What are the primary sources of revenue for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
mance obligations in the contract have been identified; 3) Transaction price has been determined; 4) Transaction price has been allocated to the performance obligations; and 5) Revenue is recognized when (or as) performance obligations are satisfied.
The Company disaggregates revenues by type: Restaurant sales, Franchise and retail royalty revenue, and Franchise fees and other income.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's Restaurant sales includes revenues recognized upon delivery of food to the customer at Company operated restaurants. Restaurant sales are recognized upon sale and are presented net of coupons and discounts, sales tax and other sales-related taxes. Restaurant sales also includes revenues recognized upon delivery of food to a third-party delivery company. The revenue is recognized as a receivable from the third-party delivery service and collection is made within three to seven business days.
Franchise and retail royalty revenues includes royalties on sales by franchised restaurants and sales of licensed products in retail stores. Royalties are based on a percentage of sales of the franchised restaurant and sales of licensed products in retail stores which are recognized as earned.
Franchise fees and other income is comprised of franchise fees, transfer fees, and area development fees that are generated from the sale of rights to develop, own and operate restaurants, as well as sublease rental income and revenues from advertising cooperative funds for those respective cooperative funds that are not consolidated. As a sublessor for the operation of certain franchised restaurants, fees for sublease income are also included within franchise fees and other income line item. The Company accounts for leases using the guidance in ASC 842, Leases, as well as ASC 606, Revenue from Contracts with Customers. See the Note 14 - Leases for further information.
Franchise fees are recorded as deferred revenue when received and recognized as revenue over the contractual term of the franchise agreements once the restaurant has opened.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company's revenues are disaggregated into three main types: restaurant sales, franchise and retail royalty revenue, and franchise fees and other income. Restaurant sales include revenues from food delivered to customers at company-operated restaurants, recognized upon sale and net of coupons, discounts, and sales taxes. It also includes revenues from food delivered via third-party delivery companies, recognized as a receivable. Franchise and retail royalty revenues come from royalties on sales by franchised restaurants and licensed products in retail stores, based on a percentage of sales. Franchise fees and other income include franchise fees, transfer fees, and area development fees from the sale of rights to develop and operate restaurants, as well as sublease rental income and revenues from advertising cooperative funds. Franchise fees are initially recorded as deferred revenue and recognized over the franchise agreement term once the restaurant opens, while area development fees are similarly deferred and recognized over the term of each franchise agreement.
For the period ended December 30, 2024, Checkersrallys reported total revenues of $300,381. Restaurant sales accounted for the largest portion at $255,474, followed by franchise and retail royalty revenue at $35,389, and franchise fees and other income at $9,518. This breakdown indicates that the majority of Checkersrallys's revenue is generated through direct sales at company-operated restaurants. Royalties from franchised locations and fees associated with new franchise agreements also contribute significantly to the overall revenue stream.
For a prospective franchisee, understanding these revenue streams is crucial. While franchisees will primarily focus on generating restaurant sales, they should also be aware of the royalty fees they will pay to Checkersrallys based on their sales. Additionally, the franchise fees and other income provide insight into how Checkersrallys generates revenue from expanding its franchise network, which could indicate the brand's growth and stability. The consistent revenue from restaurant sales and franchise royalties suggests a stable business model, but franchisees should also consider the costs associated with generating these revenues, as detailed in the financial statements.