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PETER DEGAST

BOARD CHAIRMAN, PANCAKE SUPPLY CHAIN CO-OP

As restaurant operators, we are faced with an ever-changing landscape of
priorities that require our attention. And to be successful, we can’t do it alone. We need trusted
partners that care about our businesses as much as we do. As the theme of this year’s annual report suggests, CSCS
exists to focus on our collective bottom line. I can’t think of a better kind of partner to have in this industry – one
that negotiates lowest sustainable prices, ensures continuity of supply, and supports IHOP in innovation and product
development. While we are operating in the most challenging environment ever experienced, Mike Leikam and his team
at CSCS are working tirelessly to identify new and creative ways to deliver value that create competitive advantages for
us. I encourage you to read this report and learn about all the ways this was accomplished in 2017. As we navigate
the ebbs and flows in our industry, you can count on the team at the Co-op to remain maniacally focused on making us
stronger as a system.

Competitive pressures weren’t unique to the restaurant industry in 2017, as many of the underlying markets for the
products we buy saw increases last year. The procurement team, led by Chief Procurement Officer Mark Smith, was
able to out-maneuver these pressures and deliver a market basket that cost 50 basis points less than it did last year, and
significantly better than the Producer Price Index. The team is constantly striving for creative approaches to purchasing
that will strengthen our competitive position, and this year engaged with Pricewaterhousecoopers on a project we are
calling the Restaurant Profitability Improvement, or RPI. You will be hearing more about RPI in 2018 and the incremental
value it will bring to our system, both in terms of measurable savings and process improvements.

The savings generated from procurement can quickly be eroded without a solid distribution program. The Logistics
team, led by Paul Allegri, continued delivering savings through expanded use of freight management programs such as
redistribution and third-party logistics providers to maintain competitive lane rates. Over $80 million in freight costs each
year, combined with industry challenges led by a shortage of drivers, demand strong distribution partners that are well
equipped to work with us on creative ways to weather the storms to come. Paul and his team will work diligently with
our distribution partners over the coming year to find creative ways to secure qualified drivers, establishing IHOP (and
Applebee’s) as a preferred customer in the industry.

The brand program team, led by Chris McNutt, supports IHOP’s culinary and marketing endeavors. Proactively managing
inventories on thousands of SKUs is a constant challenge, and one that has been exacerbated by the increased pace of
change. Advancements in our technology roadmap, led by Chief Financial Officer Dustin Pittman, are helping us solve
this challenge and at the same time setting the stage for advanced Member analytics. The Administration team also
produced the ninth consecutive clean financial audit, a testament to the efficiency, compliance, and controls in place to
protect our collective investment.

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