Under what terms do 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 Checkersrallys's 2025 Franchise Disclosure Document, the company typically leases land and buildings under agreements 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 chosen 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 evaluated as either fixed or variable. If these costs are determined to be fixed, they are factored into the lease liability. Fixed operating lease costs are recognized on a straight-line basis over the lease term and are included in various expense categories within the consolidated statement of operations, such as restaurant occupancy costs, franchise support and services expenses, general and administrative expenses, and restaurant retirement costs.
As a sublessor, 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. Checkersrallys 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 subleases generally obligate the sublessee to pay for costs associated with property taxes, insurance and maintenance costs and are considered to be variable.