What is the 'Net Book Value' in the context of Checkers' option to purchase, and how is depreciation calculated?

According to Checkers's 2025 Franchise Disclosure Document, the "Net Book Value" is defined within the context of Checkers's option to purchase the franchisee's personal property used in the franchised restaurant upon termination or expiration of the franchise agreement. Specifically, it applies when Checkers terminates the agreement, in which case the purchase price will be the lesser of the "Appraised Asset Value" and the "Net Book Value".

The "Net Book Value" is defined as the net book value of the purchased assets as reflected on the franchisee's books and records. For depreciation purposes, all capital assets will be depreciated on a straight-line basis over a period not exceeding 5 years, with no residual value. This means the asset's cost is evenly spread over its useful life (up to 5 years), and it's assumed to have no value at the end of that period.

In practice, this means that if Checkers exercises its option to purchase the assets of a terminated franchise, the franchisee will receive the lower of the appraised value or the depreciated book value of those assets. The depreciation method ensures that the value decreases consistently over time, potentially resulting in a lower purchase price for Checkers, especially for older assets. The valuation will be determined by an independent appraiser selected by Checkers, adding a layer of objectivity, although the franchisee must provide complete and accurate books and records to the appraiser.