When does Checkers recognize royalty revenue from franchise restaurants?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
- Franchise restaurant royalties are earned as the franchise delivers food to their customer or to a third-party delivery partner. The Company recognizes the royalty revenue in the period in which the franchise sales occur over the contract term of the franchise agreement. The Company generally bills royalties bi-monthly or bi-weekly to franchise customers and the payment is due within 10 days of the billing. See the "accounts and notes receivable" below for additional information on franchise royalty payments. Royalty rates are generally 4% of net sales but the rates may vary based on restaurants qualifying under certain development or reimaging programs.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, royalty revenue from franchise restaurants is recognized when the franchise delivers food to their customer or to a third-party delivery partner. Checkers recognizes this royalty revenue during the period in which the franchise sales occur, throughout the term of the franchise agreement.
Typically, Checkers bills royalties either bi-monthly or bi-weekly to its franchisees, with payment due within 10 days of the billing date. The standard royalty rate is generally 4% of net sales. However, this rate may vary for restaurants that qualify under specific development or reimaging programs.
For a prospective Checkers franchisee, this means that royalty payments are directly tied to sales and are due shortly after being billed. Understanding the specific royalty rate applicable to their restaurant, based on any development or reimaging programs, is crucial for financial planning. Additionally, franchisees should be aware of the billing cycle and payment terms to ensure timely payments and avoid any potential issues with Checkers.