What costs are Checkers generally obligated to pay for under its land and building leases?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company leases land and buildings generally under agreements with terms of, or renewable to, 10 to 30 years. The Company determines the lease term by assuming exercise of renewal options that are reasonably certain to be exercised. The leases are evaluated for classification as operating or finance leases.
The Company has elected the practical expedient to account for lease components and non-lease components as a single lease component for all underlying classes of assets. The leases generally obligate the Company to pay for costs associated with property taxes, insurance and maintenance and are evaluated by the Company as fixed or variable in nature. If it is concluded that they are fixed, they are included in the calculation of the lease liability. Fixed lease costs for operating lease payments are recognized on a straight-line basis over the lease term and are included in the restaurant occupancy costs, franchise support and services expenses, general and administrative expenses and restaurant retirement costs line items within the accompanying consolidated statement of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, when Checkers leases land and buildings, the leases generally obligate Checkers to cover the costs of property taxes, insurance, and maintenance. These costs are evaluated to determine if they are fixed or variable. If the costs are determined to be fixed, they are included in the calculation of the lease liability.
Fixed lease costs for operating lease payments are recognized on a straight-line basis over the lease term. These costs are then included in various expense line items within the consolidated statement of operations, such as restaurant occupancy costs, franchise support and services expenses, general and administrative expenses, and restaurant retirement costs.
This information is relevant to prospective franchisees as it provides insight into the financial obligations Checkers undertakes when leasing property. Understanding these obligations can help franchisees better assess the financial health and stability of the company, as well as the potential impact of lease-related expenses on their own operations, especially if Checkers subleases the property to the franchisee.