Under what conditions does Hardees accrue loss contingencies related to litigation?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
We accrue those loss contingencies that are deemed to be probable, and for which the amount of expected loss is reasonably estimable. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated or unrelated to possible outcomes, and as such may not be meaningful indicators of our potential liability or financial exposure. We regularly review contingencies to determine the adequacy of our accruals and related disclosures. The ultimate amount of loss may differ from these estimates.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Hardees accrues loss contingencies related to litigation when two conditions are met. First, the loss contingency must be deemed probable. Second, the amount of the expected loss must be reasonably estimable. The document emphasizes that assessing litigation contingencies is inherently subjective and requires judgment about future events.
However, Hardees may be unable to provide a meaningful estimate of loss due to several factors. These factors include the procedural status of the matter, the availability of appellate remedies, insurance coverage related to the claims, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. The document also notes that damage amounts claimed in litigation may be unsupported, exaggerated, or unrelated to possible outcomes, making them unreliable indicators of potential liability or financial exposure.
Hardees regularly reviews these contingencies to ensure the adequacy of their accruals and related disclosures. However, the FDD also states that the ultimate amount of loss may differ from these initial estimates. This means that while Hardees attempts to account for potential losses from litigation, the actual financial impact could be higher or lower than what is initially accrued.