What is the interest rate Checkersrallys can pay in kind for the Last-Out Term Loans?

According to Checkersrallys's 2025 Franchise Disclosure Document, the Last-Out Term Loans, which mature on June 16, 2028, accrue interest at a floating rate. Checkersrallys has the option to determine the interest rate, which can be either an alternative base rate plus 8% per annum, or the Adjusted Term Secured Overnight Financing Rate plus 9% per annum, plus a credit adjustment spread.

Checkersrallys has the option to pay the interest in kind, rather than in cash, at a rate of 6% per annum. This means that instead of paying the interest in cash, the company can add the accrued interest to the principal amount of the loan, effectively borrowing the interest payment.

For a prospective franchisee, this indicates that Checkersrallys has some flexibility in managing its debt obligations. The ability to pay interest in kind could be beneficial in managing cash flow, especially during periods of financial difficulty. However, it's important to note that capitalizing interest increases the overall debt burden and could lead to higher interest expenses in the long run. Franchisees should consider this aspect when evaluating the financial stability of Checkersrallys.