What was the acquisition date for the Checkersrallys Out-of-Court Restructuring?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
deferrals due to cash received and other | | 439 | | 403 | | | Revenue recognized during the period | | (1,068) | | (858) | | | Deferred franchise fees at end of period | $ | 9,025 | $ | 9,654 | |
NOTE 4 - BUSINESS COMBINATION
Out-of-Court Restructuring
As discussed in Note 1. Description of Business, the Out-of-Court Restructuring agreement, executed on June 16, 2023 (the "restructuring date"), resulted in Topco acquiring all of the voting interests of Burger BossCo. As a result, Topco gained control of Burger BossCo and the transaction was determined to be a business combination in accordance with ASC 805 and is accounted for in accordance with the acquisition method of accounting. As the accounting acquirer, Topco will recognize the assets acquired and liabilities assumed at fair value as of the acquisition date. As an indirect subsidiary of the accounting acquirer, the Company has elected to apply pushdown accounting, whereby it will also recognize the assets acquired and liabilities assumed at fair value as of the acquisition date.
The total stock consideration w
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the Out-of-Court Restructuring agreement was executed on June 16, 2023. This agreement resulted in Topco acquiring all of the voting interests of Burger BossCo. Consequently, Topco gained control of Burger BossCo, and the transaction was classified as a business combination. This classification adheres to ASC 805 standards, which necessitates accounting for the transaction using the acquisition method. As the accounting acquirer, Topco is required to recognize the assets acquired and liabilities assumed at fair value as of the acquisition date.
Furthermore, as an indirect subsidiary of the accounting acquirer, Checkersrallys has elected to apply pushdown accounting. This accounting method requires Checkersrallys to also recognize the assets acquired and liabilities assumed at fair value as of the acquisition date, aligning its financial reporting with the new ownership structure. The total stock consideration for this acquisition amounted to $97.8 million, comprising 90 shares of Burger BossCo acquired by Topco. A third-party valuation specialist determined the fair value of the stock consideration using market and income approaches, with the results appropriately weighted to ensure an accurate valuation.
For a prospective Checkersrallys franchisee, understanding the implications of this Out-of-Court Restructuring is crucial. The change in ownership and the application of pushdown accounting mean that the financial statements of Checkersrallys before and after June 16, 2023, may not be directly comparable. This is because assets and liabilities were revalued to their fair values as of the acquisition date. Franchisees should pay close attention to how these changes affect key financial metrics and performance indicators. Additionally, the transaction costs associated with the restructuring, which totaled approximately $15.8 million, could have short-term impacts on the company's profitability and investment capacity. Therefore, franchisees should inquire about the long-term strategic plans and financial projections of the company under the new ownership to assess the potential benefits and risks associated with this restructuring.