How does Checkers value its inventory of food and paper packaging?

According to Checkers' 2025 Franchise Disclosure Document, the company values its inventory, which includes food and paper packaging, at the lower of its cost or net realizable value. The cost is determined using the first-in, first-out (FIFO) method.

For a prospective Checkers franchisee, this means that the value of their inventory will be based on whichever is lower: the actual cost of the inventory or the estimated selling price less any costs associated with disposal. The FIFO method assumes that the first items purchased are the first ones sold. This is a common accounting practice in the restaurant industry, as it generally reflects the actual flow of goods and helps to prevent the inventory from becoming obsolete.

This valuation method can impact a franchisee's financial statements and, consequently, their reported profits. If the net realizable value of the inventory falls below its original cost (due to spoilage, obsolescence, or market price declines), Checkers requires the franchisee to write down the value of the inventory, which would decrease profits. Conversely, if inventory costs are rising, FIFO can result in a higher reported profit because the cost of goods sold will be based on the older, cheaper inventory costs. Franchisees should understand these accounting principles to accurately interpret their financial performance and manage their inventory effectively.