How does Checkers handle area development fees upon receipt?

According to Checkers's 2025 Franchise Disclosure Document, area development fees are initially recorded as deferred revenue when received. These fees are then allocated to each specific restaurant that is part of the development agreement. Checkers recognizes the revenue from these fees over the contractual term of each individual franchise agreement, but only after the respective restaurant has actually opened for business. This accounting practice aligns the revenue recognition with the actual operation of the franchised locations.

For a prospective Checkers area developer, this means that the fees paid upfront are not immediately recognized as income by the franchisor. Instead, Checkers spreads the recognition of this revenue over the life of the franchise agreement for each restaurant developed. This approach is common in franchising, as it ties the revenue to the ongoing performance and operation of the franchise, rather than simply the initial sale of the development rights.

This policy has implications for Checkers's financial reporting, as it affects how revenue is recognized and reported on their financial statements. For the franchisee, it provides assurance that the fees are tied to the actual opening and operation of the restaurants, aligning the franchisor's financial interest with the franchisee's success in developing and opening new locations. This deferred recognition is a standard accounting practice that provides a more accurate reflection of the value delivered over time.