Under what agreement terms does Checkersrallys generally lease land and buildings?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company leases land and buildings generally under agreements with terms of, or renewable to, 10 to 30 years. The Company determines the lease term by assuming exercise of renewal options that are reasonably certain to be exercised. The leases are evaluated for classification as operating or finance leases.
The Company has elected the practical expedient to account for lease components and non-lease components as a single lease component for all underlying classes of assets. The leases generally obligate the Company to pay for costs associated with property taxes, insurance and maintenance and are evaluated by the Company as fixed or variable in nature. If it is concluded that they are fixed, they are included in the calculation of the lease liability. Fixed lease costs for operating lease payments are recognized on a straight-line basis over the lease term and are included in the restaurant occupancy costs, franchise support and services expenses, general and administrative expenses and restaurant retirement costs line items within the accompanying consolidated statement of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to the 2025 FDD, Checkersrallys, as a lessee, typically enters into agreements to lease land and buildings for its restaurant operations with terms that range from 10 to 30 years, including potential renewal options. Checkersrallys determines the lease term by assuming that renewal options will be exercised if it is reasonably certain they will be. These leases are then categorized as either operating or finance leases.
Checkersrallys has made an accounting election to treat lease and non-lease components as a single unit for all asset classes. Generally, Checkersrallys is obligated to cover costs related to property taxes, insurance, and maintenance, which are assessed to be either fixed or variable. Fixed costs are factored into the calculation of the lease liability. Fixed operating lease costs are recognized on a straight-line basis over the lease term and are included in various expense line items such as restaurant occupancy costs, franchise support and services expenses, general and administrative expenses, and restaurant retirement costs on the company's consolidated statement of operations.
As a lessor, Checkersrallys subleases land and buildings associated with the sale of certain company-operated restaurants with terms of, or renewable to, 10 to 15 years with no option to purchase. The sublessee is generally obligated to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.