What letter of credit participation fee was Checkersrallys obligated to pay under the terms of the Revolver?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
In accordance with the terms of the Revolver, the Company was obligated to pay quarterly fees on the unused portion of the facility at a rate of 0.50% per annum on the average daily amount of unused revolving credit commitments. The Company was also obligated to pay a letter of credit participation fee on the aggregate stated amount of each letter of credit available to be drawn equal to the applicable margin for LIBOR rate loans.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company was obligated to pay a letter of credit participation fee. This fee was calculated on the aggregate stated amount of each letter of credit available to be drawn. The fee amount was equal to the applicable margin for LIBOR rate loans.
In simpler terms, Checkersrallys had to pay a fee for each letter of credit they could use. The amount of this fee was tied to the LIBOR rate, which is a benchmark interest rate. The specific percentage or amount of this margin isn't detailed, but it's linked to the LIBOR rate for loans.
For a prospective franchisee, this means that Checkersrallys's financial obligations included fees related to their credit arrangements. While the exact amount of the letter of credit participation fee isn't specified, it's important to understand that such fees exist and are tied to prevailing interest rates. Franchisees should consider these types of financial obligations when assessing the overall financial health and stability of Checkersrallys.