As of January 1, 2024, what was the net amount of favorable leasehold interests for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 21: FINANCIAL STATEMENTS]
As part of the Out-of-Court Restructuring, which was accounted for a business combination, the Company recognized "favorable leasehold interests" and "unfavorable leasehold interests" at fair value.
For the period from June 17, 2023 to January 1, 2024 (Successor), no "favorable leasehold interests" or "unfavorable leasehold interests" were derecognized as no associated leases were terminated.
Leasehold interests have definite lives and are amortized on a straight-line basis over the remaining lease term including any optional renewal periods that are likely to be exercised. The average amortization period for leasehold interests as of January 1, 2024 (Successor) was 11.1 years. The Company recognized amortization expense, net of revenue, of $0.2 million, $0.1 million, $0.2 million, and ($0.9) million for the periods ended January 1, 2024 (Successor), June 16, 2023 (Predecessor), January 2, 2023 (Predecessor), and January 3, 2022 (Predecessor), respectively. These amounts were recorded in the consolidated statements of operations as shown below.
(Tabular Dollars in Thousands, Except Share and per Share Data)
[Item 21: FINANCIAL STATEMENTS]
(Tabular Dollars in Thousands, Except Share and per Share Data)
12. Leasehold Interests, Net
"Leasehold interests, net" consisted of the following as of January 1, 2024 (Successor) and January 2, 2023 (Predecessor):
Favorable leasehold interests Unfavorable leasehold interests Total amortizable intangible leasehold interests
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys' 2025 Franchise Disclosure Document, the company recognized favorable and unfavorable leasehold interests as part of an Out-of-Court Restructuring, accounted for as a business combination. The document states that as of January 1, 2024, the company had favorable leasehold interests and unfavorable leasehold interests.
The FDD indicates that leasehold interests are amortized over the remaining lease term, including any likely renewal periods. As of January 1, 2024, the average amortization period for these interests was 11.1 years. For the period ending January 1, 2024, Checkersrallys recognized amortization expense, net of revenue, of $0.2 million.
While the FDD mentions the existence of both favorable and unfavorable leasehold interests as of January 1, 2024, it does not provide the specific net amount. A prospective franchisee should inquire with Checkersrallys about the exact value of these leasehold interests to gain a clearer understanding of the company's financial position related to its leases.