregate principal amount of $600 million (the “2019 Class A-2-II Notes”) and the Series 2023-1 7.824% Fixed Rate Senior Secured Notes, Class A-2 in an initial aggregate principal amount of $500 million (the “2023 Class A-2 Notes” and, together with the 2019 Class A-2-II Notes, the “Class A-2 Notes”). The Series 2019-1 4.194% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) were voluntarily repaid in full on April 17, 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.

Our long-term debt also includes a revolving financing facility, the 2022-1 Variable Funding Senior 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.

Maturity

The final maturity of the 2019 Class A-2-II Notes is in June 2049, but it is anticipated that, unless repaid earlier, the 2019 Class A-2-II Notes will be repaid in June 2026.

The final maturity of the 2023 Class A-2 Notes is in March 2053, but it is anticipated that, unless repaid earlier, to the extent permitted under the Indenture, the 2023 Class A-2 Notes will be repaid in June 2029.

The renewal date of the Credit Facility is June 2027, subject to two additional one-year extensions at the option of the Company upon the satisfaction of certain conditions.

Payment of Principal and Interest

While the Class A-2 Notes are outstanding, payment of principal and interest is required to be made on the Class A-2 Notes on a quarterly basis. The payment of principal on the Class A-2 Notes may be suspended when the leverage ratio for the Company and its subsidiaries is less than or equal to 5.25x. As of December 31, 2023, our leverage ratio was approximately 4.2x. Therefore, quarterly principal payments are not required.

Exceeding the leverage ratio of 5.25x does not violate any covenant related to the Class A-2 Notes.

On February 16, 2023, our Company's Board of Directors authorized a debt repurchase program of up to $100 million. Repurchases of the Company's debt, if any, are expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption. Under the authorization, the Company may make repurchases of the Company's debt from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as management may determine.

Make-whole Premiums

We may voluntarily repay the Class A-2 Notes at any time; however, if repaid prior to certain dates we would be required to pay make-whole premiums. As of December 31, 2023, the make-whole premium associated with voluntary prepayment of the Class A-2-II Notes was zero and will remain as such. As of December 31, 2023, the make-whole premium associated with voluntary prepayment of the Class A-2 Notes was approximately $43.5 million. We also would be subject to a make-whole premium in the event of a mandatory prepayment required following certain rapid amortization events or certain asset dispositions. The mandatory make-whole premium requirements are considered embedded derivatives that must be bifurcated for separate valuation. We estimated the fair value of these derivatives to be immaterial as of December 31, 2023, based on the probability-weighted discounted cash flows associated with either event.

Covenants and Restrictions

Our long-term debt is subject to a series of covenants and restrictions customary for transactions of this type, including maintenance of a debt service coverage ratio ("DSCR"). In general, the DSCR ratio is net cash flow for the four quarters preceding the calculation date divided by the total debt service payments of the preceding four quarters. The complete definitions of the DSCR and all calculation elements are contained in the indenture, and subsequent amendments thereto, under which the Class A-2 Notes were issued.

Failure to maintain a prescribed DSCR can trigger the following events:

•DSCR less than 1.75x - Cash Flow Sweeping Event

•DSCR less than 1.20x - Rapid Amortization Event

•Interest-only DSCR less than 1.20x - Manager Termination Event

•Interest-only DSCR less than 1.10x - Default Event

Our DSCR for the reporting period ended December 31, 2023 was approximately 3.6x.

Credit Facility

In August 2022, the Co-Issuers entered into 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. The applicable interest rate under the Credit Facility depends on the type of borrowing by the Co-Issuers. The applicable interest rate for advances is generally calculated at a per annum rate equal to the commercial paper funding rate or one-, two-, three- or six-month Secured Overnight Financing Rate (“SOFR”), in either case, plus 2.50%. The applicable interest rate for swingline advances and unreimbursed draws on outstanding letters of credit is a per annum base rate equal to the sum of (a) the greatest of (i) the prime rate in effect from time to time; (ii) the federal funds rate in effect from time to time plus 0.50%; and (iii) SOFR for a one-month tenor in effect at such time plus 0.50% plus (b) 2.00%.

In August 2022, the Company borrowed $100 million against the Credit Facility, all of which was outstanding at December 31, 2023. The amount of $3.4 million was pledged against the Credit Facility for outstanding letters of credit, leaving $221.6 million of the Credit Facility available for borrowing at December 31, 2023. It is anticipated that any principal and interest on

the Credit Facility outstanding will be repaid in full on or prior to the quarterly payment date in June 2027, subject to two additional one-year extensions at the option of the Company upon the satisfaction of certain conditions. The letters of credit are used primarily to satisfy insurance-related collateral requirements. The weighted average interest rate on Credit Facility borrowings for the period outstanding during the year ended December 31, 2023 was 7.68%.

Cash Flows

In summary, our cash flows for the years ended December 31, 2023 and 2022 were as follows:

Year Ended December 31,

(In millions)

Net cash provided by operating activities $ 131.1 $ 89.3 $ 41.8

Net cash used in investing activities (30.1) (80.9) 50.8

Net cash used in financing activities (225.4) (108.8) (116.6)

Operating Activities

Cash provided by operating activities is primarily driven by revenues earned and collected from our franchisees, and profit from our rental operations, financing operations and our company-owned restaurants. Cash provided by operating activities increased $41.8 million during the year ended December 31, 2023 compared to the same period of the prior year. This increase was primarily attributable to the increase in gross segment profit as discussed in the preceding sections of this MD&A, a decrease in payment for incentive compensation for the 2022 fiscal year paid in 2023, tenant improvement reimbursements received in 2023 and financing activities prepaid in 2022, offset by an increase in advertising and marketing spend primarily due to the utilization of carryover advertising fund balances from prior periods.

Investing Activities

Investing activities used net cash of $30.1 million for the year ended December 31, 2023 compared to using net cash of $80.9 million for the year ended December 31, 2022, a favorable change of $50.8 million. Net cash used in investing activities in the prior year included the Company's acquisition of Fuzzy's in December 2022 (see Note 19 - Business Acquisition of the Notes to the Consolidated Financial Statements) as well as proceeds from the sale of assets related to the refranchising of 69 Applebee's company-operated restaurants in October 2022. Capital expenditures of $37.2 million was partially offset by principal receipts from notes, equipment contracts and other long-term receivables of $9.3 million.

The following table represents the timing of principal receipts from the Company's long-term receivables for equipment, real estate leases receivable, and other notes receivable from franchisees as of December 31, 2023:

Principal Receipts Due By Period

(In millions)

__________________________________________

(1)Equipment leases receivable extend through the year 2029.

(2)Real estate leases receivable extend through the year 2042.

(3)Other notes receivable extend through the year 2028.

Financing Activities

Financing activities used net cash of $225.4 million for the year ended December 31, 2023. The net increase in cash used by financing activities of $116.6 million was primarily due to the repayment and issuance of long-term debt of $159.8 million including payment of debt issuance costs, dividends paid on common stock of $31.7 million and repurchase of common stock of $26.1 million during the year ended December 31, 2023.

Adjusted Free Cash Flow

We define “adjusted free cash flow” for a given period as cash provided by operating activities, plus receipts from notes and equipment contract receivables, less additions to property and equipment. Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock and we believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

Adjusted free cash flow is a non-U.S. GAAP measure. This non-U.S. GAAP measure is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-U.S. GAAP measures should be considered in addition to, and not as a substitute for, the U.S. GAAP information contained within our financial statements. Reconciliation of the cash provided by operating activities to adjusted free cash flow is as follows:

Favorable(Unfavorable)

(In millions)

Cash flows provided by operating activities $ 131.1 $ 41.8 $ 89.3

Net receipts from notes and equipment receivables 9.3 (1.3) 10.6

Additions to property and equipment (37.2) (1.9) (35.3)

The increase in adjusted free cash flow in 2023 compared to 2022 was primarily due to the increase in cash provided by operating activities which was discussed in preceding section of this MD&A.

Capital Allocation

Dividends

During the fiscal years ended December 31, 2023, 2022 and 2021, we declared and paid dividends on common stock as shown in Note 12 - Stockholders' Deficit, of the Notes to the Consolidated Financial Statements included in this report. On February 26, 2024, our Board of Directors declared a first quarter 2024 cash dividend of $0.51 per share of common stock, payable on April 5, 2024 to the stockholders of record as of the close of business on March 20, 2024.

Share Repurchases

On February 17, 2022, our Board of Directors authorized a new share repurchase program, effective April 1, 2022, of up to $250 million (the "2022 Repurchase Program"). In connection with the approval of the 2022 Repurchase Program, the 2019 Share Repurchase Program terminated effective April 1, 2022.

A summary of shares repurchased under the 2022 Repurchase Program, during the year ended December 31, 2023 and cumulatively, is as follows:

Shares Cost of shares

(In millions)

2022 Repurchase Program

Cumulative (life-of-program) repurchases 1,595,778 $ 104.8

Remaining dollar value of shares that may be repurchased n/a $ 145.2

See Note 12 - Stockholders' Deficit, of the Notes to the Consolidated Financial Statements included in this report for shares repurchased in fiscal 2023, 2022 and 2021.

From time to time, we also repurchase shares owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted stock awards. Shares are deemed purchased at the closing price of our common stock on the vesting date. See Part II, Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for detail on this stock repurchase activity during the twelve months ended December 31, 2023.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Our significant accounting policies are comprehensively described in Note 2 - Basis of Presentation and Significant Accounting Policies, of the Notes to the Consolidated Financial Statementscontained in Part II, Item 8 of this

10-K. We believe the accounting policies discussed below are particularly important to the understanding of our consolidated financial statements and require higher degree of judgment and/or complexity in the preparation of those consolidated financial statements. In exercising those judgments, we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate our estimates based on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Accounting assumptions and estimates are inherently uncertain and actual results may differ materially from our estimates. Changes in estimates and judgments could significantly affect our results of operations, financial condition and cash flow in the future.

Goodwill and Intangible Assets

Goodwill and intangible assets considered to have an indefinite life are evaluated throughout the year to determine if indicators of impairment exist. Such indicators include, but are not limited to, events or circumstances such as a significant adverse change in our business, in the overall climate of the business, unanticipated competition, a loss of key personnel, adverse legal or regulatory developments or a significant decline in the market price of our common stock.

If no indicators of impairment have been noted during these preliminary assessments, we perform an assessment of goodwill and intangible assets annually in the fourth fiscal quarter. We first assess qualitatively whether it is more-likely-than-not that an impairment does not exist. Significant factors considered in this assessment include, but are not limited to, macro-economic conditions, market and industry conditions, cost considerations, the competitive environment, share price fluctuations, overall financial performance and results of past impairment tests. If we do not qualitatively determine that it is more-likely-than-not that an impairment does not exist, we perform a quantitative impairment test. Additionally, in any given year, we may elect to perform a quantitative assessment of impairment.

In performing a quantitative test for impairment of goodwill, we primarily use the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of goodwill and intangible assets. Significant assumptions made by management in estimating fair value under the discounted cash flow model include future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures, changes in working capital and an estimated income tax rate, along with an appropriate discount rate based on our estimated cost of equity capital and after-tax cost of debt. Significant assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied.

In the process of a quantitative test, if necessary, of the Applebee's and Fuzzy's tradename intangible asset, we primarily use the relief of royalty method under the income approach method of valuation. Significant assumptions used to determine fair value under the relief of royalty method include future trends in sales, a royalty rate, an estimated income tax rate and a discount rate to be applied to the forecast revenue stream.

There is an inherent degree of uncertainty in preparing any forecast of future results. Future trends in system-wide sales are dependent to a significant extent on national, regional and local economic conditions, and, to a lesser extent, on global economic conditions, particularly those conditions affecting the demographics of the guests that frequently patronize our restaurants. There are numerous potential events that could reasonably be expected to negatively affect the forecast of system-wide sales, including a decrease in customers' disposable income available for discretionary spending or a decrease in the perceived wealth of customers, as well as unexpected events such as a global pandemic. As a result, our restaurants could experience a decline in sales and/or customer traffic as potential customers choose lower-cost alternatives (such as quick-service restaurants) or other alternatives to dining out. Any decreases in customer traffic or average customer check due to these or other reasons could reduce gross sales at franchise restaurants, resulting in lower royalty and other payments from franchisees. This could reduce the profitability of franchise restaurants, potentially impacting the ability of franchisees to make royalty payments owed to us when due, which could adversely impact our current cash flow from franchise operations, and negatively impacting franchisees’ ability to develop new restaurants, which could adversely impact our future cash flows from franchise operations. Any decreases in customer traffic or average customer check also could reduce the profitability of our company-operated restaurants. Significant increases in either the estimated income tax rate or the discount rate also could adversely impact estimated fair values used in quantitative tests for impairment.

During the year ended December 31, 2023, we performed a quantitative test on the Applebee’s goodwill and tradename using the approach described above. The fair values of goodwill and indefinite-lived intangible assets exceeded their respective carrying values as of the testing dates.

Long-Lived Assets

On a regular basis, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying value of long-lived tangible assets (primarily assets related to properties and equipment leased or subleased to franchisees, including operating lease right-of-use assets recorded upon adoption of ASC 842) may not be recoverable. We test impairment using historical cash flows and other relevant facts and circumstances as the primary basis for our estimates of future cash flows. Significant factors considered include, but are not limited to, current and forecast sales, current and forecast cash flows, the number of years the franchisee's restaurant has been in operation, its remaining lease life, and other factors which apply on a case-by-case basis. The analysis is performed at the individual restaurant level for indicators of permanent impairment. Recoverability of the Company's assets is measured by comparing the assets' carrying value to the undiscounted cash flows expected to be generated over the assets' remaining useful life or remaining lease term, whichever is less. This assessment requires the use of estimates and assumptions as to future cash flows of individual restaurants and properties, which are subject to a high degree of judgment and are unique to each property. If assumptions as to future cash flows decrease in the future, we may be required to record impairment charges for these assets. See Note 13 - Closure and Long-lived Tangible Asset Impairment Charges, of the Notes to the Consolidated Financial Statements for additional information on impairments of long-lived tangible assets.

On a regular basis, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying value of intangible assets with finite lives, primarily assets related to Applebee's franchise rights. Recoverability of the asset is measured by comparing the assets' carrying value to the discounted future cash flows expected to be generated over the asset's remaining useful life. Significant factors considered include, but are not limited to, current and forecast sales, current and forecast cash flows and a discount rate to be applied to the forecast revenue stream.

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.

We estimate credit loss reserves in the following manner. We record 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 that consider four components - historical losses, current conditions, reasonable and supportable forecasts and a reversion to history, if applicable.

The majority of our allowance for credit losses is comprised of specific reserves related to individual franchisees. These reserves are subject to a high degree of judgment and are unique to each franchisee. Changes in circumstances relating to each franchisee may result in increases or decreases to the allowance for credit losses in the future. Since adoption of the CECL methodology, the portion of the allowance based on expected loss rates has not been a material component of the total allowance for credit losses.

Income Taxes

We provide for income taxes based on our estimate of federal and state income tax liabilities. We make certain estimates and judgments in the calculation of tax expense and the resulting tax liabilities and in the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense. Tax laws are complex and subject to different interpretations by the taxpayers and respective governmental authorities. We review our tax positions quarterly and adjust the balances as new information becomes available.

We recognize deferred tax assets and liabilities using the enacted tax rates for the effect of temporary differences between the financial reporting basis and the tax basis of recorded assets and liabilities. Deferred tax accounting requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portions or all the net deferred tax assets will not be realized. This test requires projection of our taxable income into future years to determine if there will be taxable income sufficient to realize the tax assets. The preparation of the projections requires considerable judgment and is subject to change to reflect future events and changes in the tax laws. When we establish or reduce the valuation allowance against our deferred tax assets, our income tax expense will increase or decrease, respectively, in the period such determination is made.

FASB ASC Topic 740-10 requires that a position taken or expected to be taken in a tax return be recognized in the financial statement when it is more likely than not (i.e., a likelihood of more than 50 percent) that the position would be sustained upon examination by taxing authorities including all appeals or litigation processes, based on its technical merits. A recognized tax position is then measured on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. For each reporting period, management applies a consistent methodology to measure and adjust all uncertain tax positions based on the available information.

Business Acquisitions

We allocate the purchase price of acquired companies to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. The allocation of the purchase price requires us to make significant estimates and assumptions to determine the fair value of assets acquired and liabilities assumed and the related useful lives of the acquired assets, when applicable, as of the acquisition date.

Examples of assets we have acquired or may acquire in the future that required the use of critical estimates in valuations include, but are not limited to, tradenames and franchising rights. We engage third-party valuation specialists to assist in determining the fair value associated with our business combinations and related identifiable intangible assets. These estimates are inherently uncertain and unpredictable due to the sensitivity of the assumptions used, which may include, among others, the future expected cash flows and discount rates.

Changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

Accounting Standards Adopted in the Current Fiscal Year

See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in this report for a description of accounting standards we adopted in fiscal 2023.

Newly Issued Accounting Standards Not Yet Adopted

See Note 2 - Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in this report, for a description of newly issued accounting standards that may impact us in the future.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to financial market risk, including interest rates and commodity prices. We address these risks through controlled risk management that may include the use of derivative financial instruments to economically hedge or reduce these exposures. We do not enter into financial instruments for trading or speculative purposes.

Interest Rate Risk

The significant majority of our long-term debt outstanding at December 31, 2023 was issued at fixed interest rates (see Note 8 - Long-Term Debt, of the Notes to Consolidated Financial Statements). We are only exposed to interest rate risk on borrowings we make under our 2022-I Variable Funding Senior Secured Notes, Class A-1, a revolving credit facility, borrowings from which are subject to variable interest rates. In August 2022, we borrowed $100 million against the Credit Facility, all of which was outstanding at December 31, 2023. A 1% increase or decrease in interest rates would not have a material impact on any fees associated with the Credit Facility.

We do not engage in speculative transactions nor do we hold or issue financial instruments for trading purposes. We had no material amounts of derivative instruments at December 31, 2023 and did not hold any material amount of derivative instruments during the year ended December 31, 2023.

Investments in instruments earning a fixed rate of interest carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates. We currently do not hold any fixed rate investments.

Based on our interest-earning cash, cash equivalents and restricted cash balances as of December 31, 2023, a 1% change in interest rates would change our annual interest income by approximately $2.0 million.

Many of the food products purchased by our franchisees and area licensees are affected by commodity pricing and are therefore subject to unpredictable price volatility. Extreme increases in commodity prices and/or long-term changes could affect our franchisees, area licensees and company-operated restaurants adversely. We expect that, in most cases, the brand systems would be able to pass increased commodity prices through to their customers via increases in menu prices. From time to time, competitive circumstances could limit short-term menu price flexibility, and in those cases, franchisees' margins would be negatively impacted by increased commodity prices. Since the significant majority of our restaurants are franchised, we believe that any changes in commodity pricing that cannot be adjusted for by changes in menu pricing or other strategies would not be material to our financial condition, results of operations or cash flows.

The Company and owners of Applebee's and IHOP franchise restaurants are members of CSCS, a Co-op that manages procurement activities for the Applebee's and IHOP restaurants that belong to the Co-op. We believe the larger scale created by combining the supply chain requirements of both brands under one organization can provide cost savings and efficiency in the purchasing function. As of December 31, 2023, 100% of Applebee's domestic franchise restaurants and 100% of IHOP domestic franchise restaurants are members of CSCS. In some instances, IHOP and Applebee's may be required to guarantee their purchase of any remaining inventory of certain food and other items purchased by CSCS for the purpose of supplying limited time promotions on behalf of the Applebee's and IHOP systems as a whole. None of these food product guarantees is a derivative instrument. At December 31, 2023, our outstanding guarantees for food product purchases were $1.0 million.

International Currency Exchange Rate Risk

We have minimal exposure to international currency exchange rate fluctuations. Revenue derived from all international country operations comprised less than 3% of total consolidated revenue for the year ended December 31, 2023, such that a hypothetical concurrent 10% adverse change in the currency of every international country in which our franchisees operate restaurants would have a negative impact of less than 0.3% of our consolidated revenue. We do not hold a material amount of cash and cash equivalents in currencies other than the U.S. Dollar.

Item 8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements

PageReference

Report of Independent Registered Public Accounting Firm (PCAOB ID:42) 54

Consolidated Balance Sheets as of December 31, 2023 and 2022 56

Notes to the Consolidated Financial Statements 60

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Dine Brands Global, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Dine Brands Global, Inc. and Subsidiaries (the Company) as of December 31, 2023 and January 1, 2023, the related consolidated statements of comprehensive income, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Indefinite Lived Intangible Assets Impairment Assessment

/s/ ERNST & YOUNG LLP

We have served as the Company’s auditor since 2004.

Los Angeles, California

February 28, 2024

Dine Brands Global, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share amounts)

December 31,

Current assets:

Liabilities and Stockholders' Deficit

Current liabilities:

Current maturities of operating lease obligations 63,498 59,071

Current maturities of finance lease and financing obligations 7,243 7,542

Accrued employee compensation and benefits 23,211 23,456

Operating lease obligations, less current maturities 269,097 275,120

Finance lease obligations, less current maturities 34,389 30,377

Financing obligations, less current maturities 26,984 28,358

Deferred franchise revenue, long-term 38,658 42,343

Commitments and contingencies

Stockholders' deficit:

Accumulated other comprehensive loss (64) (65)

See the accompanying notes to the consolidated financial statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)

Year Ended December 31,

Revenues:

Franchise revenues:

Cost of revenues:

Franchise expenses:

Rental expenses:

Loss (gain) on extinguishment of debt 10 (210) 34

Other comprehensive income, net of tax:

Foreign currency translation adjustment 1 (6) (4)

Net income available to common stockholders:

Net income available to common stockholders per share:

Weighted average shares outstanding:

See the accompanying notes to the consolidated financial statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

(In thousands except share amounts)

SharesOutstanding Amount Shares Cost Total

Adoption of credit loss accounting guidance — — — — — — — —

Other comprehensive gain — — — — (4) — — (4)

Net use of shares for stock plans 131,862 — — — — — — —

Repurchase of restricted shares for taxes (21,709) — (1,771) — — — — (1,771)

Dividends on common stock — — — (6,896) — — — (6,896)

Other comprehensive loss — — — — (6) — — (6)

Net use of shares for stock plans 6,886 — — — — — — —

Repurchase of restricted shares for taxes (39,189) — (2,867) — — — — (2,867)

Other comprehensive loss — — — — 1 — — 1

Net use of shares for stock plans (28,069) — — — — — — —

Repurchase of restricted shares for taxes (61,374) — (4,355) — — — — (4,355)

See the accompanying notes to the consolidated financial statements.

Dine Brands Global, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

Cash flows from operating activities

Loss (gain) on extinguishment of debt 10 (210) 34

Changes in operating assets and liabilities:

Current income tax receivables and payables 1,160 8,326 (3,837)

Cash flows from investing activities

Proceeds from sale of property and equipment 10 17,028 946

Additions to long-term receivables (1,069) (1,069) —

Acquisition of business, net of cash acquired (101) (78,264) —

Cash flows (used in) provided by investing activities (30,097) (80,904) 3,861

Cash flows from financing activities

Repayments of revolving credit facility (30,000) — (220,000)

Payment of debt issuance costs (8,044) (6,289) —

Tax payments for share settlement of restricted stock units (859) (955) (9,783)

Supplemental disclosures

See the accompanying notes to the consolidated financial statements.

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

1. The Company

The first International House of Pancakes® (“IHOP”) restaurant opened in 1958 in Toluca Lake, California. Shortly thereafter, the Company began developing and franchising additional restaurants. The Company was incorporated as IHOP Corp. under the laws of the State of Delaware in 1976. In November 2007, the Company acquired Applebee's International, Inc., which became a wholly-owned subsidiary of the Company. Effective June 2, 2008, the name of the Company was changed to DineEquity, Inc. and on February 20, 2018, the name of the Company was changed to Dine Brands Global, Inc.® (“Dine Brands Global”). In December 2022, the Company acquired FTO Holding Company, LLC (“Fuzzy's”), which owns the Fuzzy's Taco Shop® concept and became a wholly-owned subsidiary of the Company.

The Company owns, franchises and operates three restaurant concepts: Applebee's Neighborhood Grill + Bar® (“Applebee's”), in the American full-service restaurant segment within the casual dining category of the restaurant industry; IHOP®, in the family dining mid-scale full-service category of the restaurant industry; and Fuzzy’s Taco Shop®, in the Mexican food segment within the fast-casual dining category of the restaurant industry.

As of December 31, 2023, there were 1,814 IHOP restaurants, of which 1,657 were subject to franchise agreements and 157 were subject to area license agreements. These IHOP restaurants were located in all 50 states of the United States, the District of Columbia, two United States territories and 13 countries outside the United States. As of December 31, 2023, there were 1,642 Applebee's® restaurants, all of which were subject to franchise agreements. These Applebee's restaurants were located in 49 states of the United States, two United States territories and 12 countries outside the United States. As of December 31, 2023, the Company had 132 Fuzzy restaurants in 18 states of the United States, of which 131 were subject to franchise agreements and one was company-operated.

References herein to Applebee's, IHOP, and Fuzzy's restaurants are to these restaurant concepts, whether operated by franchisees, area licensees or the Company. Retail sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company.

2. Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Dine Brands Global, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Periods

The Company has a 52/53 week fiscal year that ends on the Sunday nearest to December 31 of each year. In a 52-week fiscal year, each fiscal quarter contains 13 weeks, comprised of two, four-week fiscal months followed by a five-week fiscal month. In a 53-week fiscal year, the last month of the fourth fiscal quarter contains six weeks. For convenience, the Company refers to its fiscal years as ending on December 31 and its fiscal quarters as ending on March 31, June 30 and September 30. There were 52 calendar weeks in our 2023, 2022, and 2021 fiscal year that ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires the Company's management to make estimates and assumptions 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 are made in the calculation and assessment of the following: impairment of tangible and intangible assets and goodwill; purchase price allocation of acquired companies to the assets acquired and liabilities assumed; income taxes; allowance for doubtful 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.

Concentration of Credit Risk

The Company's cash, cash equivalents, restricted cash and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are placed with financial institutions that management believes are creditworthy. The

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Company does not believe that it is exposed to any significant credit risk on cash, cash equivalents and restricted cash. At times, cash, cash equivalents and restricted cash balances may be in excess of FDIC insurance limits.

Accounts receivable are derived from revenues earned from franchisees and area licensees located primarily in the United States. Financing receivables arise from the financing of restaurant equipment, real estate leases or franchise fees with the Company by IHOP franchisees. The Company is subject to a concentration of credit risk with respect to receivables from franchisees that own a large number of Applebee's, IHOP or Fuzzy's restaurants. As of December 31, 2023, two franchisees (one Applebee's franchisee and one franchisee with cross-brand ownership) operated a combined total of 822 Applebee's and IHOP restaurants in the United States, which comprised 24.4% of the total Applebee's, IHOP and Fuzzy's franchise and area license restaurants in the United States. Revenues from these two franchisees represented 21.1%, 18.8%, and 18.0% of total consolidated revenue for the years ended December 31, 2023, 2022 and 2021, respectively. One franchisee represented 13.9%, 12.5%, and 11.8% of total consolidated revenue for the years ended December 31, 2023, 2022 and 2021, respectively. Receivables from these franchisees totaled $19.7 million and $20.9 million at December 31, 2023 and 2022, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. These cash equivalents are stated at cost which approximates market value. Cash held related to IHOP advertising funds and the Company's gift card programs is not considered to be restricted cash as there are no restrictions on the use of these funds. The components of cash and cash equivalents were as follows:

December 31,

(In millions)

Money market funds $ 42.0 $ 75.0

IHOP advertising funds and gift card programs 82.8 96.7

Other depository accounts 21.2 98.0

Total cash and cash equivalents $ 146.0 $ 269.7

Restricted Cash

Current

Current restricted cash primarily consisted of funds required to be held in trust in connection with the Company's securitized debt and funds from Applebee's and Fuzzy's franchisees pursuant to franchise agreements, usage of which was restricted to advertising activities. The components of current restricted cash were as follows:

December 31,

(In millions)

Securitized debt reserves $ 31.2 $ 32.4

Applebee's advertising funds 2.0 5.4

Total current restricted cash $ 35.1 $ 38.9

Non-current

Non-current restricted cash of $19.5 million and $16.4 million at December 31, 2023 and 2022, respectively, represents interest reserves set aside for the duration of the securitized debt. The required reserve is approximately one quarter's interest payment on the Company's securitized debt.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Properties under finance leases are stated at the present value of the minimum lease payments. Depreciation is computed using the straight-line method over the estimated useful lives of the assets or remaining useful lives. Leasehold improvements and properties under finance leases are amortized on a straight-line basis over their estimated useful lives or the lease term, if less. The general ranges of depreciable and amortizable lives are as follows:

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

Category Depreciable Life

Buildings and improvements 25 to 40 years

Equipment and fixtures Three to five years

Internal-use software Three to 10 years

Long-Lived Assets

On a regular basis, the Company assesses whether events or changes in circumstances have occurred that potentially indicate the carrying value of long-lived assets (primarily assets related to property and equipment leased or subleased to franchisees) may not be recoverable. The analysis is performed at the restaurant level for indicators of impairment. The Company tests for impairment using current and historical operating results and cash flows as well as other relevant facts and circumstances as the primary basis for estimates of future cash flows. The Company considers factors such as the number of years the franchisee's restaurant has been in operation, sales trends, cash flow trends, remaining lease life and other factors which apply on a case-by-case basis. Continuing losses associated with an asset are an indicator of impairment.

If it is decided that there has been an impairment, the carrying amount of the asset is written down to the estimated fair value as determined in accordance with U.S. GAAP governing fair value measurements. The primary method of estimating fair value is based on a discounted cash flow analysis. Any loss resulting from impairment is recognized as a charge against operations.

See Note 13 - Closure and Long-lived Tangible Asset Impairment Charges, of the Notes to the Consolidated Financial Statements for additional information.

Goodwill and Intangible Assets

Goodwill is recorded when the aggregate purchase price of an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Intangible assets resulting from an acquisition are accounted for using the purchase method of accounting and are estimated by management based on the fair value of the assets received. The Company's identifiable intangible assets are comprised primarily of the Applebee's tradename and Applebee's franchise agreements and as of December 2022, the Fuzzy's tradename and Fuzzy's franchise agreements. Identifiable intangible assets with finite lives (franchise agreements) are amortized over the period of estimated benefit using the straight-line method and estimated useful lives. Goodwill and intangible assets considered to have an indefinite life (primarily the tradenames) are not subject to amortization. The determination of indefinite life is subject to reassessment if changes in facts and circumstances indicate the period of benefit has become finite.

Goodwill has been allocated to four reporting units. The significant majority of the Company's goodwill resulted from the November 29, 2007 acquisition of Applebee's and was allocated to the Applebee's franchised restaurants unit (“Applebee's franchise unit”). Smaller amounts of goodwill arising from other business combinations have been allocated to the Fuzzy's franchised restaurants unit (“Fuzzy's franchise unit”), the IHOP franchised restaurants unit (“IHOP franchise unit”) and the Applebee's company restaurants unit (“Applebee's company unit”). In October 2022, the Company refranchised the Applebee's company restaurant units and disposed the related assets. See Note 6 - Goodwill, of the Notes to the Consolidated Financial Statements for additional information.

The Company evaluates the goodwill of the Applebee's franchise unit and the indefinite-lived Applebee's tradename for impairment as of October 31 of each year. The Company evaluates the goodwill of the IHOP franchise unit and the Fuzzy's franchise unit for impairment as of December 31 of each year. In addition to the annual evaluation for impairment, goodwill and indefinite-lived intangible assets are evaluated more frequently if the Company believes indicators of impairment exist.

When evaluating goodwill and indefinite-lived intangible assets for impairment, under U.S. GAAP, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit or the intangible asset is more-likely-than-not greater than the carrying amount. Such qualitative factors include, but are not limited to, macro-economic conditions, market and industry conditions, cost considerations, current and future income tax rates, the competitive environment, fluctuations in the market value of the Company's common stock, absolute and relative to peers, overall financial performance and results of past impairment tests. If, based on a review of the qualitative factors, the Company determines it is more-likely-than-not that the fair value is greater than the carrying value, the Company may bypass a quantitative test for impairment. Additionally, in any given year, the Company can elect to perform a quantitative assessment of impairment.

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

In performing the quantitative test for impairment of goodwill, the Company primarily uses the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method. Significant assumptions used to determine fair value under the discounted cash flow method include expected future trends in sales, operating expenses, overhead expenses, capital expenditures and changes in working capital, along with an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax cost of debt. Significant assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied. The Company measures impairment as the excess of a reporting unit's carrying amount over its fair value as determined by the quantitative test described above.

In the process of performing its quantitative impairment review of intangible assets considered to have an indefinite life, the Company primarily uses the relief of royalty method under the income approach method of valuation. Significant assumptions used to determine fair value under the relief of royalty method include future trends in sales, a royalty rate and an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax cost of debt to be applied to the forecast revenue stream.

Business Combinations

From time to time, the Company may enter into business combinations. In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, the Company applies the acquisition method for acquisitions that meet the definition of a business combination. Under the acquisition method, the Company estimates the fair value of the identifiable assets and liabilities of the acquired entity on the acquisition date. Acquired intangible assets are valued using different methods under the income approach, including but not limited to, the multi-period excess earnings method for tradenames and franchising rights and the relief of royalty method for recipes. The Company measures goodwill as the excess of consideration transferred over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. Goodwill is assigned to each reporting unit that is expected to benefit from the synergies of the business combination. Acquisition-related expenses and transaction costs associated with business combinations are expensed in the period incurred which is included in the General and administrative expenses line item of the Consolidated Statements of Comprehensive Income.

Revenue Recognition

The Company's revenues are recorded in four categories: franchise operations, company restaurant operations, rental operations and financing operations. Franchise revenue (which comprises most of the Company's revenues) and revenue from company-operated restaurants are recognized in accordance with ASC 606 -Revenue from Contracts with Customers (“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. The Company's rental and financing revenues are recognized in accordance with other U.S. GAAP accounting standards and are not subject to ASC 606.

Franchise Revenues

The Company franchises the Applebee’s, IHOP and Fuzzy's restaurant concepts. 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 brand 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 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 revenues 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

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

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 revenues are recognized when the franchisee's reported sales occur. Depending on timing within a fiscal period, the recognition of revenue results in either a contract asset (unbilled receivable) or, once billed, accounts receivable, on the balance sheet;

•Revenue from the sales of proprietary pancake and waffle dry mix is recognized in the period in which distributors ship the franchisee's order; recognition of revenue results in accounts receivable on the balance sheet.

In determining the amount and timing of revenue from contracts with customers, the Company exercises judgment with respect to collectibility of the amount; however, the timing of recognition does not require significant judgment as it is based on either the franchise term, the month of sale as reported 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 its 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 judgments required.

Rental Revenues

Rental operations revenues include revenues from operating leases and interest income from real estate leases. See Basis of Presentation and Summary of Significant Accounting Policies - Leases.

Financing Revenues

Financing operations revenues consist primarily of interest income from the financing of franchise fees and equipment leases, other notes receivable from franchisees and sales of equipment associated with refranchised IHOP restaurants. Interest income is recorded as earned.

Gift Card

The Company administers gift card programs for each restaurant concept. The Company records a liability in the period in which a gift card is sold and recognizes costs associated with its administration of the gift card programs as prepaid assets when the costs are incurred. The liability and prepaid asset recorded on the Company's books are relieved when gift cards are redeemed. If redemption occurs at a franchisee-operated restaurant, the gift card proceeds, net of costs, is remitted to the franchisee. The Company receives gift card breakage revenue only from gift cards redeemed at company-operated restaurants. There was no breakage revenue for gift cards estimated to be redeemable at company-operated restaurants for the year ended December 31, 2023. Breakage revenue for gift cards estimated to be redeemable at company-operated restaurants for the years ended December 31, 2022 and 2021 were $0.3 million and $0.3 million, respectively.

Allowance for Credit Losses

The allowance for credit losses is the Company's best estimate of the amount of probable credit losses incurred on existing receivables; however, changes in circumstances relating to receivables may result in changes to the allowance in the future. The Company determines the allowance based on historical losses, current conditions, and reasonable and supportable forecasts used in assessing the franchisee's or area licensee's ability to pay outstanding balances. The primary indicator of credit quality is delinquency, which is considered to be a receivable balance greater than 90 days past due. The Company continually reviews the allowance for credit losses. Past due balances and future obligations are reviewed individually for collectability. Account balances are charged against the allowance after all collection efforts have been exhausted and the potential for recovery is considered remote. See Note 4 - Current Expected Credit Losses, of the Notes to the Consolidated Financial Statements for additional information.

Leases

The Company accounts for its leasing activities in accordance with accounting guidance for leases, as codified in Accounting Standards Topic 842 (“ASC 842”). In adopting ASC 842, the Company utilized expedients that allowed it to retain the classification, as either an operating lease or a finance lease, that was previously determined under prior accounting guidance for leases.The Company reassesses this classification upon renewal, extension or the modification of an existing lease

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

agreement. The Company determines the appropriate classification upon entering into a new contract determined to contain a lease.

Operating lease assets and liabilities are recognized at the lease commencement date, or were recognized upon adoption of ASC 842. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent the Company's right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets.

The Company's lease agreements generally do not provide information to determine the implicit interest rate in the agreements. This requires the Company to estimate an incremental borrowing rate to be used in calculating operating lease liabilities as of the adoption or commencement date. The Company estimates the incremental borrowing rate primarily by reference to (i) yield rates on debt issuances by companies of a similar credit rating as the Company; (ii) U.S. Treasury rates as of the adoption or commencement date; and (iii) adjustments for differences between these rates and the lease term.

The cost of an operating lease is recognized over the lease term on a straight-line basis. The lease term commences on the date the Company has the right to control the use of the leased property. Certain leases may contain provisions for rent holidays and fixed-step escalations in payments over the base lease term, as well as renewal periods. The effects of the holidays and fixed-step escalations are reflected in rent expense on a straight-line basis over the expected lease term. Differences between amounts paid and amounts expensed are recorded as deferred rent. Certain leases may include rent escalations based on inflation indexes and fair market value adjustments. Certain leases may contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales. Subsequent escalations subject to such an index and contingent rental payments are recognized as variable lease expense.

The rental payments (as lessee) or receipts (as lessor) on those property leases that meet the finance lease criteria result in the recognition of interest expense or interest income and a reduction of finance lease obligation or financing lease receivable, respectively. Finance lease obligations are amortized based on the Company's incremental borrowing rate and real estate leases receivable are amortized using the implicit interest rate.

Pre-opening Expenses

Expenditures related to the opening of new or relocated restaurants are charged to expense when incurred.

Advertising

Advertising expense reflected in the Consolidated Statements of Comprehensive Income includes our contributions to the national advertising funds, local marketing advertising costs incurred by company-operated restaurants, and certain advertising costs incurred by the Company to benefit future franchise operations. Costs of advertising typically are expensed either as incurred or the first time the advertising takes place. Any excess or deficiency of advertising fee revenue compared to advertising expenditures, is recognized in the fourth quarter of the Company's fiscal year. Any excess of revenue over expenditures is recognized only to the extent of previously recognized deficits. When advertising revenues exceed the related advertising expenses and there is no recovery of a previously recognized deficit of advertising revenues, advertising costs are accrued up to the amount of revenues.

Advertising expense included in company restaurant operations for the years ended December 31, 2023, 2022 and 2021 was $0.1 million, $5.6 million and $6.8 million, respectively.

Fair Value Measurements

The Company determines the fair market values of its financial assets and liabilities, as well as non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis, based on the fair value hierarchy established in U.S. GAAP. As necessary, the Company measures its financial assets and liabilities using inputs from the following three levels of the fair value hierarchy:

•Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

•Level 2 inputs are observable for the asset or liability, either directly or indirectly, including quoted prices in active markets for similar assets or liabilities.

•Level 3 inputs are unobservable and reflect the Company's own assumptions.

The Company does not have a material amount of financial assets or liabilities that are required under U.S. GAAP to be measured at fair value on a recurring basis. None of the Company's non-financial assets or non-financial liabilities is required to be measured at fair value on a recurring basis. Assets recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill and other

Dine Brands Global, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements (Continued)

2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)

intangible assets, which are measured at fair value if determined to be impaired. The Company has not elected to use fair value measurement for any assets or liabilities for which fair value measurement is not presently required.

The Company believes the fair values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts due to their short duration.

The Company believes the fair value of the Credit Facility approximate carrying value due to the variable interest rate. The fair values of the Company's long-term debt, excluding the Credit Facility, at December 31, 2023 and December 31, 2022 were as follows:

December 31,

(In millions)

DIN US Equity

DIN · 10-K · period ended 2023-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

DIN US Equity☆

DIN · 10-K · period ended 2023-12-31

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

DIN US Equity