For Hardees, what constitutes a material breach of the agreement that could lead to termination?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
(7) There is a material breach by Developer of any obligation under Section 12.
(8) Any Transfer that requires HR's prior written consent occurs without Developer having obtained that prior written consent.
(9) HR discovers that Developer made a material misrepresentation or omitted a material fact in the information that was furnished to HR in connection with its decision to enter into this Agreement.
(10) Developer knowingly falsifies any report required to be furnished HR or makes any material misrepresentation in its dealings with HR or fails to disclose any material facts to HR.
(11) Developer, the Development Principal, any stockholder, member, partner, director or officer of Developer, any member of the Continuity Group or any 10% Owner is convicted of, or pleads no contest to, a felony charge, a crime involving moral turpitude, or any other crime or offense that is reasonably likely, in the sole opinion of HR, to adversely affect HR, its affiliates or the Hardee's System.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, several actions constitute a material breach of the agreement. These include violating obligations under Section 12 of the agreement, transferring rights without Hardees' prior written consent, making material misrepresentations or omitting material facts during the application process, knowingly falsifying reports or making misrepresentations to Hardees, and failing to disclose material facts. Additionally, a felony conviction or a crime involving moral turpitude by the developer, a Development Principal, any stockholder, member, partner, director or officer of Developer, any member of the Continuity Group or any 10% Owner can also be considered a material breach.
For a prospective Hardees franchisee, this means that honesty and transparency are critical throughout the franchise relationship. Any attempt to deceive Hardees, whether during the initial application or in ongoing reporting, could lead to termination. Strict adherence to the terms of the agreement, particularly those outlined in Section 12, is also essential.
Furthermore, franchisees must ensure that any transfer of ownership or rights is done with the explicit written consent of Hardees. The actions of individuals associated with the franchisee, such as owners or officers, can also impact the franchise agreement. A criminal conviction of certain individuals can be grounds for termination, even if the franchisee is otherwise in compliance with the agreement.
These stipulations are fairly standard in franchise agreements, as franchisors need to protect their brand and ensure consistent standards across all locations. However, the breadth of individuals whose actions can trigger a breach (including stockholders, family members in the Continuity Group, etc.) highlights the importance of careful vetting and compliance within the franchisee's entire organization.