What is the 'Related Party Note' for Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has entered into transactions with certain companies or individuals, which are related parties by virtue of having stockholders in common, by being officers/directors of the Company or because they are controlled by significant stockholders or officers/directors of the Company.
The Company and its franchisees each pay a percentage of sales to the Checkers/Rally's National Production Fund, Inc. (the "Fund" or "NPF"), established for the purpose of creating and producing advertising for the benefit of both Company-operated and franchised restaurants. During the periods ended January 1, 2024 (Successor), June 16, 2023 (Predecessor) and January 2, 2023 (Predecessor), only one member, representing 25% of the Board of Directors of the Fund, is an employee of the Company. The Fund is not included in the accompanying consolidated financial statements, although the Company's contributions to the Fund are included in "advertising expense" in the accompanying consolidated statements of operations. Additionally, certain Company-operated restaurants and franchisees participate in advertising co-ops. The Company consolidates advertising co-ops for which it is determined to control on the basis of voting interests, and does not consolidate advertising co-ops it does not control. Co-ops not controlled by the Company are accounted for similarly to the fund. The contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.
The Company and its franchisees each pay charges based on volumes of products purchased from suppliers to Checkers and Rally's Distribution and Services, Inc. ("CDSI"), established for the purpose of providing procurement services and quality assurance support for the benefit of both Company-operated and franchised restaurants. During the period from June 17, 2023 through January 1, 2024 (Successor) and the period from January 3, 2023 through June 16, 2023 (Predecessor) and for the year ended January 2, 2023 (Predecessor), only one member, representing 25% of the CDSI Board of Directors is an employee of the Company. CDSI is not included in the accompanying consolidated financial statements, although the company's contributions to CDSI are included within "restaurant food and paper costs" in the accompanying consolidated statements of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the company engages in transactions with related parties, including those with common stockholders, officers, or directors, or entities controlled by them.
The FDD states that Checkers and its franchisees contribute a percentage of sales to the Checkers/Rally's National Production Fund, Inc. (NPF), which is used for advertising. For the fiscal year ended December 30, 2024, only one member, representing 25% of the Fund's Board of Directors, was an employee of Checkers. The contributions to the Fund represent 0.5% of net restaurant sales, while contributions to advertising co-ops range from 0.5% to 4.25% of net restaurant sales.
Additionally, Checkers and its franchisees pay charges based on product volumes purchased from suppliers to Checkers and Rally's Distribution and Services, Inc. (CDSI), which provides procurement services and quality assurance. During specified periods in 2023 and 2024, only one member, representing 25% of the CDSI Board of Directors, was an employee of Checkers.
The company also had several related party notes. A related party note matured April 25, 2024, bearing interest at LIBOR plus an applicable margin, or an alternative base rate plus an applicable margin, with interest paid quarterly. As of January 2, 2023, the balance for this note was $181,913. There were also related party Restatement Date Term Loans, notes, and amended notes maturing on various dates with interest calculated similarly. These financial arrangements and transactions with related parties are detailed in the financial statements and accompanying notes.