Does Hardees require franchisee consent for HR to transfer its rights and obligations under the Franchise Agreement?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
A. Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that HR has entered into this Agreement in reliance on Franchisee's (and Franchisee's direct and indirect owners') business skill, financial capacity, personal character, experience and demonstrated or purported ability in developing and operating high quality foodservice operations. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly has an interest in Franchisee shall sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in Franchisee, this Agreement, the Franchise, the Franchised Restaurant, the assets of the Franchised Restaurant, the Franchised Location or any other assets pertaining to Franchisee's operations under this Agreement (collectively "Transfer") without the prior written consent of HR, unless otherwise permitted by this Section.
Except as otherwise provided in this Agreement, any purported Transfer, by operation of law or otherwise, not having the prior written consent of HR shall be null and void and shall constitute a material breach of this Agreement, for which HR may terminate this Agreement without providing Franchisee an opportunity to cure the breach.
- B. Franchisee shall advise HR in writing of any proposed Transfer, submit (or cause the proposed transferee to submit) a franchise application for the proposed transferee, submit a copy of all contracts and all other agreements or proposals and submit all other information requested by HR relating to the proposed Transfer. If HR does not exercise its right of first refusal pursuant to Section 18.J., the decision as to whether or not to consent to a proposed Transfer shall be made by HR in its sole discretion and shall include numerous factors deemed relevant by HR. These factors may include, but will not be limited to, the following:
- (1) The proposed transferee (and if the proposed transferee is not a natural person, all persons that have any direct or indirect interest in the transferee as HR may require) must demonstrate to HR's satisfaction extensive experience in high quality restaurant operations of a character and complexity similar to Hardee's Restaurants; must meet the managerial, operational, experience, quality, character and
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
Based on the 2025 Hardees Franchise Disclosure Document, the agreement specifies that franchisees need prior written consent from HR (presumably Hardees Restaurants) to transfer any interest in the franchise agreement. This includes selling, assigning, or otherwise encumbering any direct or indirect interest in the franchise, the restaurant, its location, or assets. Any transfer without this consent is considered a material breach of the agreement, potentially leading to termination without an opportunity to rectify the situation.
To initiate a transfer, a Hardees franchisee must inform HR in writing and ensure the proposed transferee submits a franchise application along with all relevant contracts and information. HR has the sole discretion to approve or deny the transfer, considering factors such as the transferee's experience in similar restaurant operations, their financial stability, and their management culture's compatibility with Hardees' standards.
HR's decision regarding the transfer does not create any liability for HR, whether they consent to the transfer and the transferee faces financial difficulties, or if they withhold consent altogether. HR has the right to communicate with both the franchisee and the proposed transferee about the transfer. This comprehensive process underscores Hardees' control over who operates its franchises and ensures that new franchisees meet their standards.
Furthermore, franchisees cannot grant any security interest in their Hardees business, restaurant, location, or assets without HR's prior written consent, which will not be unreasonably withheld. HR can condition its consent on the secured party agreeing that HR has the option to purchase the secured party's rights if the franchisee defaults. If the franchisee finances any part of the transfer, the financing entity must agree that its obligations are subordinate to the transferee's obligations to HR.