Why was there no activity related to restaurant retirement or refranchising for Checkersrallys for the year ended January 1, 2024?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
-------------|----|------------------------------|----|---------------|----|-----------------|-----|----------|---|--------------------------| | For the year ended January 2, 2023 | S | 4.290 | $ | 8€ | S | - | S | (4.290) | S | 92 | | For the year ended January 3, 2022 | $ | 4.834 | $ | 375 | $ | (1.842) | S | 923 | S | 4.290 |
The Company adopted ASC 842, Leases, in fiscal year 2022 and at the time of transition the $4.3 million in reserves for restaurant retirement and refranchising costs were included as a reduction to "operating right-of-use assets, net." Subsequent to its adoption
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, there was no activity related to restaurant retirement or refranchising for the year ended January 1, 2024, because of the company's accounting practices following the adoption of ASC 842, Leases, in fiscal year 2022. At the time of transition, the $4.3 million in reserves for restaurant retirement and refranchising costs were included as a reduction to "operating right-of-use assets, net."
After adopting ASC 842, Checkersrallys assesses leases for impairment and no longer recognizes reserves for restaurant retirement and refranchising costs. This change in accounting standards means that Checkersrallys does not set aside specific reserves for these activities as it did before adopting ASC 842.
For a prospective franchisee, this implies that the costs associated with restaurant retirement or refranchising are now handled differently on Checkersrallys's financial statements. Instead of maintaining reserves, the company evaluates leases for impairment, potentially affecting how these costs are recognized and managed. Franchisees should be aware of this accounting shift and how it might influence the company's financial decisions related to underperforming or transitioning locations.