What is the estimated future amortization of goodwill for Checkers for the fiscal year ending 2027?

According to Checkers's 2025 Franchise Disclosure Document, the estimated future amortization of goodwill for the fiscal year ending 2027 is $155. This figure represents the anticipated expense related to the gradual write-down of goodwill, an intangible asset, over its useful life. Goodwill typically arises from acquisitions, representing the premium paid above the fair value of identifiable net assets. For Checkers, this goodwill was recognized as part of a business combination, amounting to $31.8 million as of January 2, 2023. The company has elected to amortize the goodwill over a 10-year period using the straight-line method.

Amortization is an accounting practice that systematically reduces the book value of an intangible asset over its useful life. In Checkers's case, the goodwill is being amortized over 10 years, reflecting the period over which the company expects to realize economic benefits from the acquisition that created the goodwill. The annual amortization expense is an important factor in Checkers's financial statements, as it affects the reported net income.

It's important to note that goodwill is also subject to impairment testing. Checkers performs impairment testing at the enterprise level if there is a triggering event that suggests the fair value of the company might be less than its carrying amount. If impairment is more likely than not, a quantitative test is required to compare the fair value of the company with its carrying amount. If the carrying amount exceeds the fair value, the difference is recognized as an impairment loss, up to the carrying amount of goodwill. This means that the actual amortization expense could be higher if an impairment loss is recognized during the amortization period.

For a prospective Checkers franchisee, understanding the amortization of goodwill and the potential for impairment is crucial for assessing the financial health and stability of the company. While the estimated amortization provides a predictable expense, the possibility of impairment introduces uncertainty. Franchisees should consider these factors when evaluating the long-term prospects of investing in a Checkers franchise.