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Lapsed patents force IHOP to interrupt franchising, update contracts, revise UFOC

GLENDALE Calif. IHOP Corp. may have to correct some franchise agreements granted after October 2000 because patents on certain of the franchisor’s trademarks have expired, the company disclosed Friday.

The chain has also stopped offering franchises, but will resume “shortly” in 45 states and within a few weeks in the other five states, IHOP said.

The lapses in the patents could result in a delay of IHOP’s $200 million recapitalization, the company noted.

IHOP said the expiration of those patents will require a revision of its Uniform Franchise Offering Circular, a document needed to grant franchises in various states. It acknowledged that “corrective measures” may be required by the laws of some states, but did not divulge details.  Nor did it estimate how many franchise agreements may need to be rectified. It did not disclose how many franchise contracts had been signed since October 2000.

The financial impact of the corrective measures has not been assessed, but the effect on the franchisor and its franchisees should not be “material,” IHOP commented.

The 1,302-unit IHOP chain is predominantly franchised. The brand, based here, is 45 years old.

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