What options does Checkers have in the event of a franchisee's default on a secured note?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Notes receivable consist of funds extended to franchisees as consideration for the sale of restaurants and repayment terms on past due rents and royalties. Specific allowances are established when collection is no longer deemed likely. With respect to secured notes, the assets of the associated restaurant often act as collateral. In the event of default, the Company has the option to acquire the restaurant assets, with the balance of the outstanding notes included in the consideration provided by the Company. However, not all notes are collateralized. Interest on outstanding notes is charged according to the terms of the promissory note and is recognized on a period basis over the term of the note.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers extends funds to franchisees, which are documented as notes receivable, to facilitate restaurant sales and cover overdue rent and royalties. These notes are sometimes secured with the restaurant's assets acting as collateral.
In the event a franchisee defaults on a secured note, Checkers has the option to acquire the assets of the associated restaurant. The balance of the outstanding notes would be included in the consideration Checkers provides for the restaurant assets.
However, the FDD also notes that not all franchisee notes are collateralized, meaning that Checkers' recourse in case of default may vary depending on the specific agreement. Interest on outstanding notes is charged according to the terms of the promissory note and is recognized on a period basis over the term of the note.