What specific restrictions in the Hardees Agreement's Section 12 are the Guarantors personally bound by?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
**1.
Guarantee To Be Bound by Certain Obligations.** Guarantors hereby personally and unconditionally guarantee to HR and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement or at law or in equity, that each will be personally bound by the restrictions contained in Section 12 of the Agreement.
- **2.
Guarantee and Assumption of Developer's Obligations.** Guarantors hereby: (A) guarantee to HR and its successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement or at law or in equity, that Developer and any assignee of Developer's interest under the Agreement shall: (1) punctually pay and perform each and every undertaking, agreement and covenant set forth in the Agreement and (2) punctually pay all other monies owed to HR and/or its affiliates; (B) agree to be personally bound by each and every provision in the Agreement, including, without limitation, the provisions of Sections 12 and 16; and (C) agree to be personally liable for the breach of each and every provision in the Agreement.
E. Applicability
The restrictions contained in this Section 12 shall apply to Developer and all guarantors of Developer's obligations. With respect to each guarantor, these restrictions shall apply until 2 years after the earlier of: (i) the expiration, Transfer or termination of this Agreement; or (ii) the date the guarantor ceases to be the Development Principal, a stockholder, member of the Continuity Group or a 10% Owner (or, if a guarantor is the spouse of a person holding one or more of these positions, the date the person ceases to hold the applicable positions). The restrictions contained in this Section 12 shall not apply to ownership of less than a 5% legal or beneficial ownership in the outstanding equity securities of any publicly held corporation. The existence of any claim Developer or any guarantor of Developer's obligations may have against HR or its affiliates, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by HR of the covenants in this Section 12.
(2) Accordingly, Developer covenants and agrees that, except with HR's prior written consent, during the Development Term, and for a continuous period of 2 years following its expiration, Transfer, or termination, Developer shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person, firm, partnership, corporation, or other entity:
(a) Divert or attempt to divert any business or customer, or potential business or customer, of any Hardee's Restaurant to any competitor, by direct or indirect inducement or otherwise.
Notwithstanding the provisions of the previous sentence, unless prohibited by applicable law, the obligations contained in Section 12.C. of the Agreement shall remain in force and effect for a period of 2 years after any such release by HR.
Developer acknowledges and agrees that violation of the covenants contained in this Section 12 will result in immediate and irreparable injury to HR for which money damages are not an adequate remedy. Therefore, in addition to being responsible for any damages caused to HR arising from Developer's violation of this Section 12, HR shall be entitled to seek the entry of an injunction prohibiting any conduct by Developer in violation of this Section 12.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the guarantors are personally bound by the restrictions outlined in Section 12 of the Hardees Agreement. Specifically, the guarantors guarantee to Hardees that they will be personally bound by these restrictions for the term of the agreement and thereafter, as provided in the agreement or at law or in equity. This obligation extends to ensuring that the developer (franchisee) adheres to all undertakings, agreements, and covenants set forth in the agreement, including the punctual payment of all monies owed to Hardees and its affiliates.
Section 12 includes restrictions related to trade secrets, confidential information, and competitive activities. The developer acknowledges that they will have access to valuable trade secrets and confidential information regarding the Hardees system. Consequently, the developer agrees not to divert business or customers to competitors, either directly or indirectly, during the development term and for two years following its expiration, transfer, or termination.
The restrictions in Section 12 apply to the developer and all guarantors of the developer's obligations. For each guarantor, these restrictions remain in effect until two years after the earlier of the expiration, transfer, or termination of the agreement, or the date the guarantor ceases to be a Development Principal, a stockholder, member of the Continuity Group, or a 10% Owner. These restrictions do not apply to ownership of less than a 5% legal or beneficial ownership in the outstanding equity securities of any publicly held corporation. Hardees has the right to seek injunctive relief to prevent any conduct by the developer that violates Section 12, as any violation would result in immediate and irreparable injury to Hardees for which money damages are not an adequate remedy.
Furthermore, if a guarantor ceases to be a member of the Continuity Group, a 10% Owner, or own any direct or indirect interest in the developer or any of the franchised restaurants, the obligations under the guarantee continue for two years after any release by Hardees, unless otherwise prohibited by applicable law. This ensures that even if a guarantor's direct involvement with the franchise changes, they remain bound by the restrictions in Section 12 for a specified period, protecting Hardees's interests and the integrity of the Hardees system.