How much did Checkersrallys pay for lenders' costs as part of issuing the New Money Loans?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
rate that equals, at the Company's option, 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 with the option to pay interest at a rate equal to 6% per annum in kind rather than in cash.
As part of issuing the New Money Loans, the Company funded $10 million out of the total $25 million commitment, Additionally, the Company was required to pay lenders' costs of $1.3 million. Accordingly, the Company allocated financing costs proportionally to the funded component and the unfunded component. The portion allocated to the funded balance is recorded as a reduction to long-term debt and the portion allocated to the unfunded balance is recorded as deferred financing cost asset. As of
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, as part of issuing the New Money Loans, Checkersrallys was required to pay lenders' costs of $1.3 million. Of the total $25 million commitment for the New Money Loans, Checkersrallys funded $10 million. Consequently, Checkersrallys allocated the $1.3 million financing costs proportionally between the funded and unfunded portions of the loan.
The portion of the financing costs allocated to the funded balance was recorded as a reduction to long-term debt. The remaining portion, allocated to the unfunded balance, was recorded as a deferred financing cost asset. As of December 30, 2024, and January 1, 2024, the balance of these deferred financing costs associated with the unfunded balance was $0.5 million and $0.6 million, respectively.
For a prospective franchisee, this indicates that Checkersrallys incurs significant costs when securing financing, which are then reflected in their financial statements. The allocation of these costs impacts the company's reported long-term debt and assets. While this information does not directly affect the franchisee's initial investment, it provides insight into the financial management and obligations of Checkersrallys as a company.