Under what conditions are franchise fees forfeited and recognized as revenue for Hardees?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise development and commitment fees are deferred when received, allocated to each agreed upon restaurant, and recognized as revenue over the contractual term of each respective franchise agreement, once the restaurant has opened. Initial franchise fees, training fees, renewal fees and transfer fees are recognized as revenue over the contractual term of the franchise agreements, once the restaurant has opened. Upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective or when an existing agreement is transferred to another franchisee. These franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. Further, franchise fees are forfeited and recognized as revenue upon the termination of the related commitments to open new franchised restaurants, the franchised restaurants closing prior to the end of the contractual agreement or the franchised restaurants being acquired by the Company.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, franchise fees are typically collected upfront when a new franchise agreement is established or when an existing agreement is transferred to a new franchisee. Hardees considers these fees closely tied to the franchise rights granted in the agreement. The franchise recognizes initial franchise fees, training fees, renewal fees, and transfer fees as revenue over the contractual term of the franchise agreement, but only after the restaurant has opened.
However, Hardees will forfeit the franchise fees and recognize them as revenue immediately under specific circumstances. These circumstances include the termination of commitments to open new franchised restaurants, the closure of franchised restaurants before the end of their contractual agreement, or the acquisition of franchised restaurants by Hardees itself.
For a prospective Hardees franchisee, this means that the initial franchise fee paid may be forfeited if the restaurant does not open as planned, if the franchisee closes the restaurant early, or if Hardees buys back the restaurant. This policy highlights the importance of fulfilling the franchise agreement and maintaining operations to avoid losing the initial investment. Franchisees should carefully consider these conditions and ensure they have a solid plan for opening and operating their Hardees restaurant to mitigate the risk of forfeiture.