Besides what is disclosed, does Hardees have any other rights to the assets of the Hardee's Funds?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
such as increased travel during school vacations and improved weather conditions, which affect the public's dining habits.
Inflation and Middle East Conflict
Inflationary pressures on labor and commodity price increases directly impacted our results of operations during the years ended January 31, 2025 and January 31, 2024. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and changes in product mix. Competitive pressures, consumer spending levels and other factors may limit our ability to recover such costs increases in the future.
Beginning October 2023, certain of our Hardee's international markets began being impacted by a military conflict in the Middle East. As a result, international franchised restaurants same-store sales were impacted to varying degrees within the Middle East. Further continuation of this conflict could have an adverse impact on our business and results of operations.
Variable Interest Entities
Hardee's Funds consideration
We consolidate the Hardee's National Advertising Fund ("HNAF") and approximately 73 Hardee's local co-operative advertising funds ("Hardee's Co-ops") (collectively, the "Hardee's Funds") since we have determined that the Hardee's Funds are VIEs and that we are the primary beneficiary. We considered a variety of factors in ide
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, Hardees consolidates the Hardee's National Advertising Fund (HNAF) and local co-operative advertising funds (Hardee's Co-ops), collectively known as the "Hardee's Funds." Hardees acts as the primary beneficiary of these funds, which are considered Variable Interest Entities (VIEs). As of January 31, 2025, the consolidated balance sheets include $26,600 of total assets and total liabilities and equity related to Hardee's Funds.
However, the disclosure explicitly states that Hardees has no rights to the assets of the Hardee's Funds beyond what is already disclosed. Additionally, Hardees has no obligations regarding the liabilities of these funds, and none of Hardees' assets serve as collateral for the creditors of these VIEs. This separation of assets and liabilities is a crucial aspect of the relationship between Hardees and its advertising funds.
For a prospective franchisee, this information indicates that while advertising funds are consolidated for financial reporting purposes, Hardees' access to and control over these funds are limited to the rights already outlined. This arrangement protects the assets within the Hardee's Funds from being used for Hardees' obligations and ensures that the funds are primarily used for advertising and promotional activities to benefit the Hardees brand and its franchisees.