What does Checkers presume when evaluating whether a tax position is uncertain?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company evaluates uncertain tax positions based upon one of the following conditions: (1) the tax position is not more likely than not to be sustained; (2) the tax position is more likely than not to be sustained, but for a lesser amount; or (3) the tax position is more likely than not to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) the Company presumes the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities, such as legislation and statutes, legislative intent, regulations, rulings, and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, when evaluating uncertain tax positions, Checkers presumes that the tax position will be examined by the relevant taxing authority. This examination is assumed to be conducted by an authority possessing full knowledge of all relevant information pertaining to the tax position.
This presumption is significant because it means Checkers does not assume that any potential audit will be superficial or uninformed. Instead, the company prepares its tax positions as if they will be scrutinized by experts with access to all pertinent details. This approach likely leads to a more conservative and accurate assessment of tax liabilities.
For a prospective Checkers franchisee, this indicates that the company strives for transparency and accuracy in its tax reporting. While it doesn't eliminate the possibility of tax-related issues, it suggests that Checkers takes a diligent approach to tax compliance, which can reduce the risk of future tax-related problems for the franchisee. Franchisees should still consult with their own financial advisors to understand the tax implications of owning a Checkers franchise.