How does the semi-monthly royalty fee payment schedule for Checkers (Item 6) affect a franchisee's ability to reinvest in their business?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
WHEREAS, Franchisor has implemented an incentive program available to certain qualified franchisees that acquire and open new "Checkers" or "Rally's" restaurants or convert an existing restaurant to a "Checkers" or "Rally's" restaurant under which Franchisor offers qualified franchisees a temporary reduction on royalty fees and a reduction of initial franchise fees if the franchisee signs a Franchise Agreement on or before December 31, 2025 (the "2024 Growth Incentive" or "Incentive");
claims against us, and our Affiliates, officers, directors, employees, agents, successors and assigns.
- 6.02 Royalty Fees. You agree to pay us royalty fees of four percent (4%) of Net Sales, payable on or before the fifth (5th) and twentieth (20th) days of each calendar month with respect to the Net Sales accrued during the most recently ended Bi-weekly Period before the payment date.
- 6.03 Sublease Administrative Fee. If we agree to sublease the Premises of your Franchised Restaurant to you and remain on the master lease, then we will charge you a sublease administrative fee of up to 10% of the rent that remains due under the then-current lease term in consideration of our remaining a guarantor on the lease.
- 6.04 Interest On Late Payments. All amounts which you owe us or any of our Affil
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, franchisees are required to pay a royalty fee of 4% of Net Sales, which are payable on or before the 5th and 20th of each month. This payment schedule, described in Item 22, requires franchisees to make royalty payments twice per month, based on the Net Sales accrued during the bi-weekly period preceding the payment date. Additionally, franchisees may be required to contribute to the National Production Fund (NPF) up to 3% of Net Sales, also payable semi-monthly along with the royalty fees.
The semi-monthly payment schedule for royalties and potential NPF contributions means that Checkers franchisees must maintain a tighter cash flow management system compared to franchises with monthly or quarterly royalty payments. The frequent payments could strain a franchisee's immediate access to capital, potentially limiting the funds available for reinvestment in areas such as equipment upgrades, marketing initiatives, or staff training. This could slow down the potential for growth and improvements to the business.
However, the 2025 Growth Incentive offers a potential offset to these royalty obligations. If a franchisee signs a Franchise Agreement by December 30, 2025, opens the restaurant within 18 months, complies with reimaging requirements, and meets the Restaurant Net Positive criteria, Checkers will waive the royalty fee until the total value of the waived fees reaches $75,000 or the restaurant operates for 24 months. This incentive could provide significant financial relief during the initial operating period, freeing up capital for reinvestment and business development. Prospective franchisees should carefully consider the implications of the semi-monthly royalty payment schedule and explore opportunities to qualify for the Growth Incentive to mitigate potential cash flow constraints.