What obligations does Checkersrallys have under the Allocation Agreement?

According to Checkersrallys's 2025 Franchise Disclosure Document, the company entered into an intercompany Allocation Agreement with Holdings on October 12, 2018. Under this agreement, Checkersrallys jointly and severally unconditionally guarantees the payment and performance of obligations related to the 2017 Senior Credit Facility. This means Checkersrallys is responsible for ensuring all obligations under the credit facility are met. These obligations encompass all payments, whether for principal, interest, or any other charges associated with the 2017 Senior Credit Facility.

In practical terms, this Allocation Agreement places a significant financial responsibility on Checkersrallys. The company is bound to cover any shortfalls or defaults related to the 2017 Senior Credit Facility, potentially impacting its financial stability and resources. The agreement requires Checkersrallys to record the debt obligation as a "related party credit facility" with an offsetting amount against "additional paid-in capital" in its consolidated balance sheets, reflecting the nature of this financial arrangement.

Furthermore, principal payments made by Checkersrallys for the related party note are recorded as "principal payments on related party note" in the consolidated statements of cash flows. Similarly, draws and repayments under the related party revolver are recorded as "borrowings under related party revolver" and "payments on related party revolver," respectively. These accounting practices ensure transparency in how Checkersrallys manages its obligations under the Allocation Agreement and the related credit facilities. Prospective franchisees should be aware of these obligations as they reflect on the financial structure and commitments of the Checkersrallys organization.