IHOP Bounces Back To Area
GRAND RAPIDS — Years after closing its last Grand Rapids restaurant near the Studio 28 Theatre complex, the International House of Pancakes is returning to the metro area in a big way. Four new IHOPs are scheduled to open here, and up to six more are set to do the same in four other West Michigan cities.
One IHOP that is expected to open within months is the result of a creative real estate deal that was put together by Bill Bussey and Dave Denton of Grubb & Ellis/Paramount Properties.
IHOP will join a Bennigan’s restaurant in an attached building at 5039 28th St. SE. The three-acre parcel in Cascade Township is the former site of a miniature golf course, and just east of Patterson Avenue. The deal sounds simple enough. But there were almost as many hazards in creating the transaction as the mini-golf course presented its players.
“Both restaurants were interested in the location, but neither required the full three-acre parcel,” said Bussey, a Grubb & Ellis/Paramount vice president and head of the retail land investment section for the firm.
Further complicating the deal was the fact that Cascade Township does not allow two separate commercial buildings on a site that is three acres or smaller. So neither restaurant could split the parcel and build its own structure.
On top of that, the landowner preferred to lease rather than sell, and not owning the property it builds on makes it more difficult for a restaurant to finance the construction.
“So we presented an alternative that involved Bennigan’s leasing the entire parcel and then subleasing half to IHOP,” said Bussey. “Each restaurant will construct its own building, but the two will be physically connected along one side.”
The deal closed recently and construction has begun. IHOP and Bennigan’s are expected to open by late summer. The Bennigan’s restaurant will be about 7,000 square feet, while the IHOP will be smaller at 4,000 square feet.
Bussey told the Business Journal that he has been trying for years to interest IHOP in returning to West Michigan, while Denton got Bennigan’s interested in the deal.
Besides the Cascade location, IHOP has plans to open restaurants near the RiverTown Crossings Mall in Grandville and at Celebration Village on the East Beltline.
“IHOP will have three stores open by the end of the year. We have a fourth site we’re working on Alpine Avenue. So there will be four ultimately in Grand Rapids,” said Bussey.
Bussey added that IHOP is also planning to build stores in Battle Creek, Benton Harbor, Kalamazoo and Muskegon. The company currently has a dozen restaurants in Michigan, 11 in metro Detroit and one in East Lansing. Typically, each IHOP costs from $700,000 to $1 million to construct.
IHOP has resurrected itself over the past few years with a new image that has worked in the nation’s largest urban areas, especially on the West Coast. The company’s net income has risen by more than half from 1998 to 2001, jumping from $26.1 million to $40.3 million over those four years. During the same period, the number of its restaurants grew by 22 percent, going from 836 to 1,017. The firm opened 93 restaurants in 2001 and franchised another 95 last year.
IHOP is one of the few restaurant chains listed on the NYSE (IHP). Shareholder equity in the firm has risen from $187.9 million in 1998 to $312.4 million in 2001.
IHOP opened its first restaurant in Toluca Lake, Calif., a Los Angeles suburb, in 1958. The company is based in Glendale, Calif., and has 50,000 employees across North America.
LaBelle Management, a Mt. Pleasant hospitality and real estate development company, is bringing Bennigan’s to Cascade. The 28th Street restaurant will be the second for the city — one is at 3303 Alpine Ave. — and the 15th for LaBelle. LaBelle has been in business since 1948 and also has hotels, resorts and conference centers, in addition to its restaurants, in Michigan and Indiana.
Bennigan’s, which began serving in 1976, features casual dining with an Irish-American flavor. The chain is owned and franchised by S&A Restaurant Corp., a legal entity of the Metromedia Restaurant Group of Plano, Texas. Bennigan’s has about 300 restaurants in 33 states. Metromedia also owns Ponderosa Steakhouse, Bonanza Steakhouse, and Steak & Ale restaurants.
IHOP and Labelle were attracted to the Cascade location for a number of reasons. The parcel is near I-96, two office parks, a Wal-Mart and a Meijer. About 52,000 vehicles travel that section of 28th Street on an average day. More than 91,000 residents live within a five-mile radius of the property and have an average annual household income of almost $65,000.