Under what agreement terms does Checkers generally lease land and buildings?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
rily ground leases that in certain instances it also subleases to franchisees. The Company accounts for leases as both a lessee and a lessor in accordance with ASC 842, Lease. For details on the Company's adoption of ASC 842, Leases and the related policy elections refer to Note 2.
Company as Lessee
The Company leases land and buildings generally under agreements with terms of, or renewable to, 10 to 30 years. The Company determines the lease term by assuming exercise of renewal options that are reasonably certain to be exercised. The leases are evaluated for classification as operating or finance 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 leases generally obligate the Company to pay for costs associated with property taxes, insurance and maintenance and are evaluated by the Company as fixed or variable in nature. If it is concluded that they are fixed, they are included in the calculation of the lease liability. Fixed lease costs for operating lease payments are recognized on a straight-line basis over the lease term and are included in the restaurant occupancy costs, franchise support and services expenses, general and administrative expenses and restaurant retirement costs line items within the accompanying consolidated statement of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table provides quantitative information concerning the Company's leases under ASC 842, Leases.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers leases land and buildings generally under agreements with terms of, or renewable to, 10 to 30 years. Checkers determines the lease term by assuming exercise of renewal options that are reasonably certain to be exercised. These leases are then classified as either operating or finance leases.
Checkers has elected a practical approach to account for lease and non-lease components as a single unit. Typically, Checkers is obligated to cover costs related to property taxes, insurance, and maintenance, which are evaluated as either fixed or variable. Fixed costs are included in the calculation of the lease liability. Operating lease payments that are fixed are recognized on a straight-line basis over the lease term. These costs are reflected in various line items within the consolidated statement of operations, such as restaurant occupancy costs, franchise support and services expenses, general and administrative expenses, and restaurant retirement costs.
Furthermore, Checkers subleases land and buildings associated with the sale of certain company-operated restaurants, with sublease terms of, or renewable to, 10 to 15 years, and there is no option to purchase. Checkers 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 sublessees generally pay for costs associated with property taxes, insurance, and maintenance costs, which are considered variable.