What was the reported value of Hardees' operating lease assets on January 31, 2024?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the\neffectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
KPMG LLP
Nashville, Tennessee April 10, 2024
CKE RESTAURANTS HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par values)
| Jan | uary 31, 2024 | Jan | uary 31, 2023 | |
|---|---|---|---|---|
| ASSETS | . ' | _ | ||
| Current assets: | ||||
| Cash and cash equivalents | . $ | 130,566 | $ | 107,853 |
| Cash and cash equivalents - restricted | 15,942 | 16,053 | ||
| Accounts receivable, net | 38,438 | 37,541 | ||
| Inventories | 3,029 | 2,999 | ||
| Prepaid expenses | 13,562 | 6,183 | ||
| Other current assets | 80 | 83 | ||
| Total current assets | 201,617 | " | 170,712 | |
| Property and equipment, net | 377,436 | 371,572 | ||
| Operating lease assets | 424,719 | 448,064 | ||
| Goodwill | 539,421 | 540,083 | ||
| Intangible assets, net | 777,538 | 793,030 | ||
| Other assets, net | 40,485 | 29,806 | ||
| Total assets | . $ | 2,361,216 | $ | 2,353,267 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities: | ||||
| Current portion of long-term debt | . $ | 11,800 | $ | 13,700 |
| Current portion of |
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the reported value of their operating lease assets as of January 31, 2024, was $424,719. This figure reflects the company's rights to use leased assets, primarily real estate for restaurant locations, for the term of the leases. Operating leases are a common arrangement in the restaurant industry, allowing Hardees to expand its footprint without significant capital expenditure on property acquisition.
For a prospective Hardees franchisee, understanding the nature and extent of these operating lease assets is crucial. It provides insight into the company's long-term obligations and potential liabilities related to leased properties. Reviewing the lease terms, including renewal options and rent escalation clauses, is essential for assessing the financial viability of a franchise location. The value of operating lease assets can also indicate the scale and scope of Hardees's real estate portfolio, which may influence site selection and lease negotiation strategies for new franchisees.
It's important to note that the value of operating lease assets is subject to estimations and assumptions, as highlighted in the FDD. These estimations involve factors such as future cash flows, lease terms, and depreciable lives of leasehold improvements. Changes in these assumptions could impact the reported value of operating lease assets and, consequently, Hardees's financial position. Therefore, a prospective franchisee should carefully evaluate the underlying assumptions and consult with financial advisors to assess the potential risks and opportunities associated with leasing restaurant locations.
Furthermore, the FDD also mentions current and non-current portions of operating leases under liabilities. As of January 31, 2024, the current portion of operating leases was $79,623, and the operating leases less current portion was $366,233. This breakdown is important for understanding the short-term and long-term lease obligations of Hardees. A prospective franchisee should consider these obligations when evaluating the overall financial health and stability of the franchise system.