How does Checkersrallys recognize revenue from franchise royalties when franchisees use a third-party delivery partner?

According to Checkersrallys's 2025 Franchise Disclosure Document, franchise restaurant royalties are earned when the franchise delivers food to their customer or to 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. The company typically bills royalties bi-monthly or bi-weekly to franchise customers, with payment due within 10 days of the billing.

This means that Checkersrallys franchisees will owe royalties on sales made through third-party delivery services just as they do on sales made directly to customers. The royalty is calculated as a percentage of sales, typically 4% of net sales, although this rate may vary based on specific development or reimaging programs. Franchisees should be aware that these royalties are billed frequently (either bi-monthly or bi-weekly) and must be paid within 10 days of the invoice date.

Checkersrallys monitors franchisees to ensure they comply with the terms of the franchise agreement. If a franchisee defaults, Checkersrallys closely monitors royalties accruing on franchisee sales to determine if collection is reasonably assured. If Checkersrallys determines that certain amounts are not probable of collection, they will not recognize the related royalty revenue and will write off the related accounts receivable when it is determined that they are uncollectible. This policy protects Checkersrallys from recognizing revenue that it is unlikely to receive, but it also highlights the importance of franchisees maintaining good financial standing to ensure their sales are properly accounted for.