What is included in 'Franchise and retail royalty revenue' for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
"Franchise and retail royalty revenue" includes royalties on sales by franchised restaurants and sales of licensed products in retail stores. Royalties are based on a percentage of sales of the franchised restaurant and sales of licensed products in retail stores which are recognized as earned.
The Company recorded $0.1 million for the fiscal period ended January 1, 2024 (Successor), $0.1 million for the fiscal period ended June 16, 2023 (Predecessor), $0.5 million for the year ended January 2, 2023 (Predecessor), and $0.2 million for the year ended January 3, 2022 (Predecessor) of amortization expense on reacquired franchise rights. These amounts are included in "franchise and retail royalty revenue" in the accompanying consolidated statements of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the 'Franchise and retail royalty revenue' includes royalties from sales at franchised restaurants and sales of licensed products in retail stores. These royalties are calculated as a percentage of sales from both the franchised restaurants and the retail sales of licensed products, and they are recognized as revenue as they are earned. Additionally, amortization expense on reacquired franchise rights are included in 'franchise and retail royalty revenue'.
For a prospective Checkersrallys franchisee, this means that a portion of the revenue Checkersrallys recognizes comes directly from a percentage of their restaurant sales. This is a standard franchise royalty arrangement. The inclusion of retail royalties suggests Checkersrallys also earns revenue from products sold outside of traditional restaurant locations, potentially offering another revenue stream for the company.
The FDD also mentions that Checkersrallys monitors franchisees to ensure compliance with the franchise agreement and sublease terms. If a franchisee defaults, Checkersrallys closely monitors royalties to determine if they are collectible. If collectability is not reasonably assured, Checkersrallys will not recognize the related royalty revenue. This indicates that the reported royalty revenue is net of adjustments for potential uncollectible amounts, providing a more accurate representation of the revenue Checkersrallys expects to receive.