How are transfer fees handled by Checkers when a franchisee sells to another franchisee?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise fees and area development fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. Transfer fees are fees for selecting pre-approved buyers for franchisee-to-franchisee sales of restaurants. The transfer fees are paid by the new franchisee, deferred when received, and recognized as revenue over the contractual term of the new franchise agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, transfer fees are charged when an existing franchisee sells their restaurant to a new, pre-approved franchisee. These fees are the responsibility of the incoming franchisee. Checkers recognizes this revenue over the term of the new franchise agreement. This accounting practice means that Checkers doesn't immediately recognize the entire transfer fee as income. Instead, it spreads the recognition out over the life of the franchise agreement.
For a prospective Checkers franchisee, this means that if you are buying an existing franchise from another franchisee, you will be responsible for paying a transfer fee to Checkers. This fee compensates Checkers for approving you as the new franchisee and for the continuation of the franchise agreement. The fee is not a one-time payment fully recognized by Checkers upon the transfer; rather, it is treated as deferred revenue and recognized over the term of the franchise agreement.
This approach is fairly standard in the franchise industry, as it aligns the franchisor's revenue recognition with the ongoing support and brand usage provided to the franchisee. It's important for prospective franchisees to understand that this transfer fee is in addition to any purchase price negotiated with the existing franchisee for the restaurant's assets and goodwill. Understanding the amount of the transfer fee and the terms of the franchise agreement is crucial for assessing the overall financial viability of purchasing an existing Checkers franchise.