When does Checkersrallys recognize franchise fees as revenue?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
come 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.
Area development fees are deferred when received, allocated to each agreed upon restaurant, and recognized as revenue over the contractual term of each respective franchise agreement 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, franchise fees are initially recorded as deferred revenue when received. Checkersrallys recognizes these fees as revenue over the contractual term of the franchise agreement. This recognition begins once the restaurant has opened for business.
Area development fees follow a similar pattern. These fees are also deferred upon receipt and allocated to each restaurant agreed upon in the development agreement. Checkersrallys then recognizes these fees as revenue over the contractual term of each respective franchise agreement, starting once the restaurant has opened.
Transfer fees, which are paid by new franchisees when purchasing an existing Checkersrallys restaurant from a previous franchisee, are also deferred when received. These fees are then recognized as revenue over the contractual term of the new franchise agreement. This approach to revenue recognition aligns with the principle of recognizing revenue as the service is provided, which in this case is the right to operate a Checkersrallys franchise over the term of the agreement.