How does the Hardees advertising fee structure in Item 6 relate to the franchisor's responsibilities for national advertising as described in Item 11?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| upon receipt of invoice | |||
| Hardee’s Advertising | An advertising and promotional obligation (“APO”) in an amount set forth in your Franchise Agreement. Your APO will be up to 7% of Hardee’s Gross Sales. Currently, your APO is 5.5% of Hardee’s Gross Sales. (3) | Divided between HNAF, Regional Co-op and LSM (each as defined below) | |
| Hardee’s National Advertising Fund (“HNAF”) | Currently, 4.25% of Hardee’s Gross Sales | On the 10th day of each month | HNAF contributions are due on the 10th day of each month and are based on Gross Sales in the prior month. |
| Hardee’s Regional Cooperative (“Regional Co-op”) | If your Franchised Restaurant is in an area covered by a Regional Co-op, currently, minimum of 0.5% of Hardee’s Gross Sales; however, your Regional Co- op can vote to increase each member’s contribution. | Same as royalty | We have the right, in our sole discretion, to establish a regional advertising and sales promotion cooperative in the regional area in which your Franchised Restaurant is located (“DMA”) to which you will be required to contribute. |
| Hardee’s Local Store Marketing (“LSM”) | Difference between your APO and the amount you contribute to HNAF and a Regional Co-op | Not paid to HR | You may develop advertising materials for your own use; however, we must approve these advertising materials in advance of use. LSM monies may be spent only for approved advertising. (4) |
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Item 6 details the advertising fees franchisees must pay, which are directly related to Hardees's obligations for national advertising as outlined in Item 11. Hardees franchisees are subject to an advertising and promotional obligation (APO) that can be up to 7% of their gross sales; currently, this obligation is set at 5.5%. This APO is divided among three components: the Hardee’s National Advertising Fund (HNAF), Regional Co-ops, and Local Store Marketing (LSM). The HNAF currently receives 4.25% of gross sales, which is due on the 10th day of each month based on the prior month's sales. If a franchisee's restaurant is in an area covered by a Regional Co-op, a minimum of 0.5% of gross sales is contributed, although the co-op can vote to increase this amount. The remaining portion of the APO, after deducting the HNAF and Regional Co-op contributions, is allocated to LSM.
The funds collected through the APO are intended to support Hardees's national and regional advertising efforts. The HNAF is specifically designated for national advertising initiatives, while the Regional Co-op funds are used for advertising and sales promotions within the franchisee's designated market area (DMA). Franchisees have some control over their LSM spending, as they can develop their own advertising materials, but these materials must be approved by Hardees in advance. This structure ensures that Hardees has a consistent revenue stream dedicated to advertising, which it can then use to promote the brand on a national and regional level.
This advertising fee structure has several implications for prospective Hardees franchisees. First, the mandatory advertising fees represent a significant ongoing expense, potentially impacting profitability. Second, while franchisees have some autonomy over LSM, the majority of the advertising spend is controlled by Hardees and the Regional Co-ops. Therefore, franchisees need to be comfortable with Hardees's advertising strategies and the decisions made by their Regional Co-op. Finally, the ability of the Regional Co-op to increase contribution levels means that franchisees could face unexpected increases in their advertising obligations. It is common in the franchise industry for brands to have a national advertising fund, but the specific percentage and allocation can vary widely, so prospective franchisees should carefully evaluate the terms outlined in the Hardees FDD.