How much in transaction costs did Checkersrallys recognize in connection with the Out-of-Court Restructuring?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ief from royalty and the income approach – multi-period excess earning method, respectively. The valuation of intangible assets was prepared by a third-party valuation specialist and incorporates significant unobservable inputs and requires significant judgment and estimates, including the amount and timing of future cash flows.
The Company recognized approximately $15.8 million of transactions costs in connection with the Out-of-Court Restructuring. Transaction costs incurred by the Predecessor during the period from January 3, 2023 to June 16, 2023 associated with the Out-of-Court Restructuring were approximately $15.6 million of which $3.7 million were contingent upon completion of the Out-of-Court Restructuring. Of the transaction costs incurred by the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company recognized approximately $15.8 million in transaction costs related to its Out-of-Court Restructuring. These costs were incurred by both the Predecessor and Successor entities during specific periods. The Predecessor, from January 3, 2023, to June 16, 2023, incurred approximately $15.6 million in transaction costs, with $3.7 million contingent upon the completion of the restructuring. Of the Predecessor's costs, $9.0 million became an assumed liability by the Successor at the closing of the restructuring. An additional $0.2 million in costs were incurred by the Successor and recorded by them. These transaction costs were recorded within general and administrative expenses on the Consolidated Statements of Operations.
For a prospective Checkersrallys franchisee, this information provides insight into the financial restructuring of the company. While these costs are not directly related to the operation of a franchise, they reflect the financial health and management decisions of the company. Understanding the context of these expenses can help a franchisee assess the stability and future prospects of the Checkersrallys brand. The fact that a portion of these costs were assumed by the Successor entity indicates a continuation of operations and a commitment to resolving the financial issues.
It's important to note that transaction-related expenses typically include advisory, legal, accounting, valuation, and other professional and consulting fees. These are one-time costs associated with the restructuring process and are expensed as incurred. Franchisees should focus on the ongoing financial performance of Checkersrallys, as reflected in other parts of the financial statements, to evaluate the long-term viability of the franchise system. Reviewing trends in revenue, profitability, and same-store sales can provide a more comprehensive picture of the company's financial health and its potential impact on franchise operations.