How is 'Gross Margin' defined for Checkers restaurants in the Statement of Gross Margin?

According to Checkers's 2025 Franchise Disclosure Document, the Statement of Gross Margin for New Company Checkers and Rally's Restaurants is based on data from two company-owned restaurants open throughout the 2024 fiscal year. The FDD defines 'Gross Margin' as Net Sales less food and paper costs, and labor and benefit costs. This provides a high-level view of profitability before considering other significant expenses.

Specifically, the FDD outlines the components used to calculate Gross Margin. Food, paper, and packaging costs are considered, factoring in any supplier rebates. Labor costs include wages, bonuses, payroll taxes, workers' compensation, medical insurance, and other employee benefits. By subtracting these costs from Net Sales, Checkers arrives at the Gross Margin figure.

For a prospective Checkers franchisee, understanding this definition is crucial. It highlights the direct costs impacting profitability, allowing franchisees to focus on managing food and labor expenses effectively. While the FDD provides this definition within the context of company-owned restaurants, it serves as a useful benchmark for franchisees to evaluate their own financial performance and identify areas for improvement. Note that royalties, occupancy, and operating costs are not included in this gross margin calculation, and are separate expenses.

In the provided Statement of Gross Margin, the average new restaurant reported a Gross Margin of $479,793, representing 39% of Net Sales. The median new restaurant also reported the same figures. This was attained or exceeded by 50% of restaurants, with a high of $493,646 and a low of $465,940. These figures are based on restaurants open between January 2022 and December 2024, reflecting their operating expenses and Net Sales during their first full 13 periods of operation.