What was the amount of Checkers' valuation allowance as of January 1, 2024?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
mporary differences that give rise to significant portions of the deferred income tax assets and liabilities recognized within "deferred income tax liabilities" in the accompanying consolidated balance sheets as of December 30, 2024 (Successor) and January 1, 2024 (Successor) were as follows:
| For the Year Ended December 30, 2024 (Successor) | For the Period Ended January 1, 2024 (Successor) | |
|---|---|---|
| Deferred tax assets | ||
| Net operating loss carryforwards | $ 58 | $ - |
| Business interest limitation carryforward | 24,472 | 21,518 |
| Accruals | 2,184 | 2,211 |
| Operating ROU assets | 36,262 | 39,355 |
| Difference between book and tax basis of property and equipment | 3,183 | 9,423 |
| Allowance for credit losses | 163 | 69 |
| Stock-based compensation | - | 32 |
| Deferred revenue and other | 2,291 | 2,507 |
| Deferred tax assets | 68,613 | 75,115 |
| Less: valuation allowance | (10,188) | (38,288) |
| Net deferred tax assets | 58,425 | 36,827 |
| Deferred tax liabilities | ||
| Difference between book and tax basis of brands intangible assets | (49,122) | ( |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the valuation allowance as of January 1, 2024, was $(38,288). This figure is part of the deferred tax assets, which totaled $75,115 before the valuation allowance was applied. After deducting the valuation allowance, the net deferred tax assets amounted to $36,827.
A valuation allowance is a reduction in the carrying value of deferred tax assets. It is recognized when it is "more likely than not" that some or all of the deferred tax assets will not be realized. In Checkers' case, this allowance reflects the company's assessment of the future recoverability of its deferred tax assets.
For a prospective Checkers franchisee, understanding the valuation allowance can provide insights into the company's financial health and its expectations regarding future profitability. A significant valuation allowance could suggest uncertainty about the company's ability to generate future taxable income to utilize its deferred tax assets. Therefore, it would be prudent for potential franchisees to seek clarification from Checkers regarding the factors contributing to this valuation allowance and its potential impact on the company's future tax liabilities.