Checkers/Rally's

The franchise fee is $30,000 ($15,000 for non-traditional sites). The FDD investment table shows a $640K floor and a $2.27M ceiling — an unusually wide range driven entirely by the building cost variable: restaurant building costs range from $491K to $1.45M depending on whether you're retrofitting an existing structure or building new. Equipment and technology add $35K–$305K, and soft costs range from $10K to $226K.

The mandatory $15,000 initial advertising deposit (separate from the ongoing ad fund) is required upfront. There's also a $10,000 development fee for multi-unit agreements. The three-month working capital of $50K to $120K is reasonable relative to median revenue, but the low end is thin.

Ongoing fees: 4% royalty on net sales plus 4.5% advertising fund — 8.5% effective burden. Two additional fees worth noting: a delivery administration fee and an order-ahead program administration fee, both billed bi-monthly. As delivery becomes a larger share of QSR revenue, these fees apply to a growing portion of sales. Buyers should ask the franchisor what these fees currently amount to, as they weren't quantified in the FDD extraction.

Checkers/Rally's discloses Item 19 data based on 301 franchised restaurants. Median annual gross revenue is $1,110,538; average is $1,166,245. The close alignment between median and average ($56K spread) suggests relatively even distribution without extreme outliers pulling the numbers.

At median revenue of $1.11M and 8.5% fee burden, you're paying $94,395 per year to the franchisor. The double drive-through model is designed for high throughput with minimal labor — the format can generate 15–20% EBITDA margins in well-run locations. At 17% on $1.11M, that's $189K in operating income before debt service. On a $1.5M all-in investment, that's an 8–10 year payback under realistic assumptions.

The challenge is the gap between median performance and the system trajectory. A brand closing 60+ locations per year is pruning its underperformers — which means the Item 19 data increasingly reflects survivors, not the full range of what buyers might experience. New locations in expansion markets or saturated markets may perform below what existing data suggests.

The numbers are straightforward: Checkers/Rally's has been contracting since at least 2021. The system went from 846 units in 2021 to 840 in 2022 to 785 in 2023 — losing 61 units in two years. In 2023 specifically, 79 units closed against just 22 openings. The net growth rate of -7% annually is among the steepest in the QSR category.

The brand went private in 2017 when Sentinel Capital Partners acquired it, then private equity owner Oak Hill Capital took over in 2022. Private equity ownership at this stage — with declining units and a buyout 7 years in — raises questions about the timeline to an exit event and how that might affect franchisee relationships. PE-owned brands sometimes prioritize franchisee-extracted fees and system-wide requirements that serve corporate financial goals over franchisee profitability.

The brand has legitimate strengths: the double drive-through format is genuinely differentiated from standard QSR, and average unit volumes at $1.1M are solid for a small-footprint concept. But the closure trend suggests more is wrong than a few underperforming markets. Buyers should ask the franchisor directly: what's the root cause of the closures, and what's the target unit count for the system in five years?

Checkers has the unusual structure of owning and operating 238 corporate restaurants (30% of the system) while the franchise system shrinks. When the franchisor is holding onto corporate locations while franchised locations close, it can indicate that corporate sites are cherry-picked profitable locations and franchisees are in the tougher markets. This isn't confirmed by the FDD, but it's a legitimate question for due diligence.

The 33 transfers in 2023 at unknown prices are significant. When a declining system has high transfer volume, it often means franchisees are exiting at discounts — and the next buyer inherits an underperforming restaurant at a price that reflects franchisor pressure to keep the system populated rather than the actual investment value.

The double drive-through model requires significant land — the building range ($491K to $1.45M) reflects freestanding structures with two-lane drive lanes. In urban and dense suburban markets, finding an appropriate pad is difficult and expensive. Buyers in markets without established Checkers/Rally's presence face both a site challenge and a brand awareness challenge simultaneously.