What policy election did Checkersrallys make regarding the risk-free rate for discounting lease payments?

According to Checkersrallys's 2025 Franchise Disclosure Document, the company elected the risk-free rate policy. This means that Checkersrallys uses either the rate implicit in the lease or the yield on United States Treasury bonds for the related term to discount lease payments. This determination is based on information available when the lease commences. The company then records the right-of-use assets and liabilities at the present value of these lease payments.

For a prospective Checkersrallys franchisee, this policy election affects how the present value of lease obligations is calculated. By using the risk-free rate or the U.S. Treasury bond yield, Checkersrallys aims to determine a fair present value for its lease liabilities, which in turn affects the financial statements. This approach simplifies the accounting process by providing a clear benchmark for discounting lease payments.

It's important to note that as of January 1, 2024, and January 2, 2023, Checkersrallys did not have any operating or finance leases for which it was obligated that had not yet commenced. This indicates that all existing lease obligations were already in effect during those periods. Franchisees should be aware of how these lease accounting policies impact their own financial reporting and consult with financial professionals to understand the implications for their specific circumstances.