FLIPPING OVER PROFITS IHOP DISHES UP SOLID PROFITS DESPITE DELAYED EATERY CONSTRUCTION.

Byline: Brent Hopkins Staff Writer

GLENDALE - As the restaurant industry finds itself slowing down, Ihop is still selling like hotcakes.

The breakfast chain reported a strong first quarter on Monday, with sales climbing 10.7 percent. The climb brought sales throughout its 978 restaurants to $330.7 million, up from $298.8 million in the same period a year ago. This translated into profits of $7.5 million, 37 cents per share, up from $7.2 million, 36 cents per share, last year.

And though the firm reported slight setbacks in construction of new restaurants, chief executive officer Kim Herzer was more than happy to take questions about how much impact economic woes will have upon Ihop.

``Quite frankly, the answer is none,'' he said. ``Over the last 42 years, we have not experienced significant sales declines during economic downturns. We continue to weather them because of excellent value and service.''

His comments were borne out by analyst Dennis Joe, who follows the pancake makers for the Sidoti Co. LLC. While upscale eateries may find themselves losing customers to less pricey spots, or diners opting for pasta over filet mignon, bargain-priced options tend to fare well.

``With Ihop, the average meal is around $6.75, so it can't get much more affordable,'' he said. ``They tend to be a little safer than most restaurants.''

As tighter economic times send more people looking for work, restaurants get a second boost, Joe said.

``Restaurants are becoming more and more of a necessity these days,'' he added. ``With two-income families, they're not a luxury, since neither person has time to prepare dinner or breakfast. And in the breakfast industry, when most people want pancakes, they're going to go to Ihop.''

With this in mind, the firm built an additional 12 restaurants last quarter, though some were delayed by inclement weather during construction. Accordingly, the company expects to continue strong performance in the future.

``It's important to understand that these are extremely short-term developments,'' Herzer said. ``All of the delayed restaurants are either open now or tracking well, and we expect them all to open in the second quarter.''

With 185 restaurants in California, Ihop was also crunched by rising utility costs, which ate into profits and forced strategic changes.

``Like everyone else, we are unable to predict the overall impact of the utility crisis,'' said chief financial officer Alan Unger. ``However, we have planned accordingly and expect to adjust.''

In addition to implementing conservation measures, the chain expects to raise prices in its corporate-owned locations. Though the percentage of company restaurants is relatively small, they help provide an example for franchised spots, Herzer said.

``Price raises will be in effect May 1 for company stores,'' Unger said. ``They should be up 5 percent, based on market study.''

Herzer, who acknowledged that his tenure as chairman may be coming to an end after three decades with the firm, stressed that the most important thing was not opening stores, meeting Wall Street expectations, or utility prices, but maintaining a strong company image.

``The brand is the important thing,'' he said. ``It's what carries us. I would like to tell you about all the mistakes I've made and the brand has helped me out, but then I'd be telling stories out of church.''

CAPTION(S):

3 photos

Photo:

(1 -- color) Ihop's famous blue, pointed roof is still a landmark.

(2 -- color) No caption (IHOP happy face pancakes)

(3) Want pancakes? Ihop and hotcakes will always be linked in many hungry diners' minds.

Gene Blevins/Special to the Daily News