What is the estimated future amortization of goodwill for Checkersrallys for the fiscal year ending 2024?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
of $28.4 million during the period ended June 16, 2023 (Predecessor). There were no impairment losses recognized during the period ended January 1, 2024 (Successor) or the years en
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the estimated future amortization of goodwill for the fiscal year ending 2024 is $93 thousand. The document also provides estimates for subsequent years, with $93 thousand for 2025, $93 thousand for 2026, $95 thousand for 2027, $93 thousand for 2028, and $882 thousand thereafter, totaling $1,349 thousand overall.
Goodwill, as defined in the FDD, arises from the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Checkersrallys has elected to amortize this goodwill over a 10-year period using the straight-line method. This means that the value of goodwill is gradually expensed over this period, reflecting its diminishing contribution to the company's earnings.
For a prospective Checkersrallys franchisee, understanding goodwill amortization is crucial because it impacts the company's financial statements and, potentially, its profitability. While goodwill itself is not a tangible asset, its amortization affects the reported earnings. Franchisees should be aware of how goodwill is accounted for, as it can influence financial metrics used to assess the company's performance. Franchisees may want to inquire about the specific assumptions and calculations used to determine the amortization schedule and the potential impact of any future impairments to goodwill.
It's important to note that goodwill is subject to impairment testing, which means Checkersrallys assesses at the enterprise level whether the fair value of the company is less than its carrying amount. If impairment of goodwill is more likely than not, a quantitative test is required that compares the fair value of the Company with its carrying amount. If the carrying amount exceeds fair value, that amount represents the impairment loss to be recognized, up to the carrying amount of goodwill. Any significant impairment could negatively affect the company's financial position.