What happens to the goodwill when Hardees sells restaurants to franchisees?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
When we sell restaurants to franchisees, we remove the related goodwill, which is based on the relative fair value of the restaurants sold and the reporting unit as a whole, from our company-operated restaurants reporting unit. A portion of the goodwill, representing the cash flows disposed, is included in the carrying amount of the restaurants in determining the gain or loss on refranchising. The portion of the goodwill disposed is generally based on the price paid to the Company to acquire the restaurants in relation to the fair value of the reporting unit as a whole. The fair value of the reporting unit is based upon the price a willing buyer would pay for the reporting unit. The remaining goodwill related to the divested restaurants, which is attributable to retained cash flows, is transferred from our company-operated restaurants reporting unit to our domestic franchised restaurants reporting unit.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, when Hardees sells restaurants to franchisees, the related goodwill is removed from the company-operated restaurants reporting unit. This goodwill is calculated based on the relative fair value of the restaurants being sold compared to the reporting unit as a whole. A portion of this goodwill, which represents the cash flows disposed of, is included in the carrying amount of the restaurants when determining the gain or loss from refranchising.
The portion of goodwill that is disposed of is generally based on the price paid to Hardees to acquire the restaurants in relation to the fair value of the entire reporting unit. The fair value of the reporting unit is determined by the price a willing buyer would pay for it. This means that the value of the goodwill is tied to the actual market value and sale price of the restaurants.
Any remaining goodwill from the divested restaurants, which is attributable to retained cash flows, is then transferred from Hardees's company-operated restaurants reporting unit to their domestic franchised restaurants reporting unit. This transfer ensures that the goodwill associated with the ongoing benefits of the franchise system is appropriately allocated within Hardees's financial reporting structure.