What does Checkers periodically do in connection with land and buildings?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company periodically subleases land and buildings in connection with the sale of Company-operated restaurants to franchisees. In certain cases, the terms of the sublease provide for rents from sublessees that are less than the rents the Company is obligated to pay under the original lease. Prior to the adoption of ASC 842, Leases, on January 4, 2022, the Company accounted for these refranchising transactions on an undiscounted basis in accordance with the provisions of ASC 840, which required the recognition of a reserve in the amount of the exposure under the sublease and recognition of the loss in the period the sublease was executed.
As part of the adoption of ASC 842, Leases, on January 4, 2022, reserves for restaurant retirement costs and sublease subsidies for lease agreements where the Company is the lessee are captured as an adjustment to the right-of-use assets at the time of transition.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers periodically subleases land and buildings related to the sale of company-operated restaurants to franchisees.
In some instances, the sublease agreements between Checkers and its franchisees may stipulate that the rent paid by the franchisee is less than what Checkers is obligated to pay under the original lease. Prior to January 4, 2022, Checkers accounted for these refranchising transactions on an undiscounted basis, which required the recognition of a reserve for the exposure under the sublease and recognition of the loss in the period the sublease was executed.
As of January 4, 2022, with the adoption of ASC 842, Leases, reserves for restaurant retirement costs and sublease subsidies for lease agreements where Checkers is the lessee are captured as an adjustment to the right-of-use assets at the time of transition. This accounting change impacts how Checkers manages its financial reporting related to subleases with franchisees.