Under what circumstances can Hardees terminate the franchise agreement without providing an opportunity to cure?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
ion 20 shall apply to Franchisee and all guarantors of Franchisee'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 Operating 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 20 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 Franchisee or any guarantor of Franchisee'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 20.
At HR's request, unless otherwise prohibited by law, Franchisee will obtain covenants similar in substance to those set forth in this Section 20 from any of its stockholders, managers, directors, members, officers, or restaurant managers and from family members of guarantors.
F. Injunctive Relief
Franchisee acknowledges and agrees that violation of the covenants contained in this Section 20 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 Franchisee's violation of this Section 20, HR shall be entitled to seek the entry of an injunction prohibiting any conduct by Franchisee in violation of this Section 20.
21. TERMINATION
A. Termination Without Cure Period
In addition to the grounds for termination that may be stated elsewhere in this Agreement, HR may terminate this Agreement, and the rights granted by this Agreement, upon written notice to Franchisee without an opportunity to cure upon the occurrence of any of the following events:
(1) Franchisee ceases to continuously operate the Franchised Restaurant for a period in excess of 5 consecutive days, unless the closing is due to a Force Majeure or is approved in writing in
advance by HR. If the closing is due to fire or other natural disaster, Franchisee must rebuild and reopen the Franchised Restaurant within six months following the fire or other natural disaster event or such longer period of time as agreed to with HR.
- (2) Franchisee is insolvent or is unable to pay its creditors (including HR); files a petition in bankruptcy, an arrangement for the benefit of creditors or a petition for reorganization; there is filed against Franchisee a petition in bankruptcy, an arrangement for the benefit of creditors or petition for reorganization, which is not dismissed within 60 days of the filing; Franchisee makes an assignment for the benefit of creditors; or a receiver or trustee is appointed for Franchisee and not dismissed within 60 days of the appointment.
- (3) Execution is levied against Franchisee's business or property; suit to foreclose any lien or mortgage against the premises or equipment of the Franchised Restaurant is instituted against Franchisee and is not dismissed within 60 days;
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Hardees Restaurants LLC (HR) can terminate the franchise agreement without giving the franchisee a chance to fix the problem under several specific circumstances. These include if the franchisee stops operating the restaurant for more than five consecutive days, unless it's due to a major event like a natural disaster or if Hardees gives prior written approval. If the closure is due to fire or natural disaster, the franchisee has six months to rebuild and reopen, unless Hardees agrees to a longer period.
Hardees can also terminate the agreement without a cure period if the franchisee becomes insolvent, can't pay their debts, files for bankruptcy, makes an assignment for the benefit of creditors, or has a receiver or trustee appointed that isn't dismissed within 60 days. Similarly, if there's a levy against the franchisee's business or property, a foreclosure suit against the restaurant's premises or equipment that isn't dismissed within 60 days, or the restaurant's property is sold after being seized by law enforcement, Hardees can terminate the agreement immediately.
Further reasons for immediate termination include a significant breach of obligations under Section 20 of the agreement, transferring the franchise without Hardees's prior written consent, or if the franchisee provides false information or omits important facts when applying for the franchise. Knowingly falsifying reports to Hardees, making misrepresentations in dealings with Hardees, or failing to disclose material facts also constitute grounds for termination without an opportunity to cure. Additionally, if a franchisee fails to achieve a passing score on two consecutive inspections, Hardees can terminate the agreement without allowing the franchisee to rectify the issues identified in the inspection reports.
These terms are fairly standard in franchising, as franchisors often reserve the right to terminate agreements immediately in cases of severe breach, insolvency, or misrepresentation to protect the brand and system. However, prospective Hardees franchisees should carefully consider these conditions and understand the potential risks of immediate termination before entering into an agreement.