What was the measurement frequency for the total leverage ratio financial covenant for Checkers, as measured under the Senior Credit Facility?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company was subject to several restrictive financial and nonfinancial covenants under the Senior Credit Facility which imposed certain restrictions on us, including restrictions on our ability to incur debt or provide guarantees; grant or suffer to existing liens; sell our assets; prepay certain indebtedness; make loans, advances, investments, and acquisitions; change our line of business; and a total leverage ratio financial covenant measured quarterly that steps down through the term of the agreement. The Second Amendment to the Restated Credit Agreements amended the total leverage ratio financial covenant based on quarterly test periods applied beginning March 22, 2021, which is the last day of the first fiscal quarter of 2021, through April 25, 2024, the maturity date of the First Lien.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the total leverage ratio financial covenant, as part of the Senior Credit Facility, was measured quarterly. This covenant was subject to amendments based on quarterly test periods, starting March 22, 2021, which was the last day of the first fiscal quarter of 2021, and continuing through April 25, 2024, the maturity date of the First Lien.
For a prospective Checkers franchisee, this information is relevant because it indicates that Checkers, as a company, is subject to certain financial restrictions and covenants imposed by its lenders. The total leverage ratio is a key metric that lenders use to assess the financial health and risk profile of Checkers. Regular monitoring of this ratio ensures that Checkers remains in compliance with its debt agreements.
The fact that the leverage ratio was measured quarterly and amended over time suggests that Checkers's financial performance and debt obligations were actively managed and adjusted based on its financial condition. This could impact franchisees indirectly, as the financial stability of the parent company can affect its ability to support franchisees, invest in the brand, and navigate economic challenges. Franchisees should be aware of these financial dynamics, as they can influence the long-term viability and success of their investment in a Checkers franchise.
It's important for potential franchisees to understand the implications of these financial covenants and how they might affect Checkers's strategic decisions and overall financial health. While the covenant was amended through April 2024, it is important to ask Checkers about the current credit facilities and covenants in place.