In Hardees' financial statements, what methods are used to estimate self-insured claim losses under workers' compensation, general liability, and auto liability insurance programs?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
assets consist of franchise agreements and favorable lease agreements and are amortized on a straight-line basis over their estimated useful lives. Our definite-lived intangible assets are tested for impairment when events or circumstances indicate the carrying value may be impaired. Refer to discussion of facility action charges (see Note 16) for a discussion of impairment of restaurant-level long-lived assets.
Deferred Financing Costs
Deferred financing costs are capitalized and amortized, utilizing the effective interest method, as a component of i
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company is self-insured for a portion of losses related to workers' compensation, general liability, and auto liability claims. To estimate these self-insured claim losses, Hardees uses actuarially determined methods.
Specifically, Hardees establishes liabilities for self-insurance with the assistance of actuaries. The assumptions used are based on the average historical losses on claims Hardees has incurred, actuarial observations of historical claim loss development, and actuarial estimates of unpaid losses for each loss category. As of January 31, 2025, Hardees discounted these claims using an estimated risk-free interest rate of 3.5%.
As of January 31, 2025, Hardees' estimated liability for self-insurance was $12,134, compared to $13,113 as of January 31, 2024. This indicates a decrease in the estimated liability for self-insurance from the previous year. These estimations are crucial for Hardees' financial reporting, as they directly impact the reported amounts of liabilities on their balance sheets. Prospective franchisees should be aware that these self-insurance practices and estimations are subject to change and can affect the company's financial stability.