How does Checkersrallys record revenue from delivery sales?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The delivery sales performance obligation is satisfied upon the delivery of food to a third-party delivery partner. The Company acts as an agent in delivery sales and, therefore, records the revenue net of costs which include commissions, fees, and in certain cases taxes. In a delivery sale the Company has arranged for another party to transfer the food to an end-customer. The delivery partner maintains the costs of web and mobile applications and directly transacts with the end-customer. The delivery partner then schedules for the restaurant to prepare and deliver the food to one of the delivery partner's employees. The net revenue is generally paid in terms of 2 to 7 days from the end of the week of sale. Delivery sales revenue varies by the costs of the service and by delivery partner.
- Franchise restaurant royalties are earned as the franchise delivers food to their customer or to a third-party delivery partner. The Company recognizes the royalty revenue in the period in which the franchise sales occur over the contract term of the franchise agreement. The Company generally bills royalties bi-monthly or bi-weekly to franchise customers and the payment is due within 10 days of the billing. See the "accounts and notes receivable" below for additional information on franchise royalty payments. Royalty rates are generally 4% of net sales but the rates may vary based on restaurants qualifying under certain development or reimaging programs.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the company recognizes revenue from delivery sales differently depending on whether it's a company-operated restaurant or a franchised location. For company-operated restaurants, the revenue recognition occurs upon the delivery of food to a third-party delivery partner. Checkersrallys acts as an agent in these transactions, recording the revenue net of costs such as commissions, fees, and sometimes taxes. This means that the reported revenue reflects the amount Checkersrallys receives after deducting the delivery service's charges. The delivery partner handles the web and mobile applications and directly interacts with the end customer, while Checkersrallys prepares and delivers the food to the delivery partner. Payment is generally received within 2 to 7 days from the end of the week of sale, and the revenue amount varies based on the service costs and the specific delivery partner.
For franchised restaurants, Checkersrallys earns royalties as the franchise delivers food to their customer or to a third-party delivery partner. The company recognizes the royalty revenue in the period in which the franchise sales occur over the contract term of the franchise agreement. Checkersrallys generally bills royalties bi-monthly or bi-weekly to franchise customers, and payment is due within 10 days of the billing. Royalty rates are generally 4% of net sales, but the rates may vary based on restaurants qualifying under certain development or reimaging programs.
For a prospective franchisee, this means that delivery sales revenue will impact royalty payments to Checkersrallys. The franchisee needs to be aware of the specific royalty rate applicable to their restaurant, as it may vary based on certain programs. Additionally, the franchisee should understand the billing and payment terms for royalties, which are generally bi-monthly or bi-weekly with payment due within 10 days of the billing. Understanding these revenue recognition and royalty payment terms is crucial for managing the financial aspects of a Checkersrallys franchise.