How does Hardees record gains and losses on the sale of restaurants?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
(iii) Gain or Loss on the Sale of Restaurants, Including Refranchising Transactions
We record gains and losses on the sale of restaurants as the difference between the net proceeds received and net carrying values of the net assets of the restaurants sold. As discussed within the section "Goodwill and Intangible Assets" in this Note 1, we include goodwill in the carrying amount of the restaurants in determining the gain or loss on disposal. If we sublease a restaurant to a franchisee on terms that result in a probable loss, then we will establish a lease subsidy allowance and record a loss at the time we enter into the lease arrangement. As further described above, the amount of the estimated liability for the lease subsidy is the present value of our estimated future payments, net of the present value of the expected sublease income.
Refranchising Transaction
During fiscal 2024, we sold one Hardee's restaurant and certain related inventory and fixed assets with a net book value of $1,267 and disposed of its allocated goodwill of $662. In connection with the sale of this restaurant, we received aggregate consideration of $2,082, and recognized a net gain of $153, which is included in facility action charges, net, in our
accompanying Consolidated Statements of Operations. In connection with the refranchising transaction, the franchisee acquired real property and equipment related to the restaurant location.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, gains and losses from restaurant sales are recorded as the difference between the net proceeds received and the net carrying values of the restaurant's net assets. This calculation includes goodwill in the carrying amount when determining the gain or loss on disposal.
If Hardees subleases a restaurant to a franchisee and anticipates a loss due to the lease terms, they establish a lease subsidy allowance and record a loss at the time the lease arrangement is made. The estimated liability for this lease subsidy is the present value of Hardees's estimated future payments, minus the present value of expected sublease income.
For instance, during fiscal year 2024, Hardees sold one of its restaurants, along with related inventory and fixed assets, which had a net book value of $1,267 and an allocated goodwill of $662. The total consideration received was $2,082, resulting in a net gain of $153. This gain was then included in facility action charges, net, within Hardees's Consolidated Statements of Operations. In this specific refranchising transaction, the franchisee acquired the real property and equipment associated with the restaurant location.