How are franchise fees, such as the initial franchise fee, recognized as revenue by Checkers?

According to Checkers's 2025 Franchise Disclosure Document, franchise fees, including initial franchise fees, transfer fees, area development fees, and renewal fees, are not immediately recognized as revenue. Instead, Checkers records these fees as deferred revenue when they are received. This means that the revenue recognition is postponed to a later period.

The deferred revenue is then recognized over the term of the franchise contract. Checkers recognizes the revenue gradually as they fulfill their obligation to grant the franchise right to the franchisee. This recognition occurs over each day of the contract term. This accounting practice aligns the revenue recognition with the period during which the franchisee benefits from the franchise agreement.

This approach is typical in franchising, as the initial fees often cover the ongoing support and brand usage rights provided over the life of the franchise agreement, rather than a single, immediate service. For a prospective Checkers franchisee, this means that Checkers does not recognize all of the initial fees as revenue immediately but spreads it out over the life of the agreement.