How many restaurant properties has Hardees entered into sale-leaseback agreements for?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
,291) | | (63,214) | | | | | | | | Lease obligations, less current portion | $ | 14,986 | $ | 6,293 | $ | 85,449 | $ | 253,159 | | | | | | | Net rent under non-cancelable operating leases was as follows:
| Fiscal 2025 | Fiscal 2024 | |
|---|---|---|
| Rent revenue: | ||
| Minimum rent revenue | $ 86,996 | $ 90,450 |
| Variable lease payments | 5,713 | 6,700 |
| Total rent revenue | 92,709 | 97,150 |
| Rent expense: | ||
| Operating lease cost | (88,491) | (92,340) |
| Variable lease cost | (1,593) | (1,854) |
| Total operating lease cost | (90,084) | (94,194) |
| Net rent income | $ 2,625 | $ 2,956 |
Lease Term and Discount Rate as of January 31,
Weighted-average remaining lease term:
| 2025 | 2024 | |
|---|---|---|
| Finance leases | 12.28 years | 12.11 years |
| Operating leases | 7.25 years | 7.67 years |
| Weighted-average discount rate: | ||
| 2025 | 2024 | |
| Finance leases | 6.2 % | 6.5 % |
| Operating leases | 2.6 % | 2.4 % |
NOTE 10 — SALE-LEASEBACK TRANSACTIONS
We currently have entered into agreements with independent third parties under which we sold and leased back a total of 125 restaurant properties. The initial minimum lease terms are 20 years and include renewal options. The leases also include provisions that provide us with the ability to repurchase the properties, which for accounting purposes, prevents sale recognition as the leased properties are real estate, and we have concluded that no two real estate assets are substantially the same.
Under the financing method, the sales proceeds received are recorded in other current liabilities and other long-term liabilities until our continuing in
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company has engaged in sale-leaseback transactions with independent third parties. As of January 31, 2025, Hardees had a total of 125 restaurant properties under these agreements. The initial minimum lease terms for these properties are 20 years and include renewal options. These leases also give Hardees the option to repurchase the properties.
Under the financing method used, the proceeds from these sales are recorded as liabilities until Hardees's involvement with the properties concludes. The properties themselves are reported as owned assets and are depreciated over their remaining useful lives. Rent payments are recorded as principal and interest. The net book value of these assets was $113,775 as of January 31, 2025, and $115,805 as of January 31, 2024.
During fiscal year 2025, one of Hardees's restaurant property lease agreements was terminated. As a result, Hardees recognized a net gain of $1,086 due to the write-off of related assets and liabilities, which is included in facility action charges in the Consolidated Statements of Operations. Closing costs and other fees associated with these sale-leaseback transactions are treated as deferred financing costs, reducing the liability balance and amortized to interest expense over the initial lease term.
Sale-leaseback agreements can be a complex financial strategy. For a prospective franchisee, this indicates that Hardees manages its real estate and financing in a specific way that impacts its financial statements. Understanding these arrangements is crucial for assessing the financial health and stability of the franchisor.