Under what conditions will Hardees and the franchisee sign the 2025 DIP Addendum?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
R and fails to cure the default within the applicable cure period, the 2025 DIP Addendum will be terminated and the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
If your Franchised Restaurant qualifies for the 2025 HR Travel Center Development Incentive and you sign a Development Agreement for more than three and up to nine Franchised Restaurants, then we and you will sign the 2025 Travel Center DIP Addendum attached to this Disclosure Document as Exhibit L. Under the terms of the 2025 Travel Center DIP Addendum and with respect to Gross Sales accruing during the applicable Franchised Restaurant's initial term of operation under the Franchise Agreement, we will reduce the royalty fee by (i) 3% of Gross Sales accruing during the Restaurant's first year of operation; (ii) 2% of Gross Sales accruing during the second year of operation; and (iii) 1% of Gross Sales accruing during the third year of operation. After the third year of operation the royalty fee reverts to 5% of Gross Sales. Additionally, the APO fee will be reduced to 3% of Gross Sales for the full 20 year term of the Franchise Agreement. If you or any of your affiliates receive, during the initial term of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between you or any of your affiliates and HR or any affiliate of HR and fails to cure the default within the applicable cure period, the HR 2025 Travel Center DIP Addendum will be terminated and the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
If your Franchised Restaurant qualifies for the 2025 HR Travel Center Development Incentive and you sign a Development Agreement for ten or more Franchised Restaurants, then we and you will sign the 2025 Travel Center DIP Addendum attached to this Disclosure Document as Exhibit L. Under the terms of the 2025 Travel Center DIP Addendum and with respect to Gross Sales accruing during the applicable Franchised Restaurant's initial term of operation under the Franchise Agreement, we will reduce the royalty fee by (i) 3% of Gross Sales accruing during the Restaurant's first year of operation; (ii) 2% of Gross Sales accruing during the second year of operation; and (iii) 1% of Gross Sales accruing during the third year of operation. After the third year of operation the royalty fee reverts to 5% of Gross Sales. Additionally, the APO fee will be reduced to 2% of Gross Sales for the full 20 year term of the Franchise Agreement. If you or any of your affiliates
receive, during the initial term of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between you or any of your affiliates and HR or any affiliate of HR and fails to cure the default within the applicable cure period, the HR 2025 Travel Center DIP Addendum will be terminated and the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
The same incentives will apply for a Conversation Restaurant, as applicable, developed under a Development Agreement; in addition we will pay you a $50,000 cash incentive if you open a Conversion Restaurant in accordance with all applicable HR requirements within 12 months of signing the Franchise Agreement for that Conversion Restaurant.
- (3) We have the right, following written notice to you, to reallocate your advertising contributions (including the allocation to HNAF and/or a Regional Co-op) and to increase your advertising contributions, but not by more than ½% of Gross Sales in any 12-month period. In addition, we may not increase the APO above 7% of Gross Sales; however, this limitation does not prevent the Franchised Restaurant's Regional Co-op from requiring a contribution that, when added to your HNAF contribution, results in a total APO in excess of 7% of Gross Sales. We may, in our sole discretion, temporarily or permanently adjust the advertising contribution for certain locations or markets due to unique or unusual circumstances.
- (4) We may eliminate the LSM obligation. The following expenditures will not be credited against your LSM obligation: free or discounted food; employee incentive programs; charitable contributions; payments in connection with permanent on-premises menu boards; lighting; yellow pages; entertainment discount books; the purchase or maintenance of vehicles; and other similar payments. Within 30 days after the end of each fiscal quarter, you must provide us or our designee with copies of all documentation demonstrating the amount and types of LSM expenditures made by you in the prior fiscal quarter.
Source: Item 6 — OTHER FEES (FDD pages 29–36)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, there are two distinct scenarios under which Hardees and a franchisee will sign the 2025 DIP Addendum. The first scenario involves the franchisee qualifying for the 2025 HR Travel Center Development Incentive. If the franchisee signs a Development Agreement for more than three Franchised Restaurants, Hardees and the franchisee will sign the 2025 Travel Center DIP Addendum. The royalty fee will be reduced by 3% of Gross Sales for the first year, 2% for the second year, and 1% for the third year, reverting to 5% thereafter. Additionally, the APO fee will be reduced to 3% of Gross Sales for the full 20-year term if the franchisee signs a Development Agreement for between four and nine restaurants, or 2% of gross sales if the franchisee signs a Development Agreement for ten or more restaurants.
The second scenario occurs if the Franchised Restaurant does not qualify for the 2025 HR Travel Center Development Incentive Program. This can happen if the restaurant opens on an address-only basis without a Development Agreement, or if the location doesn't meet the Travel Center Program requirements. These requirements include being within ½ mile of an interstate or limited access highway and having the necessary signage (high rise pylon sign, billboard, or other highway sign). In this case, Hardees and the franchisee will sign the 2025 DIP Addendum.
Under the terms of the 2025 DIP Addendum, the royalty fee and APO are reduced by 3% of Gross Sales during the first year, 2% during the second year, and 1% during the third year. After the third year, the royalty fee reverts to 4% of Gross Sales, and the APO fee reverts to 5.5% of Gross Sales. However, if the franchisee receives a written notice of default under any agreement with HR or its affiliates during the initial term and fails to cure it, the 2025 DIP Addendum will be terminated, and the royalty fee and APO will revert to the amounts in the Franchise Agreement.