For Checkers, when are contingent rent expenses recognized?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
pany wrote-off ROU operating lease assets in the amount of $2.9 million in the period from January 3, 2023 through June 16, 2023 (Predecessor). These impairment charges recognized in the Predecessor period related to stores that were not profitable, and with investment, were not projected to be profitable.
Certain leases contain contingent rental provisions based on percentages of gross sales if an established threshold is met. Contingent rent expenses are considered to be variable and are recognized once minimum sales volume is expected to be achieved. Contingent rent expense was not material for the fiscal year ended December 30, 2024 (Successor) and the periods from June 17, 2023 through January 1, 2024 (Successor) and from January 3, 2023 through June 16, 2023 (Predecessor).
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, certain leases contain contingent rental provisions that are based on a percentage of gross sales if an established sales threshold is met. These contingent rent expenses are considered variable.
Checkers recognizes these contingent rent expenses once the minimum sales volume is expected to be achieved. This means that franchisees will only see these expenses reflected in their financial statements when their sales are projected to meet or exceed the predetermined level specified in their lease agreement.
It's important to note that for the periods ending January 1, 2024, June 16, 2023, January 3, 2023, and January 3, 2022, contingent rent expense was not material. Similarly, contingent rent expense was not material for the fiscal year ended December 30, 2024, and the periods from June 17, 2023, through January 1, 2024, and from January 3, 2023, through June 16, 2023. This suggests that, historically, these contingent rent provisions have not significantly impacted Checkers' financial results during these periods.