What was the variable lease cost for Checkers for the year ended January 2, 2023?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
ministrative expenses" and "restaurant retirement costs" within the accompanying consolidated statement of operations.
(Tabular Dollars in Thousands, Except Share and per Share Data)
The following table provides quantitative information concerning the Company's leases under ASC 842, Leases.
| For the Periods | For the Year Ended | |||||
|---|---|---|---|---|---|---|
| June 17, 2023 through January 1, 2024 (Successor) | January 3, 2023 through June 16, 2023 (Predecessor) | January 2, 2023 (Predecessor) | ||||
| Finance lease cost | $ |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the variable lease cost for the year ended January 2, 2023 (Predecessor) was $2,333. Variable lease costs can fluctuate based on factors like a percentage of gross sales exceeding a certain threshold. These costs are recognized once the minimum sales volume is expected to be achieved.
Understanding variable lease costs is crucial for prospective Checkers franchisees as it directly impacts their operating expenses. Unlike fixed lease costs, which remain constant, variable lease costs can change based on the restaurant's performance. This means that during periods of high sales, franchisees may incur higher lease expenses, while during slower periods, these expenses may decrease.
Checkers' approach to classifying and accounting for leases follows accounting standards, ensuring transparency in financial reporting. Franchisees should carefully review the lease agreements and understand the terms related to variable rent, including any sales thresholds or percentages that may apply. This will help them accurately forecast their expenses and manage their restaurant's profitability.
While contingent rent expenses were deemed not material for the periods mentioned in the FDD, it's essential for potential franchisees to discuss and clarify all aspects of lease agreements with Checkers to fully understand their financial obligations and potential variability in lease costs.