What is the reported value of Checkers' operating right-of-use assets?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| Fair value of stock consideration Current assets Cash and cash equivalents Accounts and notes receivable, net Inventory Prepaid expenses Other current assets | $ 97,819 17,613 5,828 3,105 3,690 1,600 |
|---|---|
| Total current assets | 31,836 |
| Property and equipment, net | 26,300 |
| Operating right-of-use assets | 152,445 |
| Finance right-of-use assets | 14,831 |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the reported value of their operating right-of-use assets is $152,445. This figure represents the company's rights to use certain assets, primarily related to leased properties, for the duration of the lease term. These assets are recognized on the balance sheet as a result of accounting standards related to lease agreements.
For a prospective Checkers franchisee, understanding the concept of right-of-use assets and lease liabilities is crucial. As Checkers operates many of its restaurants in leased locations, these assets and liabilities can significantly impact the company's financial statements. The initial recognition of these assets and liabilities reflects the present value of future lease payments, discounted using an appropriate interest rate.
The FDD also mentions that Checkers wrote off right-of-use operating lease assets in the amount of $0.4 million for the period ended January 1, 2024, due to store closures. Additionally, they wrote off $2.9 million and $2.0 million in the period ended June 16, 2023, and year ended January 2, 2023, respectively, due to unprofitable stores. This indicates that the value of right-of-use assets can be subject to impairment if the underlying restaurants are not performing well. Franchisees should be aware of the potential for these write-offs, as they can affect the overall financial health of the company.
Furthermore, the document states that upon adopting ASC 842 - Leases, Checkers recognized an operating lease liability of $229.6 million and an operating right-of-use asset of $193.6 million on January 4, 2022. This adoption of new accounting standards had a significant impact on the company's balance sheet, highlighting the importance of staying informed about changes in accounting regulations and their potential effects on financial reporting.