How are Checkersrallys' contributions to CDSI accounted for in the consolidated financial statements?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Company are accounted for similarly to the fund. The
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.
The Company and its franchisees each pay charges based on volumes of products purchased from suppliers to Checkers and Rally's Distribution and Services, Inc. ("CDSI"), established for the purpose of providing procurement services and quality assurance support for the benefit of both Company-operated and franchised restaurants. During the fiscal year ended December 30, 2024 (Successor) and the period from June 17, 2023 through January 1, 2024 (Successor) and the period from January 3, 2023 through June 16, 2023 (Predecessor) only one member, representing 25% of the CDSI Board of Directors is an employee of the Company. CDSI is not included in the accompanying consolidated financial statements, although the company's contributions to CDSI are included within restaurant food and paper costs in the accompanying consolidated statements of operations.
The Company pays invoices on behalf of NPF and CDSI and then bills each for the balance of these invoices each period. As of December 30, 2024 (Successor), there was approximately $2.0 million and $1.0 million of accounts receivable due from the NPF and CDSI, respectively. As of January 1, 2024 (Successor), the accounts receivable due from the NPF and CDSI was approximately $2.6 million and $0.7 million, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Checkers and Rally's Distribution and Services, Inc. (CDSI) is established to provide procurement services and quality assurance support for both company-operated and franchised restaurants. Although CDSI is not included in the consolidated financial statements, Checkersrallys's contributions to CDSI are included within "restaurant food and paper costs" in the accompanying consolidated statements of operations.
Furthermore, Checkersrallys pays invoices on behalf of CDSI and then bills CDSI for the balance of these invoices each period. As of December 30, 2024, there was approximately $1.0 million of accounts receivable due from CDSI. As of January 1, 2024, the accounts receivable due from CDSI was approximately $0.7 million. These accounts receivable for CDSI are included in the accounts and notes receivable, net in the accompanying consolidated balance sheets.
For a prospective franchisee, this means that the costs associated with procurement services and quality assurance, which are paid to CDSI, are reflected in the "restaurant food and paper costs" section of Checkersrallys's financial statements. The accounts receivable from CDSI, resulting from Checkersrallys paying invoices on CDSI's behalf, are also recorded as assets on Checkersrallys's balance sheet.