Under what conditions is a Hardees Developer prohibited from having an interest in a restaurant business, either directly or indirectly?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) Own, maintain, operate, engage in, grant a franchise to, advise, help, make loans to, lease property to sell the real property underlying any Franchised Restaurant and related assets to, or have any interest in, either directly or indirectly, any restaurant business: (i) whose sales of Designated Entrée Items (as defined below) during any daypart are reasonably likely to account collectively for 20% or more of the restaurant's sales of all entrée items during that daypart; (ii) that features or promotes any Designated Entrée Item in its advertising; or (iii) that operates in a quick-service format (with or without table service).
For purposes of the previous sentence, the term "Designated Entrée Items" means any
hamburger sandwich, chicken sandwich, breakfast sandwich and any other entrée item of a type designated by HR as part of the Hardee's System or by HR at any time during the Development Term. During the Development Term, there is no geographical limitation on this restriction. Following the expiration, transfer or termination of this Agreement, this restriction shall apply within the Development Territory, within 2 miles of the border of the Development Territory and within a 2-mile radius of any then-existing Hardee's Restaurant. This restriction shall not apply to Developer's existing restaurant or foodservice operations, if any, which are identified in Appendix B, nor shall it apply to other restaurants operated by Developer that are franchised by HR or its affiliates.
If any part of these restrictions is found to be unreasonable in time or distance, each month of time or mile of distance may be deemed a separate unit so that the time or distance may be reduced by appropriate order of the court to that deemed reasonable. If, at any time during the 2-year period following the expiration, Transfer or termination of this Agreement, Developer fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Developer's satisfaction of the 2 year obligation.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, a Hardees Developer faces restrictions on holding interests in other restaurant businesses. During the Development Term, the Developer cannot own, operate, or have any interest in a restaurant business if its sales of specific entrée items (hamburger, chicken, and breakfast sandwiches, or other items designated by Hardees) are reasonably likely to account for 20% or more of the restaurant's sales during any daypart. This restriction also applies if the restaurant features or promotes any of these designated entrée items in its advertising or if it operates in a quick-service format, regardless of whether it offers table service.
These restrictions are in place to protect Hardees's market position and prevent the unauthorized use of its trade secrets and confidential information. The restrictions apply without geographical limitation during the Development Term. After the agreement expires, is transferred, or terminates, the restrictions apply within the Development Territory, within two miles of its border, and within a two-mile radius of any existing Hardees Restaurant.
However, these restrictions do not apply to the Developer's existing restaurant or foodservice operations listed in Appendix B of the agreement, or to other restaurants operated by the Developer that are franchised by Hardees or its affiliates. If any part of these restrictions is deemed unreasonable in terms of time or distance, the court may reduce the time or distance to what is considered reasonable. Non-compliance with these obligations during the two-year period following the expiration, transfer, or termination of the agreement will not count towards fulfilling the two-year obligation.