Where are credit losses recorded in Checkers' consolidated statements of operations?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
f collectability is reasonably assured. If we determine that certain amounts are not probable of collection, we do not recognize the related royalty revenue. The Company writes off the related accounts receivable when it is determined that they are uncollectible.
Credit losses are recorded in general and administrative expenses in the accompanying consolidated statements of operations. The Company had credi
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, credit losses are recorded as part of "general and administrative expenses" within the company's consolidated statements of operations. This means that when Checkers experiences losses from uncollectible accounts receivable, these losses are categorized under the general and administrative expenses section of their financial statements.
For a prospective Checkers franchisee, this detail provides insight into how the franchisor accounts for financial risks associated with franchisees who may default on their payments. The FDD states that Checkers monitors franchisees' compliance with the franchise agreement and sublease terms. When a franchisee is in default, Checkers closely monitors royalties to determine if collection is reasonably assured. If collectability is not probable, the related royalty revenue is not recognized. This proactive approach to managing credit losses suggests that Checkers actively manages its financial risks.
The inclusion of credit losses within general and administrative expenses is a common accounting practice. The FDD mentions that Checkers had credit losses of $0.6 million for the fiscal year ended December 30, 2024 (Successor), $0.1 million for the period from June 17, 2023 through January 1, 2024 (Successor) and $0.1 million for the period from January 3, 2023 through June 16, 2023 (Predecessor). These figures provide a sense of the scale of credit losses Checkers has experienced in recent periods, which can be useful for a potential franchisee in assessing the financial stability and risk management practices of the company.
Understanding where credit losses are recorded helps a franchisee to better interpret Checkers' financial statements and assess the overall financial health of the company. It also highlights the importance of the franchisee's own financial management and compliance with the franchise agreement to avoid contributing to these credit losses.