If the Addendum is terminated during the first three years of a Hardees Franchised Restaurant's operation, what happens to the royalty fee and APO?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3. Termination of Program Incentives. This Addendum and the Program will terminate following written notice to Franchisee if:
- A. Franchisee fails to open the Franchised Restaurant on or before 120 days after the contractual opening date pursuant to the terms of the Franchisee's Development Agreement or Franchise Agreement; or
- B. Franchisee or any affiliate of Franchisee receives, during the first three years of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between Franchisee or any affiliate of Franchisee and HR or any affiliate of HR and fails to cure the default within the applicable cure period, if any.
- 4. Effect of Termination. If this Addendum is terminated during the first three years of the Franchised Restaurant's operation under the Franchise Agreement, the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, specifically regarding the termination of program incentives outlined in the Addendum, if the Addendum is terminated during the first three years of a Hardees restaurant's operation, the royalty fee and APO (Advertising Pool Obligation) will revert to the amounts specified in the original Franchise Agreement.
This means that any reduced royalty fee or APO that the franchisee was benefiting from under the Addendum will no longer apply. The franchisee will then be obligated to pay the standard royalty and APO fees as outlined in the original Franchise Agreement, which could be a significant increase in ongoing costs.
Termination of the Addendum can occur if the Hardees franchisee fails to open the restaurant within 120 days of the contractual opening date or if the franchisee receives a notice of default under any agreement with Hardees and fails to cure it within the given timeframe. Therefore, it is crucial for a prospective Hardees franchisee to understand the terms of both the Addendum and the original Franchise Agreement to be fully aware of the financial implications of a potential termination.