What constitutes a 'Liquidity Event' that would trigger vesting of performance-based units in the Checkers Management Incentive Plan?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
For the awards issued, 50% of the Class B Units are service-based and vest evenly over the first to fifth anniversaries of the grant date. The remaining 50% of the Class B units are performance-based which will vest upon a Liquidity Event. A Liquidity Event is defined within the Management Incentive Plan as the sale, or similar type transaction, of Topco. Upon the occurrence of a Liquidity Event, all unvested servicebased units will become fully vested. The Management Incentive Plan further defines Specified Event(s), such as termination for cause, that will result in the automatic forfeiture of all vested and unvested shares without consideration.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, a 'Liquidity Event' is defined within the Management Incentive Plan as the sale, or similar type transaction, of Topco. This definition is relevant to the vesting of performance-based Class B Units awarded to managers and executives of Topco and its consolidated subsidiaries. Fifty percent of these Class B Units are performance-based and vest upon such a Liquidity Event.
Upon the occurrence of a Liquidity Event, all unvested service-based units will become fully vested. However, the Management Incentive Plan also specifies events, such as termination for cause, that will result in the automatic forfeiture of all vested and unvested shares without consideration. This means that while a Liquidity Event can accelerate vesting, certain negative events can negate any potential benefit.
For a prospective Checkers franchisee, this information is relevant because it highlights the conditions under which key management and executives might receive significant compensation. A sale or similar transaction of Topco could lead to a change in leadership or strategic direction for Checkers, which could indirectly impact franchisees. Understanding these incentive structures provides insight into the potential motivations and priorities of the management team.