If a Hardees franchise agreement is terminated due to the franchisee's default, what damages, besides outstanding sums, is the franchisee obligated to pay Hardees?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition, if this Agreement is terminated following Franchisee's default, since it would be difficult, if not impossible, to determine the amount of damages that HR will suffer as a result of Franchisee's breach, unless waived by HR in its sole discretion, Franchisee immediately shall pay HR, as damages and not as a penalty, the royalty fee that Franchisee would have paid during the period ("Damages Period") from the effective date of termination to the earlier of: (1) the 3 year anniversary of the effective date of termination; or (2) the date on which the Initial Term was scheduled to expire.
The amount of such royalty fee during the Damages Period will be calculated by multiplying the average weekly royalty fee owed by Franchisee for the 52-week period prior to the effective date of termination by the number of weeks in the Damages Period.
The obligation to pay this royalty fee survives termination of this Agreement and is in addition to, and not in lieu of, Franchisee's obligation to fully comply with its obligations under Section 20.C. following termination of this Agreement.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, if the Franchise Agreement is terminated following the franchisee's default, the franchisee must pay Hardees the royalty fees that would have been paid during a specific period as damages. This period extends from the termination date to either the 3-year anniversary of the termination date or the original expiration date of the initial term, whichever comes first.
The amount owed by the Hardees franchisee is calculated by taking the average weekly royalty fee from the 52-week period before the termination date and multiplying it by the number of weeks in the 'Damages Period.' This obligation to pay the royalty fee continues even after the termination of the agreement.
This payment is in addition to the franchisee's obligation to comply with their duties under Section 20.C of the agreement following termination. Hardees may waive this payment at its discretion. This clause is designed to compensate Hardees for the anticipated losses resulting from the franchisee's breach, acknowledging the difficulty in precisely determining the actual damages.