What is the interest rate Checkers has the option to pay in kind for the Last-Out Term Loans?

According to Checkers' 2025 Franchise Disclosure Document, Checkers has the option to pay interest in kind on the Last-Out Term Loans at a rate of 6% per annum rather than in cash. The Last-Out Term Loans mature on June 16, 2028. The standard interest accrual on these loans is at a floating rate, which Checkers can elect to be either an alternative base rate plus 8% per annum, or the Adjusted Term Secured Overnight Financing Rate plus 9% per annum, plus a credit adjustment spread.

This option provides Checkers with flexibility in managing its cash flow. Instead of paying the interest in cash, the interest amount can be added to the principal balance of the loan. This could be beneficial if Checkers anticipates improved cash flow in the future, allowing them to manage current financial constraints.

However, a prospective franchisee should consider the long-term implications of capitalizing interest. While it alleviates immediate cash demands, it increases the overall debt and the total interest paid over the life of the loan. Franchisees should carefully evaluate their financial projections and consult with financial advisors to determine whether this option is beneficial for their specific circumstances. Understanding the terms of the loan and the implications of choosing to pay interest in kind is crucial for making informed financial decisions.