Under what circumstances does Checkers assess definite-lived intangibles for impairment?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
Definite-lived intangible assets, principally franchise agreements are amortized on a straight-line basis over their estimated useful lives of 15 years (see Note 11. Goodwill and Intangible Assets, Net). The Company assesses definite-live intangibles for impairment on an annual basis, or upon the existence of events or conditions which indicate that the asset may not be recoverable.
The Company determined that the Out-of-Court Restructuring, was an event which indicated that these assets may not be recoverable. Accordingly, as of June 16, 2023 (Predecessor), the Company performed an impairment assessment for its definite-lived assets, indefinite-lived intangible assets, lease ROU assets, property and equipment, which resulted in an impairment. Refer to Notes 8, 10, 11 and 16 for further discussion.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company assesses definite-lived intangibles for impairment on an annual basis. These assets, primarily franchise agreements, are amortized using the straight-line method over their estimated useful lives, which is 15 years.
In addition to the annual assessment, Checkers also evaluates definite-lived intangibles for impairment whenever events or conditions suggest that the asset may not be recoverable. This means that if there are significant changes or circumstances that indicate the value of the franchise agreement has decreased, Checkers will perform an impairment assessment to determine if the asset's carrying value needs to be adjusted.
For instance, the FDD notes that the Out-of-Court Restructuring was an event that indicated that these assets may not be recoverable. Accordingly, as of June 16, 2023, Checkers performed an impairment assessment for its definite-lived assets, indefinite-lived intangible assets, lease ROU assets, property, and equipment, which resulted in an impairment. This demonstrates that significant financial events can trigger an immediate review of asset values.
For a prospective franchisee, this means that the value of their franchise agreement, a definite-lived intangible asset, is regularly reviewed by Checkers. While the standard amortization period is 15 years, events that negatively impact the business could lead to an earlier impairment, affecting the asset's book value on Checkers' financial statements.