How do the restrictions on suppliers in Item 8 affect the estimated initial investment for Checkersrallys, as detailed in Item 7?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
To ensure that high and uniform standards of quality and service are maintained, you are required to operate your Franchised Restaurant in strict conformity with our methods, standards and specifications and you are required to purchase goods, services, supplies, fixtures, equipment and inventory only from suppliers we have approved. You are not required to purchase or lease anything from us or any of our affiliates; however, we and our affiliates can be approved suppliers for items. Currently, we are not an approved supplier for any items except that we may from time to time sell used modular restaurants and restaurant equipment to Checkers and Rally's franchisees. We estimate the initial cost of all of required purchases and leases of goods, services, supplies, fixtures, equipment and inventory to be in excess of 95% of your total initial investment (see Item 7). We estimate the ongoing cost of these required purchases and leases to be in excess of 95% of your total ongoing operating expenses.
We may formulate and modify, at our sole discretion, specifications and standards we impose on franchisees and suppliers. Specifications and standards are issued to franchisees through the Operations Manual (defined below) and to suppliers by written notice. The "Operations Manual" is our confidential operations manual, as we may amend at any time, which may consist of one or more manuals or communications, containing our mandatory and suggested standards, specifications and operating procedures relating to the development and operation of Restaurants and other information relating to your obligations as a franchisee and operator of a Restaurant. The term "Operations Manual" also includes all instructions or communications we or our representatives may transmit to you or a substantial number of franchisees, whether in writing or through other media, concerning aspects or modifications to the System, standards, specifications and operating procedures, including bulletins, emails, limited access intranet sites, videotapes, audio tapes, or any other electronic medium. We attempt to negotiate purchase arrangements with suppliers (including price terms) for the benefit of all Restaurants, including those owned by franchisees. We do not provide material benefits (e.g., renewal or additional franchises) to a franchisee based on his use of designated or approved suppliers.
There are no franchisee purchasing or distribution cooperatives.
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, Item 8 outlines restrictions on sources of products and services, stating that franchisees must purchase goods, services, supplies, fixtures, equipment, and inventory only from Checkersrallys-approved suppliers to maintain quality and service standards. While franchisees are not required to purchase or lease anything directly from Checkersrallys or its affiliates, these entities can be approved suppliers.
Item 8 estimates that the initial cost of all required purchases and leases from approved suppliers will constitute over 95% of the franchisee's total initial investment. This means that the vast majority of the initial investment costs are tied to these mandatory purchases. The franchisor may modify specifications and standards imposed on franchisees and suppliers, communicating these changes through the Operations Manual or written notices. Checkersrallys attempts to negotiate purchase arrangements, including price terms, with suppliers for the benefit of all restaurants.
Item 7 provides an estimated initial investment range for a Checkersrallys restaurant on a leased site, exclusive of real estate and related costs. The total estimated initial investment ranges from $123,630 to $1,877,201, depending on the restaurant type. Significant portions of this investment are allocated to expenditures like 'Restaurant Building Costs' (ranging from $2,630 to $1,112,973), 'Restaurant Equipment & Technology' (ranging from $25,000 to $352,000), and 'Signage including Menuboards' (ranging from $4,000 to $134,081). Because Checkersrallys mandates that franchisees acquire these items from approved suppliers, the restrictions directly influence how franchisees allocate their capital during the initial setup phase.
Therefore, the supplier restrictions outlined in Item 8 have a substantial impact on the initial investment detailed in Item 7. Franchisees must factor in the costs associated with purchasing from approved suppliers, which Checkersrallys estimates will account for over 95% of the total initial investment. This requirement limits the franchisee's ability to seek potentially lower-cost alternatives, as they are bound to the approved supplier network to comply with Checkersrallys's standards and specifications.