What comprised the total accounts receivable for Checkersrallys as of December 30, 2024?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
-------------------------------|----|-------|----|-----------|----|-------| | | Gross | | Allowance | | Net | | Gross | | Allowance | | Net | | Total accounts | $ 8,372 | $ | (655) | $ | 7,717 | $ | 7,913 | $ | (514) | $ | 7,399 | | receivables | | | | | | | | | | | |
Accounts receivable is primarily comprised of franchise royalties, franchise fees, sublease rents, delivery sales receivables, and retail royalties. The Company recognizes an allowance for credit losses based on historical collection experience and on a specific identification basis based upon past due balances and the financial strength of the obligor. The Company monitors that franchisees remain in compliance with all terms of the franchise agreement and sublease, when applicable, and when a franchisee is not in compliance, they are placed in default status. When a franchisee is placed in default status, the Company closely monitors royalties accruing on franchisee sales in order to determine if collectability is reasonably assured. If we determine that certain amounts are not probable of collection, we do not recognize the related royalty revenue. The Company writes off the related accounts receivable when it is determined that they are uncollectible.
Credit losses are recorded in general and administrative expenses in the accompanying consolidated statements of operations. The Company had credit losses of $0.6 million, $0.1 million, and $0.1 million for the fiscal year ended December 30, 2024 (Successor), and for the periods from June 17, 2023 through January 1, 2024 (Successor) and from January 3, 2023 through June 16, 2023 (Predecessor), respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - FAIR VALUE MEASUREMENTS
From time to time, we measure certain non-financial assets at fair value on a non-recurring basis in connection with evaluating long-lived assets for impairment.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, accounts receivable primarily consist of franchise royalties, franchise fees, sublease rents, delivery sales receivables, and retail royalties. As of December 30, 2024, the gross total accounts receivable was $8,372, with an allowance for credit losses of $655, resulting in a net total of $7,717.
Checkersrallys recognizes an allowance for credit losses based on historical collection experience and a specific identification basis, considering past due balances and the financial strength of the obligor. The company actively monitors franchisees' compliance with franchise agreements and subleases, placing non-compliant franchisees in default status. Royalties accruing on sales from franchisees in default are closely monitored to determine if collectability is reasonably assured. If collection is deemed improbable, the related royalty revenue is not recognized.
Credit losses are recorded as general and administrative expenses. For the fiscal year ended December 30, 2024, Checkersrallys had credit losses of $0.6 million. This indicates the level of risk Checkersrallys is willing to take. The company writes off accounts receivable when they are determined to be uncollectible. Prospective franchisees should inquire about the typical default rates and collection practices to fully understand the financial implications.