What was the sublease income for Checkersrallys for the year ended January 2, 2023 (Predecessor)?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ered to be variable. Variable sublease rental income recorded for the fiscal year ended December 30, 2024 (Successor) and the periods from June 17, 2023 through January 1, 2024 (Successor) and from January 3, 2023 through June 16, 2023 (Predecessor), was $0.1 million, $0.1 million, and $0.1 million, respectively.
The Company is the sublessor on operating leases. The revenue from these subleases is recorded in franchise fees and other income in the accompanying consolidated statements of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the sublease rental income recorded for the period ended January 2, 2023 (Predecessor) was $3.7 million. This income is derived from Checkersrallys subleasing land and buildings associated with the sale of company-operated restaurants.
Checkersrallys acts as a sublessor on operating leases, and the revenue generated from these subleases is categorized under "franchise fees and other income" within the consolidated statements of operations. The terms of these subleases typically range from 10 to 15 years, inclusive of potential renewal options, but do not include an option for the sublessee to purchase the property. Despite subleasing, Checkersrallys remains responsible for the original rent payments to the primary lessors.
Additionally, Checkersrallys also recorded variable sublease rental income of $0.3 million for the year ended January 2, 2023. The subleases generally require the sublessee to cover costs related to property taxes, insurance, and maintenance, which are considered variable expenses. Therefore, the total sublease income for Checkersrallys for the year ended January 2, 2023 was $4.0 million.
Prospective franchisees should note that while sublease income contributes to Checkersrallys's revenue, the company remains obligated to the original lessors for rent payments. This arrangement means Checkersrallys carries the risk of potential discrepancies between sublease income received and rent owed, especially if sublessees default or if variable costs increase significantly.