What are the primary components of accounts receivable for Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
-------------------------|-------|----|-----------|----|-------| | | | Gross | | Allowance | | Net | | Gross | | Allowance | | Net | | Total accounts | $ | 8,372 | $ | (655) | $ | 7,717 | $ | 7,913 | $ | (514) | $ | 7,399 | | receivables | | | | | | | | | | | | |
Accounts receivable is primarily comprised of franchise royalties, franchise fees, sublease rents, delivery sales receivables, and retail royalties. The Company recognizes an allowance for credit losses based on historical collection experience and on a specific identification basis based upon past due balances and the financial strength of the obligor. The Company monitors that franchisees remain in compliance with all terms of the franchise agreement and sublease, when applicable, and when a franchisee is not in compliance, they are placed in default status. When a franchisee is placed in default status, the Company closely monitors royalties accruing on franchisee sales in order to determine if collectability is reasonably assured.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, accounts receivable primarily include franchise royalties, franchise fees, sublease rents, delivery sales receivables, and retail royalties. Checkers recognizes an allowance for credit losses based on historical collection experience and specific identification of past due balances, considering the financial strength of the party obligated to pay.
Checkers monitors franchisees to ensure they comply with the terms of the franchise agreement and sublease, if applicable. If a franchisee fails to comply, they are placed in default status, which triggers close monitoring of royalties accruing from the franchisee's sales to determine if collection is reasonably assured. If Checkers determines that certain amounts are unlikely to be collected, the related royalty revenue is not recognized.
When it is determined that accounts and notes receivable are uncollectible, Checkers writes them off. These credit losses are then recorded as general and administrative expenses in the company's consolidated statements of operations. This approach ensures that Checkers maintains a realistic view of its financial position by accounting for potential losses from uncollectible receivables.