What are the reporting units that Hardees considers when testing goodwill for impairment?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
We test goodwill for impairment on an annual basis, or more frequently if events and/or circumstances indicate that goodwill might be impaired. The impairment test is performed at the reporting unit level, and an impairment loss is recognized to the extent that the carrying amount of the reporting unit exceeds its fair value. We consider our reporting units to be company-operated restaurants, domestic franchised restaurants and international franchised restaurants as the components (e.g., restaurants) within each reporting unit have similar economic characteristics, including products and services, production processes, types or classes of customers and distribution methods.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company conducts its goodwill impairment test at the reporting unit level. Hardees considers three distinct reporting units: company-operated restaurants, domestic franchised restaurants, and international franchised restaurants.
These reporting units are determined based on the similar economic characteristics of the restaurants within each unit. This includes factors such as the products and services offered, the production processes used, the types or classes of customers served, and the distribution methods employed. By grouping restaurants with similar economic traits, Hardees aims to ensure a consistent and accurate assessment of goodwill impairment.
For a prospective franchisee, this means that the financial performance and characteristics of their franchised restaurant will be evaluated as part of the larger 'domestic franchised restaurants' reporting unit. The performance of individual franchise locations contributes to the overall assessment of goodwill impairment for that unit. This also means that when Hardees sells restaurants to franchisees, the goodwill associated with those restaurants is transferred from the company-operated unit to the domestic franchised restaurants unit, affecting the goodwill assessment of both.