During the Development Term for a Hardees franchise, can the Developer own or operate a restaurant business where sales of Designated Entrée Items account for 20% or more of the restaurant's sales during any daypart without prior written consent from HR?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Own, maintain, operate, engage in, grant a franchise to, advise, help, make loans to, lease property to sell the real property underlying any Franchised Restaurant and related assets to, or have any interest in, either directly or indirectly, any restaurant business: (i) whose sales of Designated Entrée Items (as defined below) during any daypart are reasonably likely to account collectively for 20% or more of the restaurant's sales of all entrée items during that daypart; (ii) that features or promotes any Designated Entrée Item in its advertising; or (iii) that operates in a quick-service format (with or without table service).
For purposes of the previous sentence, the term "Designated Entrée Items" means any
hamburger sandwich, chicken sandwich, breakfast sandwich and any other entrée item of a type designated by HR as part of the Hardee's System or by HR at any time during the Development Term. During the Development Term, there is no geographical limitation on this restriction. Following the expiration, transfer or termination of this Agreement, this restriction shall apply within the Development Territory, within 2 miles of the border of the Development Territory and within a 2-mile radius of any then-existing Hardee's Restaurant. This restriction shall not apply to Developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B, nor shall it apply to other restaurants operated by Developer that are franchised by HR or its affiliates.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, during the Development Term, a developer is restricted from owning or operating any restaurant business where sales of 'Designated Entrée Items' are reasonably likely to account for 20% or more of the restaurant's sales during any daypart, unless they obtain prior written consent from HR (Hardees Restaurants LLC). 'Designated Entrée Items' include hamburger sandwiches, chicken sandwiches, breakfast sandwiches, and any other entrée item designated by HR as part of the Hardee's System. This restriction applies without geographical limitation during the Development Term.
This restriction is in place to protect Hardees's trade secrets, specialized training, and confidential information related to the Hardee's system. Hardees believes that allowing developers to hold interests in competing businesses would hinder their ability to protect the Hardee's System and encourage the free exchange of ideas among operators. The FDD states that all restaurants operating in a quick-service format are substantial and direct competitors of the Hardee's System.
After the Development Term expires, is transferred, or is terminated, the restriction applies within the Development Territory, within 2 miles of the border of the Development Territory, and within a 2-mile radius of any then-existing Hardee's Restaurant. However, this restriction does not apply to the Developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B, nor does it apply to other restaurants operated by the Developer that are franchised by HR or its affiliates.
This clause ensures that developers remain focused on growing the Hardees brand and do not divert resources or knowledge to competing ventures. A prospective franchisee should carefully review Appendix B to understand any existing operations that are exempt from this restriction and consider the implications of this restriction on any future business ventures.