Under its lease agreements, is Checkers obligated under noncancelable leases, primarily ground leases that in certain instances it also subleases to franchisees?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company leases real estate for the operation of its restaurants as well as acts as a sublessor for the operation of certain franchised restaurants. As lessee, the Company is obligated under several noncancelable leases, primarily 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, Leases. 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Checkers leases real estate for its restaurant operations and acts as a sublessor for certain franchised restaurants. Checkers is obligated under several noncancelable leases, primarily ground leases, which in some instances, it subleases to franchisees. These leases are accounted for in accordance with ASC 842, Leases.
Checkers typically leases land and buildings under agreements with terms of 10 to 30 years, including potential renewal options that Checkers deems reasonably certain to be exercised. These leases are evaluated to determine if they should be classified as operating or finance leases. Checkers has elected to treat lease and non-lease components as a single lease component for all underlying asset classes.
The leases generally require Checkers to cover costs related to property taxes, insurance, and maintenance. These costs are evaluated to determine if they are fixed or variable. Fixed costs are included in the calculation of the lease liability and are recognized on a straight-line basis over the lease term. These costs are reflected in line items such as restaurant occupancy costs, franchise support and services expenses, general and administrative expenses, and restaurant retirement costs within the consolidated statement of operations.