Under what condition might Checkers require a security deposit from a franchisee?

According to Checkers's 2025 Franchise Disclosure Document, Checkers may require a security deposit from a franchisee if Checkers agrees to sublease the premises of the franchised restaurant to the franchisee. This security deposit is refundable, and the amount will depend on the security deposit Checkers pays to the landlord of the premises.

This means that if a prospective Checkers franchisee does not directly lease the restaurant location from the property owner, but instead subleases it from Checkers, Checkers might ask the franchisee to provide a security deposit. This deposit serves as a financial guarantee for Checkers, protecting them against potential damages or unpaid rent by the franchisee during the sublease term. The amount of the deposit is directly tied to what Checkers itself has to deposit with the primary landlord, ensuring they are not exposed to additional risk.

It is important to note that Checkers did not receive any security deposits from franchisees during their 2024 fiscal year. While this doesn't guarantee they won't require one in the future, it suggests that subleasing with a security deposit is not a common practice for Checkers. A prospective franchisee should discuss the likelihood and potential amount of a security deposit with Checkers during their due diligence process, especially if subleasing is being considered.

In addition to a security deposit, Checkers may also charge a sublease administrative fee. This fee, up to 10% of the remaining rent under the lease term, compensates Checkers for remaining a guarantor on the lease. This fee applies when a franchisee purchases an existing Checkers restaurant from Checkers or its affiliate and Checkers remains on the master lease.