What is the range of terms for which Checkersrallys has estimated cash outlays for restaurant retirement and refranchising costs?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The cash outlays for these costs have been estimated for various terms ranging from two years to ten years and are discounted at a credit-adjusted risk-free rate in the case of closed or undeveloped restaurants and are undiscounted in the case of sales of restaurants to franchisees. In certain instances, the properties are subleased or have the potential to be subleased for an amount less than the obligation relating to the contractual rent payments. In these cases, the amount of the initial reserve has been reduced by the actual sublease income or an estimate based on local market conditions and the Company's experience with previous sites. The disposal and sale activities were completed in each of the periods in which expense was recognized in the table above and the amounts recognized as expense represent the total costs estimated to be incurred.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company estimates cash outlays for restaurant retirement and refranchising costs over various terms. These terms range from two years to ten years. These estimates are related to costs from restaurants that have been closed, were never developed, or were sold to a franchisee subject to a sublease with rents less than what Checkersrallys is obligated to pay under the original lease.
These costs primarily include non-cancelable rent payments due over the remaining contractual rent period at the cease-use date, net of estimated or actual sublease rental income, and estimates of related contractual property taxes. For closed or undeveloped restaurants, these cash outlays are discounted at a credit-adjusted risk-free rate. However, in cases where restaurants are sold to franchisees, the cash outlays are undiscounted.
In instances where properties are subleased or have the potential to be subleased for less than the obligation relating to contractual rent payments, the initial reserve amount is reduced by the actual sublease income or an estimate based on local market conditions and Checkersrallys's experience with previous sites. The disposal and sale activities were completed in the periods in which the expense was recognized, and the amounts recognized as expense represent the total costs estimated to be incurred.