Due to the Out-of-Court Restructuring, what happened to Checkersrallys' basis in tax attributes (NOLs and credits)?

According to Checkersrallys's 2025 Franchise Disclosure Document, due to the Out-of-Court Restructuring, the company reduced its basis in tax attributes, including net operating losses (NOLs) and credits, to zero. This means that Checkersrallys cannot use these previously accumulated losses and credits to offset future taxable income, which could increase their tax liability. As of January 2, 2023 (Predecessor), the company had approximately $42.9 million of federal NOLs, approximately $0.1 million of federal alternative minimum tax credit carryforwards and approximately $3.8 million of federal employment credits available to be utilized.

For a prospective franchisee, this has no direct impact on their individual franchise's tax situation. However, it reflects the financial challenges Checkersrallys faced and how the restructuring impacted its corporate tax position. The inability to utilize these tax attributes could affect Checkersrallys's overall profitability and financial strategy, which indirectly could influence the resources and support available to franchisees.

Additionally, the FDD notes that due to the Out-of-Court restructuring, there is no tax-deductible goodwill. Goodwill typically arises from acquisitions and can be amortized for tax purposes, providing a deduction. The absence of tax-deductible goodwill further limits Checkersrallys's ability to reduce its taxable income. Franchisees should be aware of these factors as they assess the financial health and stability of the Checkersrallys organization.