What are the implications of Checkers requiring franchisees to purchase from approved suppliers (Item 8) on the estimated initial investment (Item 7)?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
To ensure that high and uniform standards of quality and service are maintained, you are required to operate your Franchised Restaurant in strict conformity with our methods, standards and specifications and you are required to purchase goods, services, supplies, fixtures, equipment and inventory only from suppliers we have approved. You are not required to purchase or lease anything from us or any of our affiliates; however, we and our affiliates can be approved suppliers for items. Currently, we are not an approved supplier for any items except that we may from time to time sell used modular restaurants and restaurant equipment to Checkers and Rally's franchisees. We estimate the initial cost of all of required purchases and leases of goods, services, supplies, fixtures, equipment and inventory to be in excess of 95% of your total initial investment (see Item 7). We estimate the ongoing cost of these required purchases and leases to be in excess of 95% of your total ongoing operating expenses.
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, franchisees are required to purchase goods, services, supplies, fixtures, equipment, and inventory only from suppliers that Checkers has approved. This requirement is in place to ensure high and uniform standards of quality and service are maintained across all franchised restaurants. While franchisees are not required to purchase or lease anything directly from Checkers or its affiliates, Checkers and its affiliates can be approved suppliers for these items.
The estimated initial cost of all required purchases and leases of goods, services, supplies, fixtures, equipment, and inventory is substantial. Checkers estimates that these costs will exceed 95% of the franchisee's total initial investment. This means a very large portion of the initial investment will be spent on these required purchases from approved suppliers.
Item 7 provides an estimated initial investment table. For a modular design drive-thru restaurant, the total estimated initial investment ranges from $637,343 to $1,345,757. Given that over 95% of the initial investment is tied to required purchases, franchisees should carefully evaluate the approved supplier list and pricing to ensure they are comfortable with the potential costs. The "Restaurant Equipment & Technology" line item, estimated between $193,260 and $329,538, is one example of a required purchase from approved suppliers that contributes to the overall initial investment. Similarly, the "Inventory" line item, estimated between $4,000 and $12,000, represents another required purchase from approved suppliers. For a site-built restaurant, the "Restaurant Equipment & Technology" line item is estimated between $122,976-$329,538.
Because Checkers may modify the specifications and standards imposed on franchisees and suppliers, franchisees should stay informed about any changes to the approved supplier list or product specifications, as these changes could impact their costs. Franchisees should also inquire about any rebates or allowances Checkers receives from suppliers based on purchases by franchisees, as these arrangements could potentially affect the overall cost of goods and services.