What qualitative factors does Checkersrallys consider when evaluating potential impairment indicators for indefinite-lived intangible assets?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company assesses the impairment of indefinite-lived intangible assets, which consist of tradename intangibles, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating potential impairment indicators, the Company considers qualitative factors such as significant industry or economic trends that could negatively affect the Company's business. If that assessment demonstrates that it is more likely than not that an impairment does not exist, no further testing is required. If impairment is deemed to be more likely than not, a quantitative test is required that compares the fair value of the Company with its carrying amount. If the carrying amount exceeds fair value, that amount represents the impairment loss to be recognized.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company assesses the impairment of indefinite-lived intangible assets, such as brand name intangibles, annually or when circumstances suggest the carrying value may not be recoverable. In evaluating potential impairment indicators, Checkersrallys considers qualitative factors. These qualitative factors include significant industry or economic trends that could negatively affect Checkersrallys's business.
If the initial qualitative assessment suggests that an impairment is unlikely, no further testing is required. However, if the qualitative factors indicate that impairment is more likely than not, Checkersrallys will then perform a quantitative test. This quantitative test compares the fair value of the company with its carrying amount.
For a prospective Checkersrallys franchisee, this means that the franchisor is actively monitoring the value of its brand and other intangible assets. Factors like a downturn in the fast-food industry or broader economic recession could trigger a review of these assets. While this doesn't directly impact day-to-day operations, it reflects the franchisor's approach to financial management and could indirectly affect the brand's perceived value and stability.