What contractual premium is Checkers required to pay upon each principal repayment on or after the first anniversary, but prior to the second anniversary?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Additionally, the Company is required to make recurring quarterly principal payments on the Second Out Loans in the amount equivalent to 0.25% of the original principal amount. The remainder of the principal amount is due upon maturity. Upon each principal repayment, the Company is required to pay a contractual premium, equal to (i) prior to the first anniversary, a make-whole provision calculated as a discounted amount of remaining interest payments prior to the first anniversary, (ii) 8% on or after the first anniversary, but prior to the second anniversary, (iii) 7% on or after the second anniversary, but prior to the third anniversary, (iv) 5% on or after the third anniversary, and (v) 3% on or after the fourth anniversary.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company is required to pay a contractual premium upon each principal repayment for its Second Out Loans. The amount of the premium depends on the timing of the repayment. Specifically, for repayments made on or after the first anniversary but before the second anniversary of the loan, Checkers must pay a premium of 8%.
This premium is in addition to the principal repayment itself. The FDD states that Checkers makes recurring quarterly principal payments on the Second Out Loans, with each payment equivalent to 0.25% of the original principal amount. The remainder of the principal is due upon maturity. Therefore, each quarterly payment between the first and second anniversaries of the loan triggers an additional 8% premium payment.
For a prospective Checkers franchisee, this detail from the financial statements is important because it provides insight into the company's debt obligations and repayment terms. While franchisees are not directly responsible for these loan repayments, the financial health of the franchisor can impact the level of support and resources available to franchisees. Understanding these obligations can help a potential franchisee assess the overall stability and financial management of Checkers.