Did the impairment tests performed by Checkersrallys in 2022 and 2021 result in any impairment charges?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
In 2022 and 2021, the Company performed impairment tests of the brands intangible assets by completing a quantitative assessment at the enterprise level which relied upon unobservable inputs (Level 3) as of September 12, 2022, and September 6, 2021, respectively. The impairment tests did not result in any necessary impairment charges and, therefore, no impairment charges were recognized in 2022 and 2021.
As noted in Note 1 due to the Out-of-Court Restructuring the Company compared the fair value of the asset with its carrying amount and recognized an impairment in the Predecessor period of 2023 as noted within Note 11. As the brands intangible asset and goodwill were recognized at fair value as part of the Out-of-Court Restructuring, the Company subsequently performed a
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the impairment tests conducted in 2022 and 2021 did not lead to any impairment charges. The company performed these tests on the brands' intangible assets, utilizing a quantitative assessment at the enterprise level. This assessment relied on unobservable inputs as of September 12, 2022, and September 6, 2021.
However, the document also notes that due to an Out-of-Court Restructuring, Checkersrallys compared the fair value of its assets with their carrying amount and recognized an impairment in the Predecessor period of 2023. Following this restructuring, the brand's intangible assets and goodwill were recognized at fair value, leading to subsequent qualitative assessments to determine potential impairment as of the first day of the last fiscal quarter of the fiscal year (Successor).
While the impairment tests in 2022 and 2021 resulted in no charges, prospective franchisees should be aware of the factors that can trigger impairment tests, such as under-performance, industry trends, and economic conditions. Understanding how Checkersrallys assesses and manages its assets is crucial for evaluating the financial health and stability of the franchise system.