Must all of a Hardees franchisee's accrued monetary obligations to HR and its affiliates be satisfied before a transfer can occur?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- (3) All of Franchisee's accrued monetary obligations to HR and its affiliates (whether arising under this Agreement or otherwise) and all other outstanding obligations related to the Franchised Restaurant (including, but not limited to, bills from suppliers, taxes, judgments and any required governmental reports, returns, affidavits or bonds) have been satisfied or, in the reasonable judgment of HR, adequately provided for.
HR reserves the right to require that a reasonable sum of money be placed in escrow to ensure that all of these obligations are satisfied.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, a franchisee must satisfy all accrued monetary obligations to HR (Hardees Restaurants LLC) and its affiliates before a transfer of the franchise can occur. This includes obligations arising under the Franchise Agreement or otherwise. The franchisee must also satisfy all other outstanding obligations related to the franchised restaurant, such as supplier bills, taxes, judgments, and required governmental reports.
Hardees retains the right to ensure these obligations are met, even to the point of requiring a reasonable sum of money to be placed in escrow. This protects Hardees and its affiliates from potential financial losses or legal issues arising from unpaid debts or non-compliance by the transferring franchisee.
This requirement is fairly standard in franchising, as franchisors typically want to ensure that a transfer does not negatively impact the brand's reputation or financial stability. By requiring satisfaction of all outstanding obligations, Hardees aims to maintain a clean financial slate and ensure the new franchisee starts with a solid foundation. This also protects suppliers and other creditors associated with the Hardees restaurant.