Under what circumstances does Hardees include renewal option periods in the amortization period for leasehold improvements?

According to Hardees's 2025 Franchise Disclosure Document, the amortization period for leasehold improvements may include renewal option periods under specific conditions. Hardees will only include renewal option periods in the amortization if the exercise of the renewal option is reasonably certain at the time of acquisition.

This means that when a Hardees franchisee makes leasehold improvements to their restaurant location, the costs of those improvements are typically spread out over the shorter of the estimated useful life of the improvements or the term of the lease. However, if it is highly likely that the franchisee will renew the lease because not doing so would result in a significant economic penalty, Hardees may extend the amortization period to include the renewal period.

For a prospective Hardees franchisee, this policy could affect how quickly they can deduct the cost of leasehold improvements as a business expense. If a renewal option is included in the amortization period, the annual amortization expense will be lower, but it will continue for a longer time. If the renewal option is not included, the annual expense will be higher, but the expense will be fully realized over a shorter period. Franchisees should carefully consider the terms of their lease and the likelihood of renewal when planning for leasehold improvements.