How does Checkers account for advertising costs related to on-air advertising in its financial statements?

According to Checkers' 2025 Franchise Disclosure Document, the company expenses advertising costs for on-air advertising the first time the advertisement is aired. Checkers also expenses advertising costs for on-lot merchandising on the first day of advertising.

In addition to these direct advertising expenses, Checkers and its franchisees contribute to the Checkers/Rally's National Production Fund, Inc. (NPF), which creates and produces advertising for both company-operated and franchised restaurants. The contributions to this fund are also included in advertising expenses in the consolidated statements of operations. The contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.

It is important to note that advertising expense does not include expenses incurred for coupons and discounts. These are recorded as reductions to restaurant sales at the time of the sale. A prospective franchisee should understand how these advertising expenses are accounted for, as it impacts the reported financial performance of Checkers and its franchisees. Understanding the breakdown of these expenses can help a franchisee assess the true cost and effectiveness of advertising efforts.