In this FDD Talk 2017 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 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Checkers franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Checkers financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average and median net sales for the 139 company-owned and 240 franchised Checkers Restaurants that were open and operating during the entire 53-week period ending January 2, 2017 (the “2016 Fiscal Year”)
- 2016 average and median net sales for the 29 company-owned Checkers Restaurants and the 66 franchised Checkers Restaurants comprising the top 25% of all 379 company-owned and franchised Checkers Restaurants that were open and operating during the entire 2016 Fiscal Year
- average and median net sales during the first 52-week period of operations for the 8 company-owned and 71 franchised Checkers Restaurants that opened between January 1, 2013 and December 31, 2015
- average and median net sales, food and paper costs, labor and benefit costs, and gross margin during the first full 12 months of operation for the 8 new company-owned Checkers Restaurants that opened between January 1, 2013 and December 31, 2015 and were open and operating during the entire 2016 Fiscal Year
- average and median 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 the 8 company-owned Checkers Restaurants that opened after January 1, 2013
- same-store sales information in Fiscal Years 2014, 2015, and 2016 for the 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
11 Things You Need to Know About the Checkers Franchise
Sale of Checkers Validates Company’s Growth
1. On March 23, 2017, Checkers Drive-In Restaurants Inc. announced that the company had been sold to private equity group Oak Hill Capital Partners for $525 million. According to Checkers executives, the deal sets the company up for further growth as Oak Hill’s investment will help the chain further its expansion.
2. Checkers Drive-In Restaurants Inc. CEO Rick Silva said that the company has experienced sales growth over the last eight years which has led to a 700-basis-point improvement in profits and enviable unit volumes that have operators building new units. Silva also said that same-store sales in 2016 grew 3 percent and same-store sales are up 3.5 percent so far in 2017.
3. Additionally, Checkers has added 100 new operators in the last two years, and has 130 locations planned, plus commitments for another 120 units. Silva thinks that Oak Hill is smart for joining Checkers at this time in the company’s growth.
D.C. Area Expansion
4. In early April, Checkers announced that the chain has plans to open 20 new locations in the Washington, D.C. area. The company made it a point to mention that the new restaurants would be branded as Checkers and not Rally’s.
5. John Palumbo, a director of franchise development for Checkers Drive-in Restaurants Inc., says “There’s such a strong connection with customers to the Checkers name and the Rally’s name, that when we tried to make the switch and convert some stores as a test, we didn’t have positive results at all.”
6. There are currently 16 Checkers locations in the D.C. area, with only one location in the District proper. Palumbo believes that Checkers’ new store model is particularly suitable for D.C. because it requires a minimal footprint and smaller investment. The new stores require only a 1,000-square-foot building that is built modularly off-site.
7. In recent years, Checkers has gotten rid of its signature double drive-thru in favor of a single drive-thru. The new stores consist of a kitchen, a walk-up window, and a drive-thru, with no interior seating, which the company believes makes it more conducive to more expensive markets like D.C.
Using Shipping Containers to Build New Restaurants
8. In early March, Checkers Drive-In Restaurants Inc. announced that it would start constructing its new restaurants from corrugated metal shipping containers – with Michigan set to be one of the first states where the prototype design would be built out. According to the company, the new eateries will take less time and cost to build and will also be environmentally friendly.
9. In addition to Michigan, franchisees in Texas and Florida have expressed interest in the shipping container design.
10. Although using shipping containers has many advantages, according to Bruce Kim, a director of franchise development for the company, there are a few downsides to the containers, including not being able to withstand hurricanes and earthquakes. Kim also says that some people may not like the look of a building with a corrugated metal exterior, especially if it does not fit in with the architecture in the rest of the community.
11. However, Kim believes that Michigan is the perfect place to test the new design because the state doesn’t face the same weather concerns as other places and the people are used to industrial looking buildings and designs.
Section II – Estimated Costs
- Please click here for detailed estimates of Checkers/Rally’s franchise costs, based on Item 7 of the company’s 2017 FDD (updated).
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Checkers/Rally’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.