How does Hardees account for advertising costs related to contributions to the Hardee's Funds for company-operated restaurants?

According to Hardees's 2025 Franchise Disclosure Document, advertising costs for company-operated restaurants' contributions to the Carl's Jr. Fund and the Hardee's Funds are expensed as the company-operated restaurants' revenue is earned. This is because Hardees is obligated to share ratably in the cost of the related advertising programs. The cost of local and incremental advertising that is not funded by the Carl's Jr. Fund or the Hardee's Funds is expensed as it is incurred.

For a Hardees franchisee, this means that a portion of their revenue will be allocated towards advertising and marketing programs. These contributions are generally determined based on a percentage of revenue and contributed to the applicable funds ratably throughout the year. The funds are used for various advertising and marketing programs, which are administered internally by Hardees for the Carl's Jr. Fund, certain international advertising funds, and HNAF. A third party administers the Hardee's Co-ops.

In fiscal year 2025, advertising contributions by company-operated restaurants totaled $19,626, while in fiscal year 2024, they totaled $18,735. These contributions are eliminated in consolidation. This accounting practice ensures that advertising expenses are recognized in the same period as the revenue they are intended to generate, providing a clear picture of the profitability of company-operated restaurants.

Prospective franchisees should be aware that while national and regional advertising is covered by these funds, any local or incremental advertising efforts they undertake independently will be expensed as incurred. Understanding the allocation of advertising funds and the responsibilities for local advertising is crucial for managing marketing expenses and strategies as a Hardees franchisee.