What terms, or renewable terms, does Checkers sublease land and buildings associated with the sale of certain Company-operated restaurants?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company subleases land and buildings associated with the sale of certain Company-operated restaurants with terms of, or renewable to, 10 to 15 years with no option to purchase. The Company determines the sublease term by assuming exercise of renewal options that are reasonably certain to be exercised. The Company continues to be responsible for the rent payments to the original lessors. The subleases are evaluated for classification as operating, direct financing or sales-type leases. The Company has elected the practical expedient to account for lease components and non-lease components as a single lease component for all underlying classes of assets. The subleases generally obligate the sublessee to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers subleases land and buildings associated with the sale of certain company-operated restaurants. These subleases have terms of, or are renewable to, 10 to 15 years. There is no option for the sublessee to purchase the property. Checkers determines the sublease term by assuming that renewal options that are reasonably certain to be exercised will be.
Checkers remains responsible for the rent payments to the original lessors, even when subleasing to a franchisee. The subleases are evaluated to determine if they should be classified as operating, direct financing, or sales-type leases. Checkers accounts for lease and non-lease components as a single unit.
The sublessee is generally obligated to cover costs related to property taxes, insurance, and maintenance, which are considered variable costs. Sublease rental income is recorded as "franchise fees and other income" on the company's consolidated statements of operations.