For Checkersrallys, what costs are sublessees generally obligated to pay under the sublease agreements?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company subleases land and buildings associated with the sale of certain Company-operated restaurants with terms of, or renewable to, 10 to 15 years with no option to purchase. The Company determines the sublease term by assuming exercise of renewal options that are reasonably certain to be exercised. The Company continues to be responsible for the rent payments to the original lessors. The subleases are evaluated for classification as operating, direct financing or sales-type leases. The Company has elected the practical expedient to account for lease components and non-lease components as a single lease component for all underlying classes of assets. The subleases generally obligate the sublessee to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, when Checkersrallys subleases land and buildings associated with the sale of certain company-operated restaurants, the sublessee is generally obligated to cover costs associated with property taxes, insurance, and maintenance. These costs are considered variable.
This means that as a Checkersrallys franchisee operating under a sublease agreement, you will likely be responsible for paying property taxes, insurance premiums, and maintenance expenses for the property. These costs can fluctuate, as they are considered variable, and can impact your overall operating expenses.
It's important to note that Checkersrallys remains responsible for the original rent payments to the original lessors, even when subleasing to a franchisee. This arrangement is typical in franchise subleasing, where the franchisor maintains the primary lease and the franchisee operates under a sublease. Prospective franchisees should carefully review the sublease agreement to fully understand their financial obligations and how these variable costs are determined and adjusted.