Within how many days of billing are franchisee-related accounts receivable due to Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
d to certain letters of credit and debt arrangements and are presented within cash and cash equivalents on the consolidated balance sheets. Restricted cash balances as of January 1, 2024 (Successor) and January 2, 2023 (Predecessor) were $2.6 million and $0.4 million respectively.
Accounts and Notes Receivable, Net
Receivables consist primarily of royalties, rents, franchise fees and notes due from franchisees and are recorded net of an allowance for credit losses. Franchisee related accounts receivable are due within 10 days of billing and in some instances we draw the funds directly from the franchisee's bank account on a predetermined day. Although the Company maintains an allowance for credit loss, the majority of the balance relates to specific accounts where collection is not expected. The reserves are established using the specific identification method based on our best estimate of the collectible balance. When determining collectability, we evaluate the debtor's financial condition, the historical experience with the debtor, and the pledged security interest value, if any.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, franchisee-related accounts receivable are due within 10 days of billing. This means that a Checkers franchisee is expected to pay royalties, rent, and franchise fees within ten days of receiving the bill from Checkers. In some instances, Checkers may directly draw funds from the franchisee's bank account on a predetermined day.
This quick turnaround time is important for prospective franchisees to consider. They will need to ensure they have sufficient cash flow to meet these payment obligations promptly. Failing to pay within the stipulated timeframe could lead to penalties, default status, or even termination of the franchise agreement.
Checkers monitors franchisees to ensure compliance with the franchise agreement and sublease terms. If a franchisee fails to comply, they are placed in default status, and Checkers closely monitors royalties accruing on franchisee sales to determine if collection is reasonably assured. If Checkers determines that certain amounts are not probable of collection, they do not recognize the related royalty revenue and will write off the related accounts receivable when it is determined that they are uncollectible.
It is also worth noting that Checkers has traditionally experienced a high rate of collection, which they attribute to the security interest they hold in the assets of the business when a sublease is in place or through a personal guarantee of the franchisee. This suggests that Checkers takes active measures to ensure timely payments and minimize credit losses.