What factors does Checkers consider when determining the collectability of a franchisee's debt?

According to Checkers' 2025 Franchise Disclosure Document, when determining the collectability of a franchisee's debt, Checkers evaluates several factors. These include the debtor's financial condition, the historical experience Checkers has had with the debtor, and the value of any pledged security interest. This evaluation is part of establishing reserves for credit losses, with the majority of the balance relating to specific accounts where collection is not expected.

Checkers' franchise agreements often provide remedies in the event of a franchisee's default on outstanding balances. These remedies can include a security interest in the assets of the business when a sublease is in place or a personal guarantee from the franchisee. This helps Checkers maintain a high rate of collection.

Accounts receivable primarily consist of royalties, rents, and franchise fees due from franchisees. These receivables are typically due within 10 days of billing. In some cases, Checkers directly draws funds from the franchisee's bank account on a predetermined day. This practice, along with the security measures in place, likely contributes to Checkers' ability to manage and collect franchisee debt effectively.