Under what circumstances does Hardees reassess lease classification and remeasure assets and lease liabilities?

According to Hardees's 2025 Franchise Disclosure Document, Hardees will reassess lease classifications and remeasure assets and lease liabilities under specific circumstances. This reassessment occurs when a lease is modified, but not in a way that it's accounted for as a separate contract. Additionally, certain other events can trigger the need for reassessment.

This policy is important for prospective Hardees franchisees because lease obligations can significantly impact their financial statements. If a lease is modified, perhaps through renegotiated terms or an extension, Hardees will determine if the changes necessitate a reclassification of the lease (e.g., from an operating lease to a finance lease) or a remeasurement of the associated assets and liabilities. This could affect the franchisee's reported expenses, assets, and liabilities, which in turn impacts their profitability and balance sheet.

The document also mentions that Hardees recognizes variable lease costs for both operating and finance leases during the period when changes in the underlying facts and circumstances that determine these variable lease payments occur. This means that if factors like market rates or usage change, affecting the lease payments, Hardees will account for these changes in the period they happen. Franchisees should be aware of how these variable costs are determined and how they might fluctuate, as this can affect their ongoing operational expenses.

Understanding these accounting practices is crucial for franchisees to accurately interpret their financial statements and make informed business decisions. It is advisable for prospective franchisees to seek clarification from Hardees regarding the specific events that would trigger a lease reassessment and how variable lease costs are calculated to fully understand the potential financial implications.