What is the present value of the finance lease payments for Checkers, as reported in the financial statements?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ase liability by applying the liability's effective interest rate to the total contractual payments that are due within the next 12 months. A maturity analysis of annual undiscounted cash flows for lease liabilities under noncancelable leases as of December 30, 2024 (Successor), is as follows (in thousands):
| Fiscal Year | Operating Leases | Finance Leases |
|---|---|---|
| 2025 | $ 15,390 | $ 2,358 |
| 2026 | 15,054 | 2,402 |
| 2027 | 12,662 | 2,437 |
| 2028 | 12,219 | 2,521 |
| 2029 | 11,194 | 2,552 |
| Thereafter | 144,221 | 41,956 |
| Total undiscounted lease payments | 210,740 | 54,226 |
| Less: interest | (64,943) | (19,281) |
| Present value of lease payments | $ 145,797 | $ 34,945 |
Company as Lessor
The Company subleases land and buildings associated with the sale of certain Company-operated restaurants with terms of, or renewable to, 10 to 15 years with no option to purchase. The Company determines the sublease term by assuming exercise of renewal options that are reasonably certain to be exercised. The Company continues to be responsible for the rent payments to the original lessors. The subleases are evaluated for classification as operating, direct financing or sales-type leases. The Company has elected the practical expedient to account for lease components and non-lease components as a single lease component for all underlying classes of assets. The subleases generally obligate the sublessee to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the present value of lease payments is broken down between operating leases and finance leases. For 2024, the present value of finance leases is listed as $25,283. For 2025, the present value of finance leases is listed as $34,945.
These figures represent the discounted value of Checkers's future obligations for their finance leases, taking into account factors like interest. Finance leases typically involve elements of ownership, such as transferring the asset to the lessee by the end of the lease term or granting an option to purchase the asset.
A prospective Checkers franchisee should understand the difference between operating and finance leases, as they have different implications for the franchisee's balance sheet and financial obligations. Reviewing these figures helps potential franchisees assess the long-term financial commitments Checkers has made and how these commitments might affect the company's financial health and stability.