Page 224 - Board Member Onboardin August 2019

get more ideas vetted and implemented faster. In 2018, the team delivered projects totaling $8MM in value to the system.
We are excited about what we can accomplish working with IHOP in this manner going forward.

The challenges facing foodservice distributors today are unprecedented, and that is having an impact on the entire
restaurant industry. The national shortage of truck drivers complicated by new transportation regulations and the lack
of available warehouse labor is harming service levels and increasing costs. Available distribution capacity across the
industry is tight as distributors are right-sizing their businesses and being very selective with whom they chose to do
business. We need to do everything we can to continue to foster partnerships with our distributors that are both fair and
transparent and that position us as a customer of choice.

Paul Allegri, Vice President of Logistics, and I are leading the effort to engage differently with our distributors. We are
implementing multiple initiatives to position the system appropriately, and we are working closely with the Pancake Board
of Directors to assess our long-term distribution strategy.

Mark Smith, Chief Procurement Officer, and his team were critical to delivering $6MM in savings identified through the
new RPM process. In addition, they implemented another $2MM in annualized savings through non-food contracts. They
were also proactive in sourcing alternative suppliers for disposable items produced in China to avoid implications of newly
implemented tariffs. This work averted increases of 25% on some items. The IHOP market basket was up 2.2% versus
the prior year primarily driven by shell eggs and dry mix increases.

Under the leadership of Chris McNutt, Vice President of Brand Program Management, our Brand Programs team had a
strong year highlighted by great work supporting the IHOb burger promotion. Burger sales exploded, and Chris’ team
along with our supplier, J&B Group, were positioned to ensure we had adequate supply to support the surge in sales. J&B
Group earned the IHOP Supplier Partner of the Year award for their work on this promotion. In line with our Driving Change
theme, Chris restructured the Brand Programs team to better align our inventory managers with specific distributors and
improve communication.

On the administrative front, our Chief Financial Officer, Dustin Pittman, and his team continue to make tremendous strides
executing our technology road map. They are implementing automated supply planning tools that will help us better
manage distributor inventories across the system as well as other capabilities to drive more efficiencies within CSCS. This
work will help us make better and timelier business decisions on your behalf. Under his leadership, we also earned our 9th
clean audit in a row from our third-party auditor, Crowe LLP.

continuous

improvement

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