How does Hardees recognize compensation expense relating to time vesting profit sharing interests?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
Our equity-based compensation structure includes both time vesting and performance vesting profit sharing interests. We recognize compensation expense relating to time vesting profit sharing interests ratably over the requisite service period for the entire award. Performance vesting profit sharing interests vest through meeting performance and service conditions. We record compensation expense for performance vesting profit sharing interests when we deem the achievement of the performance goals to be probable. We recognize compensation expense for each separately vesting portion of performance vesting profit sharing interests ratably over the requisite service period that is determined to be the most likely outcome. We record reversals of share-based compensation expense for forfeitures as they occur. Our share-based compensation structure is described more fully in Note 17.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company's equity-based compensation structure includes both time vesting and performance vesting profit sharing interests. Hardees recognizes compensation expense relating to time vesting profit sharing interests ratably over the requisite service period for the entire award. This means that the total value of the time-vesting profit-sharing interest is spread out evenly as an expense over the period the employee is required to work to earn those interests.
For performance vesting profit sharing interests, which vest upon meeting specific performance and service conditions, Hardees records compensation expense when it deems the achievement of the performance goals to be probable. If there are separately vesting portions, Hardees recognizes compensation expense for each portion ratably over the service period, based on the most likely outcome.
Hardees also records reversals of share-based compensation expense for forfeitures as they occur. This indicates that if an employee leaves the company or fails to meet the vesting conditions, the previously recognized compensation expense is reversed, reducing the company's overall expenses. The details of Hardees's share-based compensation structure are further described in Note 17 of the financial statements.