For Hardees, what specific expenses are included within the total interest expense?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
n covenants or restrictions are not satisfied or complied with, the Senior Notes are subject to accelerated repayment events and events of default. Although management does not anticipate an event of default, if any such event occurred and was not cured within any applicable cure period, the unpaid amounts outstanding could become immediately due and payable.
Refinancing Transaction
In April 2024, the Co-Issuers completed a refinancing transaction (the "Series 2024-1 Refinancing") under which the Co-Issuers issued the Series 2024-1 Class A-2 Notes. A portion of the net proceeds from the sale of the Series 2024-1 Class A-2 Notes were used to repay in full the Co-Issuer's outstanding Series 2018-1 Class A-2-II Notes, including transaction costs. As a result of the refinancing, the Company recorded a loss
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the company incurred debt issuance costs of $7,860 related to the Series 2024-1 Refinancing and the amendment of the Series 2018-1 Variable Funding Notes. These costs were capitalized and allocated between the Series 2024-1 Class A-2 Notes and the Series 2018-1 Variable Funding Notes.
These deferred financing costs are amortized to interest expense within the Consolidated Statements of Operations using the effective interest method. The amortization period is over the expected term of the Series 2024-1 Class A-2 Notes, which is seven years, and five years for the Series 2018-1 Variable Funding Notes. This means that the initial cost of $7,860 is not recognized immediately as an expense but is spread out over the life of the notes, impacting the interest expense each year.
Additionally, in connection with the acquisition of Hardee's restaurants from a franchisee, Hardees assumed a $2,100 unsecured note. A payment of $200 was made on November 20, 2020, and the remaining $1,900 was paid down on July 25, 2023. The interest expense would also include any interest accrued and paid on this unsecured note until it was fully paid off. This provides a detailed breakdown of what constitutes Hardees's interest expense, including the amortization of debt issuance costs and interest on assumed notes.