What is the meaning of 'predecessor' in the context of the Checkers financial statements?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
As a result of the Out-of-Court Restructuring as further discussed below and in Note 4 - Business Combination, periods prior to June 16, 2023 reflect the financial statements of CDI prior to the Out-of-Court Restructuring, (referred to herein as "Predecessor"). The period subsequent to June 16, 2023 reflects the financial statements of CDI after the Out-of-Court Restructuring (referred to herein as "Successor"). As the Out-of-Court Restructuring resulted in a change in control of CDI's parent, the Company elected to apply pushdown accounting, thus assets and liabilities were recorded at their fair values at the date of the Outof-Court Restructuring. Due to the changes in the accounting basis of assets and liabilities, the Successor and Predecessor financial statements are not necessarily comparable. Where applicable, a black line separates the Successor and Predecessor periods to highlight the lack of comparability.
Predecessor
On April 25, 2017, pursuant to the merger agreement (the "Merger Agreement") dated as of March 18, 2017, among Checkers Holdings, Inc. ("Holdings"), Oak Hill Capital Partners IV (Onshore), L.P., a Cayman Islands Exempted Limited Partner ("OHCP") and Burger BossCo, Inc ("Burger BossCo")., a Delaware corporation and a wholly owned subsidiary of OHCP ("Merger Sub") formed solely for the purpose of entering into the merger, Holdings was acquired by Merger Sub (the "Merger"). Following the Merger, Checkers and Rally's Restaurants, Inc. ("CRRI") merged with and into Holdings, with Holdings surviving such merger and becoming CDI's immediate parent. Pursuant to the Assignment and Assumption Agreement dated as of April 25, 2017, OHCP assigned all of its rights and future performance obligations
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the term "Predecessor" in the financial statements refers to the financial statements of Checkers Drive-In Restaurants, Inc. (CDI) prior to an Out-of-Court Restructuring that occurred on June 16, 2023. The period after this date is referred to as "Successor." This distinction is important because the restructuring resulted in a change of control of CDI's parent company, which led Checkers to apply pushdown accounting, meaning assets and liabilities were recorded at their fair values as of the restructuring date.
For a prospective Checkers franchisee, understanding the difference between "Predecessor" and "Successor" periods is crucial when reviewing the financial statements. Because the Out-of-Court Restructuring altered the accounting basis of assets and liabilities, the financial statements from these periods are not directly comparable. To highlight this lack of comparability, Checkers uses a black line to separate the Successor and Predecessor periods in its financial statements.
Furthermore, the 2025 FDD explains that on April 25, 2017, Checkers Holdings, Inc. was acquired by Merger Sub, a wholly-owned subsidiary of Oak Hill Capital Partners IV (Onshore), L.P. Following this merger, Checkers and Rally's Restaurants, Inc. merged with and into Holdings, with Holdings surviving and becoming CDI's immediate parent. This historical context provides additional insight into the ownership and structural changes that have impacted Checkers's financial reporting over time. A prospective franchisee should pay close attention to these structural changes, as they can significantly impact the financial performance and stability of the franchise system.