What accounting standard did Checkers adopt in fiscal year 2022 that impacted the reserves for restaurant retirement and refranchising costs?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
------|----|------------------------------|----|---------------|----|-----------------|-----|----------|---|--------------------------| | For the year ended January 2, 2023 | S | 4.290 | $ | - | S | - | S | (4.290) | S | - | | For the year ended January 3, 2022 | S | 4.834 | S | 375 | S | (1.842) | S | 923 | S | 4.290 |
The Company adopted ASC 842, Leases, in fiscal year 2022 and at the time of transition the $4.3 million in reserves for restaurant retirement and refranchising costs were included as a reduction to "operating right-of-use assets, net." Subsequent to its adoption of ASC 8
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, in fiscal year 2022, Checkers adopted ASC 842, Leases. This adoption had a significant impact on how the company accounts for restaurant retirement and refranchising costs. Prior to this change, Checkers maintained $4.3 million in reserves for these costs.
Upon adopting ASC 842, Checkers included these reserves as a reduction to "operating right-of-use assets, net." Subsequently, Checkers assesses leases for impairment and no longer recognizes separate reserves for restaurant retirement and refranchising costs. This means that after adopting ASC 842, Checkers stopped setting aside specific reserves for these expenses, instead incorporating them into the valuation of their right-of-use assets.
For a prospective franchisee, this change in accounting standard means that Checkers' financial statements from 2022 onward will not show specific reserves for restaurant retirement and refranchising costs. Instead, these costs are factored into the overall lease accounting and asset valuation. This could affect how a franchisee interprets Checkers' financial health and approach to lease management, as the costs are now embedded within broader asset valuations rather than being explicitly reserved.