What was the restaurant occupancy expense for Checkers for the year ended January 3, 2022 (Predecessor)?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ff right-of-use operating lease assets in the amount of $2.9 million and $2.0 million in the period ended June 16, 2023 (Predecessor), and year ended January 2, 2023 (Predecessor), respectively. These impairment charges related to stores that were not profitable, and with investment, were not projected to be profitable.
Under ASC 840, Leases, lease expense was $23.4 million for the year ended January 3, 2022 (Predecessor) and is included in the "restaurant occupancy expense", "franchise support and services expenses", "general and administrative expenses" and "restaurant retirement costs" within the accompanying consolidated statement of operations.
(Tabular Dollars in Thousands, Except Share and per Share Data)
Certain leases contain contingent rental provisions based on percentages of gross sales if an established threshold is met. Contingent rent expenses are considered to be variable and are recognized once minimum sales volume is expected to be achieved. Contingent rent expense was not material for the periods ended January 1, 2024 (Successor), June 16, 2023 (Predecessor), January 3, 2023 (Predecessor), and January 3, 2022 (Predecessor).
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, restaurant occupancy expense for the year ended January 3, 2022 (Predecessor) was $1,417. However, it is important to note that under ASC 840, Leases, lease expense was $23.4 million for the year ended January 3, 2022 (Predecessor) and is included in the "restaurant occupancy expense", "franchise support and services expenses", "general and administrative expenses" and "restaurant retirement costs" within the accompanying consolidated statement of operations.
Restaurant occupancy expenses typically include costs related to leasing or renting the restaurant space. This can include base rent, property taxes, insurance, and maintenance costs. For franchisees, understanding the components of occupancy expenses is crucial for budgeting and financial planning. Occupancy costs are a significant expense for most restaurants, and can greatly impact profitability.
It's important to note that Checkers' lease expenses are accounted for under ASC 840, Leases, for the year ended January 3, 2022. This means that the reported restaurant occupancy expense may include other lease-related expenses beyond just the base rent. Prospective franchisees should carefully review the financial statements and related notes in the FDD to fully understand the composition of restaurant occupancy expenses and how they are accounted for. This will help them accurately project their own occupancy costs and assess the financial viability of a Checkers franchise.