Under Checkersrallys' sublease agreements, who is generally obligated to pay for costs associated with property taxes, insurance, and maintenance?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company 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 Company determines the sublease term by assuming exercise of renewal options that are reasonably certain to be exercised. The Company continues to be responsible for the rent payments to the original lessors. The subleases are evaluated for classification as operating, direct financing or sales-type 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 subleases generally obligate the sublessee to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys' 2025 Franchise Disclosure Document, when Checkersrallys subleases land and buildings associated with company-operated restaurants to franchisees, the sublessee is generally responsible for covering the costs of property taxes, insurance, and maintenance. These costs are considered variable.
This arrangement means that as a Checkersrallys franchisee, you will likely be obligated to pay for property taxes, insurance, and maintenance costs associated with the subleased property. These expenses can fluctuate, impacting your operating costs. It is important to factor these variable costs into your financial projections and business plan.
Prospective franchisees should carefully review the sublease agreement to fully understand their obligations regarding property taxes, insurance, and maintenance. Understanding the specific terms of the sublease is crucial for managing expenses and ensuring the financial viability of the franchise.