Under what conditions, related to ownership and business activities, will Hardees permit the Franchise Agreement to be executed by an Affiliated Entity formed by the Developer?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- E. At Developer's request, HR will permit the Franchise Agreement for any Franchised Restaurant in the Development Territory to be executed by a business entity formed by Developer to develop and operate the Franchised Restaurant ("Affiliated Entity"), provided all of the following conditions are met: (1) Developer, the Development Principal (defined in Section 8.F.) or Developer's Continuity Group (defined in Section 8.D.) owns at least 51% of all ownership interests in the Affiliated Entity; (2) the Affiliated Entity conducts no business other than the operation of the Franchised Restaurant; (3) Developer, the Development Principal, the members of Developer's Continuity Group and all holders of a legal or beneficial interest of 10% or more in Developer or, if Developer is a limited partnership, in
Developer's general partner ("10% Owner(s)") agree to assume full and unconditional liability for, and agree to perform all obligations, covenants and agreements contained in the Franchise Agreement; and (4) all owners of the Affiliated Entity possess a good moral character and meet HR's standards, as determined by HR in its sole discretion, and Developer provides HR all reasonably requested information to permit HR to make such a determination.
Source: Item 23 — Receipts (FDD pages 85–541)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Hardees will permit a Franchise Agreement to be executed by an Affiliated Entity formed by the Developer if certain conditions are met.
Specifically, the Developer, the Development Principal, or the Developer's Continuity Group must own at least 51% of all ownership interests in the Affiliated Entity. This ensures that the Developer maintains significant control over the entity operating the Hardees franchise. Additionally, the Affiliated Entity must conduct no business other than the operation of the Franchised Restaurant, ensuring that the entity's sole focus is on the Hardees business.
Furthermore, the Developer, the Development Principal, the members of the Developer's Continuity Group, and all holders of a legal or beneficial interest of 10% or more in the Developer must agree to assume full and unconditional liability for all obligations, covenants, and agreements contained in the Franchise Agreement. This provides Hardees with assurance that the obligations under the Franchise Agreement will be met. Finally, all owners of the Affiliated Entity must possess good moral character and meet Hardees's standards, as determined by Hardees in its sole discretion, and the Developer must provide Hardees with all reasonably requested information to permit Hardees to make such a determination. This allows Hardees to maintain its brand standards and reputation.