What method does Hardees use to compute depreciation for property and equipment?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based on the assets' estimated useful lives, which generally range from three to 40 years.
Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the related lease terms. The amortization period for leasehold improvements includes renewal option periods only in instances in which the exercise of the renewal option is reasonably certain at the acquisition date because failure to exercise such option would result in an economic penalty.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company calculates depreciation for property and equipment using the straight-line method. This method evenly distributes the cost of an asset over its estimated useful life.
For Hardees, the estimated useful lives of their assets typically range from three to 40 years. This means that the cost of an asset will be divided evenly over this period to determine the annual depreciation expense. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the related lease terms.
This approach is commonly used in the franchise industry because of its simplicity and ease of calculation. It provides a consistent and predictable way to account for the decline in value of assets over time. For a prospective franchisee, understanding the depreciation method is important for financial planning and forecasting, as it directly impacts the reported profitability of the business.