Under what conditions can Hardees exercise its option to purchase the assets of a franchised restaurant upon termination or expiration of the franchise agreement?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- A. Upon the expiration or termination of this Agreement for any reason, HR will have the option to purchase from Franchisee some or all of the assets used in the Franchised Restaurant ("Assets").
HR may exercise its option by giving written notice to Franchisee at any time following such expiration or termination up until 60 days after the later of: (1) the effective date of termination or expiration; or (2) the date Franchisee ceases to operate the Franchised Restaurant.
As used in this Section 23, "Assets" shall mean and include, without limitation, leasehold improvements, equipment, vehicles, furnishings, fixtures, signs and inventory (non-perishable products, materials and supplies) used in the Franchised Restaurant, and the real estate fee simple or the lease or sublease for the Franchised Location.
HR shall be entitled to the entry of interlocutory and permanent orders of specific performance by a court of competent jurisdiction if Franchisee fails or refuses to timely meet its obligations under this Section 23.
- B. HR shall have the unrestricted right to assign this option to purchase the Assets.
HR or its assignee shall be entitled to all customary representations and warranties that the Assets are free and clear (or, if not, accurate and complete disclosure) as to: (1) ownership, condition and title; (2) liens and encumbrances; (3) environmental and hazardous substances; and (4) validity of contracts and liabilities inuring to HR or affecting the Assets, whether contingent or otherwise.
- C. The purchase price for the Assets ("Purchase Price") shall be their fair market value, (or, for leased assets, the fair market value of Franchisee's lease) determined as of the effective date of purchase in a manner that accounts for reasonable depreciation and condition of the Assets; provided, however, that the Purchase Price shall take into account the termination of this Agreement.
Further, the Purchase Price for the Assets shall not contain any factor or increment for any trademark, service mark or other commercial symbol used in connection with the operation of the Franchised Restaurant nor any goodwill or "going concern" value for the Franchised Restaurant.
HR may exclude from the Assets purchased in accordance with this Section any equipment, vehicles, furnishings, fixtures, signs, and inventory that are not approved
as meeting then-current standards for a Hardee's Restaurant or for which Franchisee cannot deliver a Bill of Sale in a form satisfactory to HR.
- D. If HR and Franchisee are unable to agree on the fair market value of the Assets within 30 days after Franchisee's receipt of HR's notice of its intent to exercise its option to purchase the Assets, the fair market value shall be determined by two professionally certified appraisers, Franchisee selecting one and HR selecting one within 60 days after Franchisee's receipt of HR's notice of intent to exercise its purchase option.
If the higher appraisal is more than 10% greater than the other appraisal, the two appraisers shall select a third professionally certified appraiser who also shall appraise the fair market value of the Assets.
The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and shall be the Purchase Price.
- E. The appraisers shall be given full access to the Franchised Restaurant, the Franchised Location and Franchisee's books and records during customary business hours to conduct the appraisal and shall value the leasehold improvements, equipment, furnishings, fixtures, signs and inventory in accordance with the standards of this Section 25.
The appraisers' fees and costs shall be borne equally by HR and Franchisee.
- F. Within 10 days after the Purchase Price has been determined, HR may exercise its option to purchase the Assets by so notifying Franchisee in writing ("HR's Purchase Notice").
The Purchase Price shall be paid in cash or cash equivalents at the closing of the purchase ("Closing"), which shall take place no later than 60 days after the date of HR's Purchase Notice.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Hardees has the option to purchase some or all of the assets used in the franchised restaurant upon the expiration or termination of the franchise agreement for any reason. Hardees can exercise this option by providing written notice to the franchisee anytime following the expiration or termination of the agreement, up to 60 days after the later of the effective date of termination or expiration, or the date the franchisee ceases to operate the franchised restaurant.
The assets Hardees may purchase include leasehold improvements, equipment, vehicles, furnishings, fixtures, signs, inventory (non-perishable products, materials, and supplies), and the real estate or lease for the franchised location. The purchase price for these assets will be their fair market value, or the fair market value of the lease for leased assets, determined as of the effective date of purchase, accounting for reasonable depreciation and the condition of the assets. However, the purchase price will consider the termination of the agreement and will not include any value for trademarks or goodwill.
Hardees has the right to assign this purchase option to another party. If Hardees exercises its option, the franchisee must provide customary representations and warranties that the assets are free and clear of any issues related to ownership, condition, title, liens, encumbrances, environmental and hazardous substances, and the validity of contracts. Hardees can exclude any assets that do not meet the current standards for a Hardee's Restaurant or for which the franchisee cannot provide a satisfactory bill of sale.
If Hardees and the franchisee cannot agree on the fair market value of the assets within 30 days of Hardees's notice of intent to purchase, the value will be determined by two professionally certified appraisers, one selected by each party. If the two appraisals differ by more than 10%, a third appraiser will be selected, and the average of the appraisals will determine the purchase price. Hardees must then provide a written purchase notice within 10 days of the price determination, with the closing to occur no later than 60 days after the purchase notice, with payment made in cash or cash equivalents.