In Checkers' Out-of-Court Restructuring, how was the fair value of the stock consideration determined?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
alue as of the acquisition date. As an indirect subsidiary of the accounting acquirer, the Company has elected to apply pushdown accounting, whereby it will also recognize the assets acquired and liabilities assumed at fair value as of the acquisition date.
The total stock consideration was $9
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the fair value of the stock consideration in the Out-of-Court Restructuring was determined by a third-party valuation specialist. This specialist used both the market and income approaches to assess the value. The total stock consideration amounted to $97.8 million, which was comprised of 90 shares of Burger BossCo acquired by Topco. The valuation process involved weighting the results obtained from the market and income approaches appropriately to arrive at a final fair value.
For a prospective Checkers franchisee, understanding how the company values its stock during restructuring can provide insight into the financial strategies and decisions made at the corporate level. This valuation directly impacts the company's financial statements and, consequently, the overall financial health of the franchise system. Knowing that a third-party specialist was involved may give franchisees confidence that the valuation was objective and professionally determined.
The use of both market and income approaches is a common practice in valuation to provide a balanced assessment. The market approach considers what similar companies or assets are worth in the current market, while the income approach focuses on the present value of the expected future cash flows. The reliance on a third-party valuation specialist ensures that the valuation is conducted independently and without bias, which is crucial for maintaining transparency and trust among stakeholders.
It is important for potential franchisees to recognize that these valuations are based on specific assumptions and market conditions at the time of the restructuring. While the FDD provides this information, franchisees might want to further investigate the assumptions used in these valuations to fully understand the financial implications. Understanding these details can help franchisees assess the stability and future prospects of the Checkers franchise.