Page 5 - 2019 Pancake Supply Chain Co-op, Inc. Annual Report

Mike Leikam

President & CEO, Centralized Supply Chain

Services, LLC

February 16, 2019 marked the 10-year anniversary of the founding
of CSCS. Over the past decade the Co-op has delivered hundreds of
millions of dollars in value to the system, and those results were delivered
through the relationships we have developed across our vast supply
chain. Relationships with our suppliers, distributors, IHOP and Applebee’s,
trade associations, industry experts, academia, and most importantly,
our Member-owners, have been founded on the principles of integrity,
accountability, fairness, and transparency. Results through Relationships
became a fitting theme for the 2019 Pancake Supply Chain Co-op annual report.

The Restaurant Profit initiative we launched in 2017 continued to pay dividends in 2019.
The cross-functional team of CSCS and IHOP team members delivered $15.8MM in value or $9.3K per
restaurant. Backed by a governance process that includes a Steering Committee of IHOP and CSCS
leadership and franchisees, Peter DeGast, Dan Campbell, Mark Justice and Paul Kenny, all the work and
results were reviewed to ensure alignment. We have fundamentally changed how CSCS and IHOP work
together to drive cost management projects through this approach. Results through Relationships.

The 2019 IHOP Market Basket was 1.0% favorable versus full-year 2018. During the same period,
the market, as measured by Producers Price Index modified for the products we buy, was favorable
3.1%, the difference driven by egg markets. Chief Procurement Officer, Mark Smith, and his team took
positions on eggs that locked price eliminating price volatility for our Members over the past several
years. While they dramatically outperformed the market last year, the egg market dropped this year.
Results through Relationships.

High operating costs and labor shortages persist in the food service distribution industry. Capacity is
tight. Consolidation continues, highlighted by US Foods acquisition of FSA/SSA, which services most of
the western part of the US for us. Paul Allegri, Vice President of Logistics, and I continued to implement
our multi-point plan to position IHOP and Applebee’s as “Customers of Choice” with distributors. One of
our 2019 WIGs, our Wildly Important Goals, was to formulate a long-term strategy to ensure distribution
solutions at acceptable service levels and economics. We engaged a consultant to understand
how distributors see us as a customer, to learn how our franchisees define a good
distributor, and to recommend near and long-term strategies. We have aligned with
the Pancake Board on a distributor partner strategy that will help us achieve these
goals. Results through Relationships.

Our Brand Program Management (“BPM”) team under the direction of Vice
President, Chris McNutt, delivered strong results. They managed dozens of
Restaurant Profit product implementations, bettered processes and tools for
improved information sharing with distributors during promotions, and supported
supply for numerous new product tests. We also implemented additional
governance steps for approvals for purchasing inventory for promotions based
on IHOP’s forecast. Detailed strategies for how much to buy for promotions are now
reviewed for every promotion with the Pancake Co-op Board to ensure alignment.
Results through Relationships.

Chief Financial Officer, Dustin Pittman, and his Administration team delivered our other organizational WIG,
the development of role driven dashboards to speed decision making and the implementation of Microsoft
Teams as a platform for enterprise collaboration. His team also implemented a new enterprise IT network

Results through 5
Relationships