In this FDD Talk 2016 post, you’ll learn the following:
- Section I – Background information on the Checkers franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Checkers franchise, based on Item 7 of the company’s 2016 FDD
- Section III – Presentation and analysis of Checkers’ financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
- 2015 average net sales for the 172 company-owned, 291 franchised, and 463 company-owned and franchised Checkers Restaurants that were open and operating during the entire 52-week period ending December 28, 2015
- 2015 average net sales for the top 25% of the 172 company-owned, 291 franchised, and 463 company-owned and franchised Checkers Restaurants that were open and operating during the entire 52-week period ending December 28, 2015
- average net sales during the first 52-week period of operations for the 12 company-owned, 55 franchised, and 67 company-owned and franchised Checkers Restaurants that opened on or after January 1, 2014
- average net sales, food and paper costs, labor and benefit costs, and gross margin during the first full 12 months of operation for 9 new company-owned Checkers Restaurants that opened between 2013 and 2014 and were open and operating during the entire 2015 Fiscal Year
- average net sales during the first 52-week period of operations, average total cost, average return on investment, and average cash-on-cash return on investment for 9 company-owned Checkers Restaurants that opened after January 1, 2013
- same-store sales information in Fiscal Years 2013, 2014, and 2015 for company-owned, franchised, and company-owned and franchised Checkers Restaurants that were open at least 18 fiscal periods prior to the beginning of the applicable fiscal year of the comparison and that operated continuously during that time
Section I – Background Information
There was a time when the nation’s two largest double drive-thru burger chains (Checkers and Rally’s) were engaged in a fierce battle against each other, until they realized they’d be better off joining forces, which they did in 1999. The two companies realized it would make the most sense for them to join forces into one double drive-thru behemoth.
Now headquartered in Tampa, FL, the combined Checkers and Rally’s operation has more than 828 locations (323 of which are company-owned and one of which is located outside the U.S.).
Rally’s locations took on the Checkers look with the bold checkerboard squares, red neon signs, and chrome styling on their small modular buildings. With the exception of the name on the signs, the Checkers and Rally’s menu offerings as well as their look are the same.
Here’s how Checkers/Rally’s keeps things rolling in the drive-thru burger segment:
The Deal War is ON
You can blame McDonald’s for starting the latest round of cut-throat fast food discounting that has other chains following suit – good for consumers but not necessarily good for overall business.
McDonald’s has its McPick 2 for a $5 deal that can include full-size sandwiches (Big Mac, Quarter Pounder) with Chicken McNuggets and fries. Hardee’s came up with the $4 Real Deal, Wendy’s has a 4 for $4 deal, and Checkers/Rally’s has come up with a $2 Meal Deal that includes one of several sandwich options and a small order of fries.
The chain is looking to make a major splash in the Houston market, having started with a couple locations in 2014 and then adding 5-10 per year every year – which it calls “smart” growth, not “fast” growth. The owner of what was then the only location in Texas said the Houston market could easily handle 100 locations.
Not to leave all the excitement down south, the chain announced in May of this year that it would be making a major push in the Philadelphia area, with plans to open five locations this year and another 30 over the next five years.
Beyond Burger Basics
The chain offers no fewer than seventeen different burgers, which is a wide range of offerings. The general opinion out there is that these burgers are a definite step above your average fast-food burger, but don’t rise anywhere near the level of the newer better-burger places like Five Guys or In-N-Out.
But you also don’t have to get a burger – the menu includes chicken, fish, hot dogs, fries, and desserts.
Drive-Thru Challenges of the 21st Century
One of the challenges is that a greater percentage of America’s population than ever is in dense urban areas where it’s hard to put in a traditional drive-thru, not to mention that Millennials have a surprisingly low rate of car ownership at just 66% as of several years ago.
Section II – Estimated Costs
- Please click here for detailed estimates of Checkers franchise costs, based on Item 7 of the company’s 2016 FDD (updated).