What is the amortization method used for Checkersrallys' leasehold interests?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
r a business combination, the Company recognized "favorable leasehold interests" and "unfavorable leasehold interests" at fair value.
For the period from June 17, 2023 to January 1, 2024 (Successor), no "favorable leasehold interests" or "unfavorable leasehold interests" were derecognized as no associated leases were terminated.
Leasehold interests have definite lives and are amortized on a straight-line basis over the remaining lease term including any optional renewal periods that are likely to be exercised. The average amortization period for leasehold interests as of January 1, 2024 (Successor) was 11.1 years. The Company recognized amortization expens
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, leasehold interests are amortized using the straight-line method. This amortization occurs over the remaining lease term, which includes any optional renewal periods that are likely to be exercised. As of January 1, 2024, the average amortization period for leasehold interests was 11.1 years.
For a prospective Checkersrallys franchisee, understanding the amortization of leasehold interests is crucial because it impacts the financial statements of the business. Amortization expense, net of revenue, was $0.2 million for the period ended January 1, 2024 (Successor), $0.1 million for the period ended June 16, 2023 (Predecessor), $0.2 million for the period ended January 2, 2023 (Predecessor), and ($0.9) million for the period ended January 3, 2022 (Predecessor).
The straight-line method means that the cost of the leasehold improvements is evenly spread out over the life of the lease. This provides a consistent expense each period, simplifying financial forecasting. The specific amounts recognized were recorded in the consolidated statements of operations.
It is important to note that the company's accounting policies and estimates, including those related to lease terms and renewal options, can significantly impact the reported amortization expense. Prospective franchisees should carefully review these policies and consider how they might affect their individual financial situation.