Does Hardees have a right of first refusal regarding a proposed Developer Transfer?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
If the offer to Developer involves assets in addition to this Agreement, Developer's Franchised Restaurants and other restaurants operated by Developer that are franchised by HR or its affiliates, Developer's notice to HR shall state the cash value of that portion of the offer received by Developer relating to this Agreement and those restaurants. If the proposed Transfer provides for payment of consideration other than cash or it involves intangible benefits, HR or its designee may elect to purchase the interest proposed to be sold for the reasonable equivalent in cash. If the parties are unable to agree within 30 days on the reasonable equivalent in cash of the non-cash part of the offer received by Developer, or the cash value of that portion of the offer received by Developer relating to this Agreement, Developer's Franchised Restaurants and those other restaurants, the amount shall be determined by two professionally certified appraisers, Developer selecting one and HR or its designee selecting one. If the higher appraisal is more than 10% greater than the other appraisal, the two appraisers shall select a third professionally certified appraiser who also shall determine the amount. The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and HR or its designee may exercise its right of first refusal within 30 days after being advised in writing of the decision of the appraisers. The cost of the appraisers shall be shared equally by the parties.
HR's failure to exercise its right of first refusal shall not constitute consent to the proposed Transfer nor a waiver of any other provision of this Section 10 with respect to a proposed Transfer. If HR does not exercise its right of first refusal, Developer may not thereafter Transfer the interest at a lower price or on more favorable terms than those that have been offered to HR. HR shall again be given a right of first refusal if a transaction does not close within 6 months after HR elected not to exercise its right of first refusal. In no event shall Developer offer the interest for sale or transfer at public auction, nor at any time shall an offer be made to the public to sell, transfer or assign, through any advertisement, either in the newspapers or otherwise, without first having obtained the written consent of HR to the auction or advertisement.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, Hardees retains a right of first refusal regarding a proposed Developer transfer. If a Developer intends to transfer their interest, they must first notify Hardees in writing, providing all relevant details of the offer.
If the offer to transfer includes assets beyond the Development Agreement and Hardees franchises, the Developer must specify the cash value attributable to the Development Agreement and Hardees restaurants. If the proposed transfer involves non-cash consideration, Hardees can elect to purchase the interest for the reasonable cash equivalent. If Hardees and the Developer cannot agree on the cash equivalent within 30 days, they each select a certified appraiser to determine the amount. If the higher appraisal exceeds the lower one by more than 10%, a third appraiser is selected, and the average of the appraisals is used. Hardees then has 30 days after being informed of the appraisal decision to exercise its right of first refusal.
Hardees' failure to exercise its right of first refusal does not constitute approval of the transfer or waive any other transfer-related provisions. If Hardees declines to exercise its right, the Developer cannot transfer the interest at a lower price or on more favorable terms than those initially offered to Hardees. If the transaction does not close within 6 months after Hardees' declination, Hardees is again granted a right of first refusal. The Developer is prohibited from offering the interest for sale at public auction or through public advertisement without Hardees' prior written consent.
This right of first refusal allows Hardees to maintain control over who becomes a Developer within their system, ensuring that any new Developer meets their standards and is a good fit for the brand. This is a common practice in franchising, as franchisors want to ensure that new franchisees or developers are qualified and will uphold the brand's reputation and standards.