Monday, July 7, 2008

This Day in Business History (First IHOP Opens)


July 7, 1958—The family that cooks and eats together gets rich and loses its fortune together—or so it proved for Al Lapin Jr., who used recipes for waffles and pancakes tested by his mother Viola and financial assistance from brother Jerry to open the first International House of Pancakes (IHOP) in Toluca Lake, Calif. (Oh, yes: wife Marilyn acted as cashier, and four-month-old son Randy lay under the register in a bassinet, lending occasional vocal support.)

Just as customers fed themselves on affordable breakfasts and a panoply of flavored syrups, Al Lapin’s business concept fed off residual traffic from a nearby Bob’s Big Boy restaurant. Before long, weekend customers were standing in lines that stretched outside the doors of the restaurant.

For more than 30 years, I have passed, only five minutes from my house, by one of the franchise units of Lapin’s original operation. That familiar blue roof and full pots of coffee on the tables never struck me as anything unusual, nor the menus filled with the likes of bacon and eggs paired with buttermilk or different types of pancakes. I should never have taken it for granted. In its way, IHOP symbolizes the exhilaration, the risk, the rebounds and the necessary grind-in-out nature of American-style entrepreneurship. It’s an environment made for dreams–and nightmares.

The story of Lapin reminds me of the career trajectory of Clay Felker, the recently deceased founder of New York Magazine: A small idea becomes a major institution; its creator, brimming with contagious exuberance, attempts to expand the concept, only to lose control of his empire to aggressive outsiders; the rest of his life is spent in a vain attempt to duplicate his heyday.

Another way that Lapin resembled Felker: a fascination with show business glitter. In the 1960s, Felker was married to actress Pamela Tiffin (known today for appearances in the Billy Wilder Cold War comedy One, Two, Three and the Paul Newman hard-boiled detective thriller Harper); as a young man, Lapin was a film-school student before George Lucas, Martin Scorsese et. al. made this cool.

Even after leaving cinema, the franchise magnate never forgot the importance of visual appeal. Two of his mantras illustrate his larger marketing philosophy: “You have to look like a dollar to borrow a dime” and “People eat with their eyes before they eat with their hands.” (Hmmm…people eating “with their eyes”—sounds a bit like eye candy to me. I know certain males so fond of this form of consumption that by now they’re visual diabetics!)

A year after the Toluca Lake unit opened, the IHOP chain became an operating division of International Industries. Over the next decade and a half, Lapin gathered a whole slew of restaurant and other food service concepts under the International Industries umbrella, such as Copper Penny coffee shop, Love’s Wood Pit Barbecue, The Original House of Pies, and the Orange Julius chain.

By the early 1970s, this penchant for acquisitions led International Industries and Lapin into financial difficulties, with only IHOP and Orange Julius operating profitably. As the economy went south, creditors, especially for franchisors, evaporated.

By 1975, International Industries had folded, though IHOP managed to split off as a separate entity. After a few unsuccessful attempts to regain its footing, IHOP Chief Financial Officer Richard Herzer convinced creditors to keep the concept alive in 1987. Four years later, the revived company went public. As of March 31, 2008, there were 1,353 IHOP restaurants in 49 states, the U.S. Virgin Islands, Canada and Mexico.

Unlike the company he founded, Lapin never fully bounced back. Subsequent business ventures went awry, leading him to declare bankruptcy in 1989. Toward the end of his life, he returned to his first love—film—as executive producer of the 2001 movie, Race to Space, starring Annabeth Gish and James Woods. Lapin died in 2004. I would be surprised if more than 5% of people who eat in IHOP restaurants nowadays know anything about the chain’s founder. For Lapin, fame has proved about as ephemeral as his original company’s earnings.

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