The presence of casual dining restaurant IHOP is set to expand exponentially in Puerto Rico with the opening of at least 15 locations in the next five years, at an investment of some $22.5 million, franchise executives said.
The chain already has five restaurants in Puerto Rico, with a sixth location slated to open by the end of this summer in the southern part of the island, said Humberto Rovira, CEO of Encanto Restaurants, which acquired the franchise rights in 2013.
Another restaurant will open in 2020 — each location entails an investment of about $1.5 million and creates 60 direct and 20 indirect jobs, he said.
IHOP’s first restaurant opened 60 years ago in California, serving its signature buttermilk pancakes and a broad menu of other breakfast, lunch and dinner options.
“It’s estimated that Puerto Rico’s breakfast market generates more than $350 million a year, so you can see the opportunity is there to continue growing,” Rovira said.
IHOP entered the local market in the mid-1990s. However, the franchisee was stripped of its rights due to poor service and restaurant appearance, and the eatery — located on Ponce de León Avenue in Hato Rey — closed, as this media outlet reported.
In late 2009, Caguas-based Cousins International Food Corp. brought back the brand, only to file for bankruptcy three years later. At the time of the proceeding, it had already opened restaurants in Caguas and Barceloneta. Encanto Restaurants picked up those assets through the court-assisted process and moved ahead with its expansion.
Fast-forward seven years, and Encanto has invested more than $8 million in the restaurant chain, creating more than 250 jobs, Rovira said.
The success of the local operation has not gone unnoticed by corporate executives who were in Puerto Rico this week to meet with local staff and mark today’s “National Pancake Day” celebration to raise money for the San Jorge Children’s Hospital.
William Urrego, general manager of the Americas for IHOP’s parent company Dine Brands, said once completed, Rovira’s growth plan will make Puerto Rico one of the chain’s better markets.
“The revenue generated in Puerto Rico is higher than the U.S. mainland average,” he said. “We started in Toluca Lake, California, and the projected growth and numbers in Puerto Rico is similar to that market.”
Dine Brands is also expanding its global presence, by entering new markets — Ecuador, Peru, Pakistan and “possibly Colombia and Korea,” Urrego said.
Meanwhile, Stephen Joyce, CEO of Dine Brands, said the Puerto Rico operations are part of the U.S. market, but receive support from the international division “because that’s where we have a bilingual team. We want to make sure we adjust to the culture and that nothing gets lost in translation.”
While the restaurant’s expansion is pushing forward, Rovira admitted that the most pressing challenge is Puerto Rico’s high employee turn-over rate, which jumped from 40 percent to 70 percent in the last year.“There are people leaving, they’re moving into other industries. And while the U.S. average is higher than 70 percent, it’s still high for Puerto Rico,” said Rovira, whose company also owns the franchise rights to KFC, Taco Bell and Pizza Hut.
Urrego added that while the labor issue is pervasive in the restaurant business in general, it’s more acute in Puerto Rico because “people are moving away and due to the growth of lots of recovery-type jobs.”