Under what conditions will the Hardees royalty fee and APO revert to the amounts in the Franchise Agreement?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
- 3. Termination of Program Incentives. This Addendum and the Program will terminate following written notice to Franchisee if:
- A. Franchisee fails to open the Franchised Restaurant on or before 120 days after the contractual opening date pursuant to the terms of the Franchisee's Development Agreement or Franchise Agreement; or
- B. Franchisee or any affiliate of Franchisee receives, during the first three years of operation of the Franchised Restaurant under the Franchise Agreement, a written notice of default under any agreement between Franchisee or any affiliate of Franchisee and HR or any affiliate of HR and fails to cure the default within the applicable cure period, if any.
- 4. Effect of Termination. If this Addendum is terminated during the first three years of the Franchised Restaurant's operation under the Franchise Agreement, the royalty fee and APO for the Franchised Restaurant will immediately revert to the applicable amounts set forth in the Franchise Agreement.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, the royalty fee and APO (Advertising Pool Obligation) will revert to the original amounts specified in the Franchise Agreement if the Addendum modifying these fees is terminated. This termination occurs under two specific conditions.
First, the Addendum will terminate if the Hardees franchisee fails to open the franchised restaurant on or before 120 days after the contractual opening date as outlined in the Development Agreement or Franchise Agreement. This means a delay in opening beyond this period triggers a return to the standard, higher fees.
Second, the Addendum terminates if the Hardees franchisee, or any affiliate, receives a written notice of default under any agreement with Hardees or its affiliates during the first three years of operation and fails to resolve (cure) that default within the given cure period. This implies that any serious breach of contract, left unaddressed, will also result in the termination of the Addendum and a reversion to the original fee structure.
In practical terms, a Hardees franchisee needs to ensure timely opening of the restaurant and diligent compliance with all agreements to maintain the reduced royalty and APO fees provided by the Addendum. Failure to do so could significantly impact their financial obligations to Hardees.