What restrictions were imposed on Checkers under the Senior Credit Facility's restrictive covenants?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company was subject to several restrictive financial and nonfinancial covenants under the Senior Credit Facility which imposed certain restrictions on us, including restrictions on our ability to incur debt or provide guarantees; grant or suffer to existing liens; sell our assets; prepay certain indebtedness; make loans, advances, investments, and acquisitions; change our line of business; and a total leverage ratio financial covenant measured quarterly that steps down through the term of the agreement. The Second Amendment to the Restated Credit Agreements amended the total leverage ratio financial covenant based on quarterly test periods applied beginning March 22, 2021, which is the last day of the first fiscal quarter of 2021, through April 25, 2024, the maturity date of the First Lien.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company was subject to restrictive covenants under its Senior Credit Facility. These covenants placed limitations on Checkers' operational and financial activities.
Specifically, Checkers faced restrictions on its ability to incur additional debt or provide guarantees, grant or allow existing liens, sell assets, prepay certain debts, make loans, advances, investments, and acquisitions, and change its line of business. Additionally, Checkers was subject to a total leverage ratio financial covenant, which was measured quarterly and adjusted throughout the agreement's term. The Second Amendment to the Restated Credit Agreements modified this leverage ratio based on quarterly test periods, starting March 22, 2021, and lasting through April 25, 2024, which was the maturity date of the First Lien.
For a prospective franchisee, these restrictions on Checkers could mean a more cautious approach to growth and investment decisions. It may also signal a period of financial constraint or restructuring, as evidenced by the March 2023 default where Checkers failed to make a required interest payment, leading to a forbearance agreement and eventual out-of-court restructuring. Understanding these financial limitations is crucial for franchisees, as it could impact the support and resources Checkers can provide.