For Checkersrallys, what is the criteria for consolidating advertising co-ops in the financial statements?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Additionally, certain Company-operated restaurants and franchisees participate in advertising co-ops. The Company consolidates advertising co-ops for which it is determined to control on the basis of voting interests, and does not consolidate advertising co-ops it does not control. Co-ops not controlled by the Company are accounted for similarly to the fund. The 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company consolidates advertising co-ops in its financial statements based on control. Specifically, Checkersrallys consolidates advertising co-ops for which it has determined it has control based on voting interests. Conversely, Checkersrallys does not consolidate advertising co-ops that it does not control.
For a prospective franchisee, this means that if a local advertising co-op is managed in such a way that Checkersrallys has the majority of the voting interests, its financial activity will be included in Checkersrallys's overall financial statements. If Checkersrallys does not maintain control, the co-op's financials are accounted for separately, similar to the National Production Fund (NPF).
The FDD also notes that contributions to the NPF are 0.5% of net restaurant sales, while contributions to advertising co-ops range from 0.5% to 4.25% of net restaurant sales. This indicates that advertising co-ops can represent a more significant portion of a franchisee's sales compared to the NPF, making the control and consolidation criteria relevant to understanding the financial structure.