When does Hardees recognize variable lease payment income for operating and financing leases?

According to Hardees's 2025 Franchise Disclosure Document, the company recognizes variable lease payment income for both operating and financing leases in a specific accounting period. This period is defined as the time when changes in the facts and circumstances that the variable lease payments are based on actually occur.

For a prospective Hardees franchisee, this accounting practice is relevant if they sublease property from Hardees. If the lease payments they receive are variable (i.e., they change based on some condition), Hardees will only recognize that income when the underlying condition changes.

This accounting treatment ensures that Hardees's financial statements accurately reflect income in the periods it is actually earned, based on real-world changes affecting lease payments. This is a standard accounting practice, as it aligns revenue recognition with the economic substance of the lease agreement.