What are the specific obligations of a Checkers franchisee regarding the purchase of goods, services, and supplies, as detailed in Item 8?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES**
Generally
To ensure that high and uniform standards of quality and service are maintained, you are required to operate your Franchised Restaurant in strict conformity with our methods, standards and specifications and you are required to purchase goods, services, supplies, fixtures, equipment and inventory only from suppliers we have approved. You are not required to purchase or lease anything from us or any of our affiliates; however, we and our affiliates can be approved suppliers for items. Currently, we are not an approved supplier for any items except that we may from time to time sell used modular restaurants and restaurant equipment to Checkers and Rally's franchisees. We estimate the initial cost of all of required purchases and leases of goods, services, supplies, fixtures, equipment and inventory to be in excess of 95% of your total initial investment (see Item 7). We estimate the ongoing cost of these required purchases and leases to be in excess of 95% of your total ongoing operating expenses.
We may formulate and modify, at our sole discretion, specifications and standards we impose on franchisees and suppliers. Specifications and standards are issued to franchisees through the Operations Manual (defined below) and to suppliers by written notice. The "Operations Manual" is our confidential operations manual, as we may amend at any time, which may consist of one or more manuals or communications, containing our mandatory and suggested standards, specifications and operating procedures relating to the development and operation of Restaurants and other information relating to your obligations as a franchisee and operator of a Restaurant. The term "Operations Manual" also includes all instructions or communications we or our representatives may transmit to you or a substantial number of franchisees, whether in writing or through other media, concerning aspects or modifications to the System, standards, specifications and operating procedures, including bulletins, emails, limited access intranet sites, videotapes, audio tapes, or any other electronic medium. We attempt to negotiate purchase arrangements with suppliers (including price terms) for the benefit of all Restaurants, including those owned by franchisees. We do not provide material benefits (e.g., renewal or additional franchises) to a franchisee based on his use of designated or approved suppliers.
There are no franchisee purchasing or distribution cooperatives.
None of our officers own an interest in any privately-held suppliers, or a material interest in any publicly-held suppliers, of the Checkers or Rally's franchise systems. From time to time, our officers may own non-material interests in publicly-held companies that may be suppliers (or have subsidiaries that may be suppliers) to Restaurants; however, we have an internal "Conflict of Interest Policy" that prohibits officers and employees from using our property, position, or information for improper and unusual personal gain.
Items We Supply or Derive Revenue From
We and our affiliates may receive revenues from required purchases and leases of products and services by franchisees. The revenues are collected by approved suppliers or distribution centers on behalf of the system and are paid to us. Our total revenues for the fiscal year which ended December 30, 2024 were $300,381,238 of which $6,189,551 or 2.1% were revenues from required purchases and leases of products and services by franchisees. Our total revenue from franchisee purchases includes $2,225,520 in gross revenue from subleases with franchisees. We generally collect rent as a pass through for landlords on the underlying lease but may earn a profit. We did not earn any profit from subleases during our 2024 fiscal year. Our intention is not to earn a profit, but instead to use all revenues collected from franchisee and company-owned restaurant purchases of products and services to offset expenses we incur in administering system-wide programs such as people, guest and operations programs, insurance procurement, promotional and price management tools, supply chain programs, brand protection (including quality assurance and food safety) programs and research and development. However, we may earn a profit from franchisees' required purchases and leases of products and services.
Our affiliate, CDSI, also earned $7,890,469.14 in gross revenue from required purchases and leases of products and services by franchisees during our 2024 fiscal year.
Other than CDSI, none of our affiliates derived any revenue or other material considerations from required franchisee
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, Item 8 outlines a franchisee's obligations regarding the purchase of goods, services, and supplies. To maintain consistent quality and service standards, franchisees must operate their restaurants according to Checkers's methods, standards, and specifications. This includes purchasing goods, services, supplies, fixtures, equipment, and inventory exclusively from suppliers approved by Checkers.
While franchisees are not required to purchase or lease anything directly from Checkers or its affiliates, these entities can be approved suppliers. Checkers may modify the specifications and standards imposed on franchisees and suppliers, communicating these changes through the Operations Manual or written notices. The Operations Manual includes mandatory and suggested standards, specifications, operating procedures, and other information related to the franchisee's obligations. Checkers also attempts to negotiate purchase arrangements, including price terms, with suppliers for the benefit of all restaurants.
Item 8 also states that Checkers and its affiliates may receive revenues from required purchases and leases of products and services by franchisees. These revenues are collected by approved suppliers or distribution centers and paid to Checkers. For the fiscal year ended December 30, 2024, Checkers's total revenues were $300,381,238, with $6,189,551 (2.1%) coming from franchisee purchases and leases. This includes $2,225,520 in gross revenue from subleases with franchisees. Checkers states that it intends to use these revenues to offset expenses related to system-wide programs, though they may earn a profit from these purchases and leases. Additionally, Checkers's affiliate, CDSI, earned $7,890,469.14 in gross revenue from required purchases and leases of products and services by franchisees during the 2024 fiscal year.
Prospective franchisees should note that the initial and ongoing costs of these required purchases and leases are estimated to be significant, exceeding 95% of the total initial investment and ongoing operating expenses, respectively. This highlights the importance of carefully evaluating the approved supplier list and understanding the potential costs associated with these requirements. Franchisees should also inquire about the criteria for supplier approval and the process for suggesting new suppliers to Checkers.