What was the reported fair value of Checkersrallys' franchise agreements acquired during the restructuring?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
| Fair value of stock consideration Current assets Cash and cash equivalents Accounts and notes receivable, net Inventory Prepaid expenses Other current assets | $ 97,819 17,613 5,828 3,105 3,690 1,600 |
|---|---|
| Total current assets | 31,836 |
| Property and equipment, net | 26,300 |
| Operating right-of-use assets | 152,445 |
| Finance right-of-use assets | 14,831 |
| Intangible assets | 198,900 |
| Favorable leasehold interests | 2,080 |
| Other assets | 2,584 |
| Total assets | $ 428,976 |
| Current liabilities Accounts payable Accrued liabilities Accrued wages and benefits Current portion of deferred revenue Current maturities of long-term debt, and financing obligations Current portion of accrued self-insurance Current portion of operating lease liabilities Current portion of finance lease liabilities | $ (3,126) (21,547) (3,829) (2,761) (923) (1,565) (11,939) (374) |
| Total current liabilities | (46,064) |
| Deferred income tax liabilities | (48,326) |
| Operating lease liability | (158,850) |
| Finance lease liability | (16,548) |
| Long-term debt, less current maturities and deferred financing costs | (74,438) |
| Financing obligations, less current maturities | (7,893) |
| Deferred revenue, less current portion | (7,348) |
| Accrued self-insurance, less current portion | (2,130) |
| Unfavorable leasehold interests | (200) |
| Long-term liabilities | (1,126) |
| Total liabilities | (362,923) |
| Net assets acquired | 66,053 |
| Goodwill | $ 31,766 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The fair values of identifiable intangible assets acquired as of the restructuring date are as follows:
| | Acquisition Date Fair Value | Weighted Average Use
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys' 2025 Franchise Disclosure Document, the acquisition date fair value of franchise agreements was $1,400. This valuation was part of a larger assessment of intangible assets acquired during the company's restructuring. The fair values of tradenames and franchise agreements were determined using the relief from royalty and the income approach - multi-period excess earning method, respectively.
The valuation of these intangible assets, including franchise agreements, was conducted by a third-party valuation specialist. This valuation process incorporated significant unobservable inputs, requiring considerable judgment and estimates, particularly concerning the amount and timing of future cash flows. This indicates that the reported value is based on projections and assumptions about the future performance of Checkersrallys franchises.
For a prospective franchisee, this valuation is relevant because it reflects the financial importance Checkersrallys places on its franchise agreements as assets. The listed weighted average useful life of the franchise agreements is 15 years, which is the period over which Checkersrallys expects to realize the economic benefits of these agreements. Understanding these valuations and the methods used to derive them can provide franchisees with insight into how Checkersrallys assesses the long-term value and sustainability of its franchise system.