How are franchise restaurant royalties earned by Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- Franchise restaurant royalties are earned as the franchise delivers food to their customer or to a third-party delivery partner. The Company recognizes the royalty revenue in the period in which the franchise sales occur over the contract term of the franchise agreement. The Company generally bills royalties bi-monthly or bi-weekly to franchise customers and the payment is due within 10 days of the billing. See the "accounts and notes receivable" below for additional information on franchise royalty payments. Royalty rates are generally 4% of net sales but the rates may vary based on restaurants qualifying under certain development or reimaging programs.
- Franchise fees including the initial franchise fee, transfer fees, area development fees, and renewal fees are recognized over the term of the franchise contract as the performance obligation to grant the franchise right is satisfied over each day of the contract term. Franchise fees may vary based on qualification under certain development incentive programs.
The Company earns retail royalty fees based on a contract for the sale of licensed products, including the Famous Seasoned Fries© at retail outlets. The performance obligation is satisfied as sales in the retail outlets are made, royalties are payable monthly within 30 days, and vary with retail sales volume.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchise restaurant royalties are earned when the franchise delivers food to a customer or to a third-party delivery partner. Checkers recognizes this royalty revenue during the same period in which the franchise sales occur, spreading it out over the contract term of the franchise agreement. Typically, Checkers bills these royalties either bi-monthly or bi-weekly to its franchisees, with payment due within 10 days of the billing date. The standard royalty rate is 4% of net sales, but this percentage may vary for restaurants that qualify under specific development or reimaging programs.
In addition to restaurant royalties, Checkers also earns retail royalty fees from the sale of licensed products, such as the Famous Seasoned Fries©, at retail outlets. These retail royalties are earned as sales are made in the retail outlets. Payment terms for retail royalties differ from those of restaurant royalties, as they are payable monthly within 30 days and vary based on retail sales volume.
For a prospective Checkers franchisee, understanding how royalties are calculated and when they are due is crucial for managing cash flow and financial planning. The potential variation in royalty rates based on development or reimaging programs could be an incentive for franchisees to participate in these programs, but it's important to fully understand the requirements and benefits. Additionally, franchisees should be aware of the different payment schedules for restaurant and retail royalties if they are involved in both aspects of the business.