Does HR have a fiduciary obligation to Hardees franchisees with respect to HNAF?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
HR or its designee will administer HNAF. The HNAF is not a trust or escrow account, and HR has no fiduciary obligation to franchisees with respect to it. HR has the right to terminate HNAF and establish, if HR so elects, a different advertising fund. HR also has the right to terminate (and subsequently restart) any Regional Co-op. HR may incorporate any fund and may have a separate entity manage the fund.
Unaudited reports of the operations of HNAF and the Regional Co-ops are prepared annually and are available to you upon written request.
Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 44–57)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, HR (presumably Hardees Restaurants Inc.) does not have a fiduciary obligation to franchisees regarding the Hardee's National Advertising Fund (HNAF). The FDD explicitly states that the HNAF is not a trust or escrow account. This means that Hardees is not legally bound to act in the best financial interests of its franchisees when managing the advertising fund.
This lack of fiduciary duty gives Hardees significant discretion in how HNAF funds are spent. While unaudited reports of HNAF operations are available to franchisees upon written request, Hardees has the right to terminate HNAF, establish a different advertising fund, or even incorporate the fund under a separate entity. Franchisees contribute a percentage of their gross sales to HNAF, and Hardees determines how these funds are allocated for advertising, marketing, and public relations programs.
For a prospective Hardees franchisee, this means accepting that Hardees has broad control over advertising funds without a legal obligation to prioritize individual franchisee benefit. While Hardees contributes to HNAF on the same basis as franchisees, and aims to spend advertising payments in the year they are received (or the following year), there's no guarantee that advertising expenditures will directly benefit each franchisee proportionally to their contribution. Franchisees should carefully consider this aspect and review the unaudited HNAF reports to understand how the funds are being utilized.