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FDD Talk 2016: The Hardee’s Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on November 7, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Hamburger Franchise

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Hardee's Burger Photo by powerplantop

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Hardee’s franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Hardee’s franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Hardee’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average total sales, total materials, total labor and benefits, total operating expenses, advertising, and restaurant EBITDAR for the 101 domestic Hardee’s Restaurants and Dual Concept Restaurants that were operated by the franchisor for all of Fiscal Year 2016 (which ended on the last Monday in January) and that were remodeled to the Classic Star design (which is the design for all new Hardee’s Restaurants)
  • Fiscal Year 2001 to Fiscal Year 2016 average unit sales volume, percent increase over previous fiscal year, and percent increase over Fiscal Year 2001 for all domestic Hardee’s Restaurants, Dual Concept Restaurants, and Toll Road Restaurants operated by the franchisor or its predecessor that were open and operating during the designated fiscal year, including Restaurants that did not operate for the entire fiscal year
  • 2002 to 2016 increase in same-store sales for all domestic Restaurants operated by the franchisor or its predecessor that had sales for comparable periods during the prior fiscal year
  • Fiscal Year 2016 average share of sales that are generated during the breakfast day part for domestic Restaurants operated by the franchisor that had been open and operating for the entire fiscal year

Section I – Background Information

Hardee’s Will Hail From Nashville

Hardee’s will have a new home in 2017 after a refranchising initiative that cleared the way for parent company CKE Restaurant Holdings to consolidate offices and move to Nashville.

More than 90 percent of locations for Hardee’s and sister chain Carl’s Jr. are now franchised. This move reduced office-space needs and enabled CKE Restaurant Holdings to consolidate offices and move its headquarters from St. Louis, Missouri, to Nashville, Tennessee. The move is expected to take place early in 2017.

The chain finished 2015 with 1,698 U.S. franchises and 330 international locations, along with 118 corporate restaurants.

Hardee’s, Carl’s Jr. Tops in Net Openings

Hardee’s and Carl’s Jr. in 2015 had the highest net increase in U.S. locations among all free-standing hamburger drive-in restaurants, according to the year-end 2015 QSR MarketSHARE Report by Restaurant Trends. Hardee’s had 33 net openings to Carl’s Jr.’s four, for a total of 37. The next-best competitor was Burger King, which had a net total new openings of minus-1.

Chain Nears Top 10 on Franchise 500

Hardee’s was ranked No. 12 on Entrepreneur’s Franchise 500 list for 2016. The chain has been nibbling on the list’s top 10 for several years, getting as close as No. 11 in 2014. (It ranked No. 17 in 2015.)

Deal Will Bring 124 Restaurants to Ohio, Florida

CKE Restaurant Holdings announced in April 2016 a franchise development agreement with Pavilion Restaurant Group that is expected to bring 124 Hardee’s restaurants to Ohio and Florida over the next nine to 12 years.

Pavilion, a Charlotte, North Carolina-based restaurant operating company and an affiliate of Pavilion Development Company, will develop 84 restaurants in Cincinnati, Columbus, Cleveland, Dayton, Toledo and Youngstown, Ohio; and Fort Myers, Orlando and West Palm Beach, Florida.

Bigger, Better and Bolder

Hardee’s, whose tagline is “Bigger, Better, Burgers and Biscuits,” is known for large burgers, particularly the Thickburger and its varieties, and the chain’s longstanding Made From Scratch Biscuits. Bold menu items are paired with even bolder advertising, some of which has been found overly suggestive by some people.

The chain was founded in 1960 when Wilber Hardee opened a single restaurant in Greenville, North Carolina. A second location opened a year later after Hardee partnered with James Gardner and Leonard Rawls. Hardee later sold his shares to his partners, who began franchising, starting with friends.

Hardee’s, Carl’s Jr.: A Long-Distance Relationship

The company changed hands several times before being purchased by CKE Restaurant Holdings, the parent company of Carl’s Jr., in 1997, when Hardee’s was the fourth-largest fast-food brand in the U.S.

Hardee’s and Carl’s Jr., its West Coast counterpart, operated as completely different entities for more than three decades before the purchase by CKE Restaurant Holdings, but became very similar in menu and design. Despite their similarities, the two chains retain their geographical independence with very little overlap.

Boddie-Noell Largest Franchise Operator

Boddie-Noell Enterprises is the largest Hardee’s franchise operator in the U.S., owning more than 330 units in four states. The franchisor opened its first Hardee’s restaurant in 1964, just two years after the chain was established. Boddie-Noell also franchises BNE Land & Development, Rose Hill Plantation, and Highway Diner.

Hardee’s is seeking franchisees in Midwestern and Eastern markets, with emerging markets in Connecticut, Illinois, Massachusetts, Michigan, New York, Pennsylvania, Rhode Island and Wisconsin.

All-Natural Beef and Chicken

In June 2016, Hardee’s and Carl’s Jr. became the first major quick-service restaurants to put both all-natural beef and chicken on their respective menus when both added the All-Natural Charbroiled Chicken Breast Fillet.

Hardee’s had introduced its All-Natural Burger in July 2015, an extension of the industry-first burger of the same name sold at Carl’s Jr. restaurants since December 2014. The burger features grass-fed free-range beef without added antibiotics, steroids or hormones.

Its all-natural beef patty is topped with cheese, lettuce, tomatoes, red onion, pickles, ketchup, mustard and mayonnaise.

Among other recent introductions to the menu:

  • Bacon Swiss Chicken Biscuit, placed on the breakfast menu in November 2015.
  • Grilled Ham ‘N’ Cheese Thickburger in May 2016, combining the best of a burger and a grilled cheese.
  • Bacon 3-Way Burger in July 2016, featuring a bacon overload of three types:  bacon strips, crumbled bacon and even bacon jam, an innovative condiment made from bacon, balsamic vinegar, caramelized onions and molasses.

The two chains also introduced the $4 Real Deal in January 2016, giving customers a choice of a charbroiled Double Cheeseburger or a Spicy Chicken Sandwich along with french fries and a beverage.

Section II – Estimated Costs

  • Please click here for detailed estimates of Hardee’s franchise costs, based on Item 7 of the company’s 2016 FDD.

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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