What is the amortization period for Checkers' franchise agreements during the Successor period?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| | January 1, 2024 (Successor) | | | | | | Januar | y 2, 2 | 023 (Predec | esso | or) | |--------------------------------------|-----------------------------|----------------|----|----------------------|-------|----|-----------------|--------|------------------------|------|--------| | | | Gross mount | | mulated rtization | Net | | Gross Amount | | umulated ortization | | Net | | Franchise agreements | $ | 1,400 | $ | (51) $ | 1,349 | $ | 29,900 | $ | (6,305) | $ | 23,595 | | Reacquired franchise rights | | = | | = | - E | | 3,220 | | (480) | | 2,740 | | Total finite-lived intangible assets | $ | 1,400 | $ | (51) $ | 1,349 | $ | 33,120 | $ | (6,785) | $ | 26,335 |
(Tabular Dollars in Thousands, Except Share and per Share Data)
Franchise agreements are amortized based on the expected future benefits to be realized. As such, the amortization period for franchise agreements is 15 years (Successor) and 27 years (Predecessor) and amortization expense is recorded on a straight-line basis over such period. We recorded amortization expense of $0.1 million for the period ending January 1, 2024 (Successor), We
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchise agreements are amortized based on the expected future benefits. For the Successor period, the amortization period is 15 years. This means that Checkers spreads the cost of the franchise agreements over a 15-year period for accounting purposes after the Out-of-Court Restructuring. The amortization expense is recorded on a straight-line basis during this period.
For a prospective franchisee, this indicates how Checkers accounts for its franchise agreements internally. It also distinguishes between the accounting treatment before (Predecessor) and after (Successor) the Out-of-Court Restructuring. The amortization expense was recorded as $0.1 million for the period ending January 1, 2024 (Successor).
It's important to note the distinction between the Successor and Predecessor periods due to the Out-of-Court Restructuring, which resulted in changes to the accounting basis of assets and liabilities. This change impacts how Checkers recognizes and amortizes franchise agreements, potentially affecting their financial statements and reported expenses.