Under what circumstances will the 2025 DIP Addendum be terminated for a Hardees franchise?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
If your Franchised Restaurant does not qualify for the 2025 HR Travel Center Development Incentive Program because: (1) the Franchised Restaurant opens on an address only basis pursuant to a Franchise Agreement that is not part of a Development Agreement, or (2) the Franchised Restaurant location does not meet the requirements of the Travel Center Program – meaning, the location is not within ½ mile of an interstate or limited access highway and/or does not have the signage required to be eligible for the Travel Center Program (combination of high rise pylon sign, billboard or other highway sign) then we and you will sign the 2025 DIP Addendum attached to this Disclosure Document as Exhibit L. Under the terms of the 2025 DIP Addendum, we will reduce the royalty fee and APO by (i) 3% of Gross Sales accruing during the Restaurant's first year of operation; (ii) 2% of Gross Sales accruing during the second year of operation; and (iii) 1% of Gross Sales accruing during the third year of operation. After the third year of operation the royalty fee reverts back to 4% of Gross Sales and the APO fee reverts back to 5.5% of Gross Sales. If you or any of your affiliates receive, during the initial term of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between you or any of your affiliates and HR or any affiliate of HR and fails to cure the default within the applicable cure period, the 2025 DIP Addendum will be terminated and the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
Source: Item 6 — OTHER FEES (FDD pages 29–36)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the 2025 DIP Addendum can be terminated if a franchisee or their affiliates receive a written notice of default under any agreement with HR (Hardees Restaurants) or its affiliates during the initial term of operation of the franchised restaurant, and fail to cure that default within the applicable cure period. If this occurs, the 2025 DIP Addendum will be terminated, and the royalty fee and Advertising and Promotional Obligation (APO) for the Hardees restaurant will immediately revert to the amounts specified in the Franchise Agreement. This applies whether the franchisee qualifies for the HR Travel Center Development Incentive Program or not.
For franchisees participating in the HR Travel Center Development Incentive Program, the royalty fee is reduced for the first three years of operation. For those signing a Development Agreement for ten or more restaurants, the royalty fee is reduced by 3% of gross sales in the first year, 2% in the second, and 1% in the third, reverting to 5% thereafter. The APO fee is reduced to 2% of gross sales for the full 20-year term. For those signing a Development Agreement for more than three and up to nine restaurants, the royalty fee reductions are the same, but the APO fee is reduced to 3% of gross sales for the full 20-year term.
For franchisees whose restaurants do not qualify for the HR Travel Center Development Incentive Program, the royalty fee and APO are reduced by the same percentages (3%, 2%, and 1% for the first three years). After the third year, the royalty fee reverts to 4% of gross sales, and the APO fee reverts to 5.5% of gross sales. Regardless of which DIP Addendum applies, failure to cure a default notice will result in its termination and a return to the standard royalty and APO fees outlined in the Franchise Agreement. This condition underscores the importance of maintaining compliance with all agreements with Hardees and its affiliates to retain the benefits of the DIP Addendum.