How does Checkersrallys compute depreciation for property and equipment?

According to Checkersrallys's 2025 Franchise Disclosure Document, depreciation for property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. For leasehold improvements, Checkersrallys depreciates them over the shorter of their estimated useful lives, which are generally 10 years, or the remaining term of the lease.

For prospective franchisees, this means that the cost of property and equipment will be spread evenly over their useful life, which impacts the annual financial statements. For example, if a piece of equipment costs $10,000 and has a useful life of 5 years, the annual depreciation expense would be $2,000. Leasehold improvements are treated similarly, but the depreciation period cannot exceed 10 years or the lease term, whichever is shorter. This is a common practice in the franchise industry, as it accurately reflects the consumption of the asset over time.

Additionally, the FDD notes that property and equipment were recorded at fair value in connection with the Merger for the Predecessor periods and in connection with the Out-of-Court Restructuring for the Successor period and are otherwise recorded at cost. Expenditures for betterments are capitalized, while maintenance and repairs are expensed as incurred. This means that significant improvements to the property are added to the asset's value and depreciated, while regular upkeep costs are treated as immediate expenses. Understanding these accounting practices is crucial for franchisees to accurately assess their financial performance and manage their assets effectively.