What is the meaning of 'successor' 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the term "Successor" in the financial statements refers to the period following an Out-of-Court Restructuring that occurred on June 16, 2023. Specifically, periods prior to June 16, 2023, are labeled as "Predecessor," while periods after this date are labeled as "Successor." This restructuring involved changes in the capital structure of Burger BossCo, Checkers' parent company. As a result, the equity of Burger BossCo was issued to Checkers Topco, LLC, and the secured creditors of Holdings and Burger BossCo acquired all of the equity of Topco.
The Out-of-Court Restructuring led to a change in control of CDI's parent company, which prompted Checkers to apply pushdown accounting. This means that the assets and liabilities were recorded at their fair values as of the date of the restructuring. Consequently, the financial statements for the "Successor" and "Predecessor" periods are not directly comparable due to these changes in the accounting basis. To highlight this lack of comparability, a black line separates the Successor and Predecessor periods in the financial statements.
For a prospective Checkers franchisee, understanding the distinction between "Predecessor" and "Successor" periods is crucial when reviewing the financial statements. The financial performance before and after June 16, 2023, reflects different accounting treatments and potentially different operational structures. Therefore, comparing these periods directly may not provide an accurate picture of the company's ongoing financial health and performance. Franchisees should focus on the trends and performance within each distinct period to gain a better understanding of Checkers' financial situation.
Given these changes, it is important for potential franchisees to carefully review the notes to the financial statements and seek clarification from Checkers regarding any questions or concerns about the impact of the Out-of-Court Restructuring on the company's financial performance and future prospects. Understanding these nuances can help franchisees make informed decisions about their investment in a Checkers franchise.