How does Checkersrallys recognize franchise restaurant royalty revenue?

According to Checkersrallys's 2025 Franchise Disclosure Document, franchise restaurant royalties are recognized as revenue when the franchise delivers food to a customer or a third-party delivery partner. Checkersrallys recognizes the royalty revenue in the period in which the franchise sales occur over the contract term of the franchise agreement.

Checkersrallys typically bills royalties either bi-monthly or bi-weekly to its franchise customers, with payment due within 10 days of the billing date. The standard royalty rate is generally 4% of net sales, but this rate may vary for restaurants that qualify under specific development or reimaging programs.

If a Checkersrallys franchisee is placed in default status, the company closely monitors royalties accruing on franchisee sales to determine if collectability is reasonably assured. If Checkersrallys determines that certain amounts are not probable of collection, the related royalty revenue is not recognized. When accounts receivable are deemed uncollectible, they are written off. This policy ensures that Checkersrallys only recognizes royalty revenue that is likely to be received, providing a more accurate representation of its financial performance.