Does the text specify any dependencies related to the financial data for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has entered into transactions with certain companies or individuals, which are related parties by virtue of having stockholders in common, by being officers/directors of the Company or because they are controlled by significant stockholders or officers/directors of the Company.
The Company and its franchisees each pay a percentage of sales to the Checkers/Rally's National Production Fund, Inc. (the "Fund" or "NPF"), established for the purpose of creating and producing advertising for the benefit of both Company-operated and franchised restaurants. During the periods ended January 1, 2024 (Successor), June 16, 2023 (Predecessor) and January 2, 2023 (Predecessor), only one member, representing 25% of the Board of Directors of the Fund, is an employee of the Company. The Fund is not included in the accompanying consolidated financial statements, although the Company's contributions to the Fund are included in "advertising expense" in the accompanying consolidated statements of operations. Additionally, certain Company-operated restaurants and franchisees participate in advertising co-ops. The Company consolidates advertising co-ops for which it is determined to control on the basis of voting interests, and does not consolidate advertising co-ops it does not control. Co-ops not controlled by the Company are accounted for similarly to the fund. The contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.
The Company and its franchisees each pay charges based on volumes of products purchased from suppliers to Checkers and Rally's Distribution and Services, Inc. ("CDSI"), established for the purpose of providing procurement services and quality assurance support for the benefit of both Company-operated and franchised restaurants. During the period from June 17, 2023 through January 1, 2024 (Successor) and the period from January 3, 2023 through June 16, 2023 (Predecessor) and for the year ended January 2, 2023 (Predecessor), only one member, representing 25% of the CDSI Board of Directors is an employee of the Company. CDSI is not included in the accompanying consolidated financial statements, although the company's contributions to CDSI are included within "restaurant food and paper costs" in the accompanying consolidated statements of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to the 2025 FDD, Checkersrallys' financial data has dependencies related to transactions with related parties. These related parties include entities with common stockholders or officers/directors.
Specifically, Checkersrallys and its franchisees contribute a percentage of sales to the Checkers/Rally's National Production Fund, Inc. (NPF), which is used for advertising. The FDD states that only one member, representing 25% of the Board of Directors of the Fund, is an employee of Checkersrallys. Although the Fund itself is not included in the consolidated financial statements, Checkersrallys' contributions to the Fund are recorded as advertising expenses. Additionally, some restaurants and franchisees participate in advertising co-ops, which are consolidated if Checkersrallys has voting control. The contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.
Checkersrallys and its franchisees also pay charges to Checkers and Rally's Distribution and Services, Inc. (CDSI) based on the volume of products purchased from suppliers. CDSI provides procurement services and quality assurance. Similar to the NPF, only one member, representing 25% of the CDSI Board of Directors, is an employee of Checkersrallys. CDSI is also not included in the consolidated financial statements, but Checkersrallys' contributions to CDSI are included within restaurant food and paper costs.
These related party transactions could impact a franchisee because the costs associated with these transactions (advertising and procurement) directly affect the franchisee's expenses and, consequently, their profitability. Understanding the nature and extent of these related party transactions is crucial for a prospective franchisee to assess the financial health and stability of Checkersrallys.