Under what conditions will Hardees franchisees be required to sign the 2025 DIP Addendum?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
If your Franchised Restaurant does not qualify for the 2025 HR Travel Center Development Incentive Program because: (1) the Franchised Restaurant opens on an address only basis pursuant to a Franchise Agreement that is not part of a Development Agreement, or (2) the Franchised Restaurant location does not meet the requirements of the Travel Center Program – meaning, the location is not within ½ mile of an interstate or limited access highway and/or does not have the signage required to be eligible for the Travel Center Program (combination of high rise pylon sign, billboard or other highway sign) then we and you will sign the 2025 DIP Addendum attached to this Disclosure Document as Exhibit L. Under the terms of the 2025 DIP Addendum, we will reduce the royalty fee and APO 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 back to 4% of Gross Sales and the APO fee reverts back to 5.5% of Gross Sales. 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 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.
Source: Item 6 — OTHER FEES (FDD pages 29–36)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, franchisees will be required to sign the 2025 DIP Addendum under specific conditions related to the HR Travel Center Development Incentive Program. If a Hardees franchised restaurant does not qualify for this incentive program because it either opens on an address-only basis without a Development Agreement, or the location fails to meet the Travel Center Program requirements (not within ½ mile of an interstate or limited access highway and/or lacks the required signage), then the franchisee and Hardees will sign the 2025 DIP Addendum.
Under the terms of the 2025 DIP Addendum, Hardees will reduce the royalty fee and Advertising and Promotional Obligation (APO) for the first three years of operation. Specifically, the royalty fee and APO will be 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 or any of their affiliates receive a written notice of default under any agreement with HR or its affiliates during the initial term and fail to cure the default within the specified period, the 2025 DIP Addendum will be terminated. In such cases, the royalty fee and APO for the Hardees restaurant will immediately revert to the amounts outlined in the Franchise Agreement. This addendum provides a financial incentive for new restaurants that do not qualify for the Travel Center Development Incentive Program, but it is contingent on compliance with all agreements.