As filed with the Securities and Exchange Commission on May 17, 2012

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CKE INC.

(Exact name of registrant as specified in its charter)

Delaware

5812

27-3026224

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(IRS Employer

Identification No.)

6307 Carpinteria Ave., Ste A.

Carpinteria, California 93013

(805) 745-7500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Andrew F. Puzder

Chief Executive Officer

CKE Inc.

6307 Carpinteria Ave., Ste A.

Carpinteria, California 93013

(805) 745-7500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Howard A. Kenny

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, New York 10178

(212) 309-6000

Charles A. Seigel III

Senior Vice President and

Assistant Secretary

CKE Inc.

6307 Carpinteria Ave., Ste. A

Carpinteria, California 93013

(805) 745-7500

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨

CALCULATION OF REGISTRATION FEE



Title of each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price^(a)	Amount of Registration Fee^(b)
Common stock, $0.01 par value per share	$100,000,000	$11,460.00

(a)	Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) promulgated under the Securities Act of 1933.

(b)	The amount of the filing fee is calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, and Fee Advisory #3 for fiscal year 2012, issued September 29, 2011, by multiplying the transaction valuation by 0.00011460.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus dated May 17, 2012

PROSPECTUS

Shares

CKE INC.

Common Stock

This is our initial public offering. We are selling of the shares being offered hereby. The selling stockholder identified in this prospectus is selling an additional shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholder.

We expect the public offering price to be between $ and $ per share. Currently, no public market exists for our common stock. We intend to apply to list our common stock on the New York Stock Exchange under the symbol “CK.” Following this offering, we will remain a “controlled company” as defined under the New York Stock Exchange listing rules, and Apollo Management, L.P. and its affiliates will beneficially own % of our shares of outstanding common stock, assuming the underwriters do not exercise their option to purchase up to additional shares.

Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page 16 of this prospectus.


	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to CKE Inc.	$	$
Proceeds, before expenses, to the selling stockholder	$	$

The underwriters may also purchase up to an additional shares from us and the selling stockholder at the initial public offering price less the underwriting discount.

The shares will be ready for delivery on or about , 2012.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is , 2012.

TABLE OF CONTENTS


	Page

INDUSTRY AND MARKET DATA		ii

TRADEMARKS, SERVICE MARKS AND TRADENAMES		ii

NON-GAAP FINANCIAL MEASURES		ii

SUMMARY		1

RISK FACTORS		16

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS		31

USE OF PROCEEDS		33

DIVIDEND POLICY		33

CAPITALIZATION		34

DILUTION		35

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION		37

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION AND OTHER DATA		41

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		44

BUSINESS		78

MANAGEMENT		93

EXECUTIVE COMPENSATION		100

PRINCIPAL AND SELLING STOCKHOLDERS		123

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		125

DESCRIPTION OF CAPITAL STOCK		127

DESCRIPTION OF INDEBTEDNESS		131

SHARES ELIGIBLE FOR FUTURE SALE		135

MATERIAL UNITED STATES TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK		137

UNDERWRITING		140

LEGAL MATTERS		147

EXPERTS		147

WHERE YOU CAN FIND ADDITIONAL INFORMATION		147

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

-i-

We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Dealer Prospectus Delivery Obligations

Until , 2012 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

INDUSTRY AND MARKET DATA

We have obtained certain industry and market share data from third-party sources, such as Sandelman Quick-Track reports and other industry publications, that we believe are reliable. In many cases, however, we have made statements in this prospectus regarding our industry and our position in the industry based on estimates made from our experience in the industry and our own investigation of market conditions. We believe these estimates to be accurate as of the date of this prospectus. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. As a result, you should be aware that the industry and market data included in this prospectus, and estimates and beliefs based on that data, may not be reliable. We cannot guarantee the accuracy or completeness of any such information.

TRADEMARKS, SERVICE MARKS AND TRADENAMES

We own or have rights to trademarks, service marks or tradenames that we use in connection with the operation of our business, including our corporate names, brands, logos and product names. Other trademarks, service marks and tradenames appearing in this prospectus are the property of their respective owners. The trademarks we own include CKE Restaurants^®, Carl’s Jr.^® and Hardee’s^® along with the names of various products offered at our restaurants. Solely for convenience, some of the trademarks, service marks and tradenames referred to in this prospectus are listed without the ^® and^TMsymbols, but we assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and tradenames.

NON-GAAP FINANCIAL MEASURES

To supplement our financial information presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), we use additional measures to clarify and enhance understanding of past performance and prospects for the future.

Adjusted EBITDA, Adjusted EBITDA margin, company-operated restaurant-level adjusted EBITDA, company-operated restaurant-level adjusted EBITDA margin, and franchise restaurant adjusted EBITDA (each as defined below) (“Non-GAAP Measures”), as presented in this prospectus, are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. They are not measurements of our financial performance under U.S. GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with U.S. GAAP or alternatives to net cash provided by operating activities as a measure of our liquidity.

-ii-

“Adjusted EBITDA” represents income (loss) before income taxes, interest income and expense, asset impairments, facility action charges, depreciation and amortization, management fees, pro-forma cost savings as a result of becoming privately held, the effects of acquisition accounting adjustments, and certain non-cash and other items. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total revenue. See Note 5 under “Summary—Summary Historical and Pro Forma Financial and Other Data.”

We define company-operated restaurant-level adjusted EBITDA as company-operated restaurants revenue less restaurant operating costs, plus depreciation and amortization expense, less advertising expense, but excluding general and administrative expenses and facility action charges. Company-operated restaurant-level adjusted EBITDA margin is defined as company-operated restaurant-level adjusted EBITDA divided by company-operated restaurants revenue. We define franchise restaurant adjusted EBITDA as franchised restaurants and other revenue less franchised restaurants and other expense, plus depreciation and amortization expense. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Presentation of Non-GAAP Measures.”

We believe the Non-GAAP Measures provide investors with helpful information with respect to our operating performance and cash flows. Our Non-GAAP Measures may not be comparable to those of other companies.

In addition, in evaluating these Non-GAAP Measures, you should be aware that in the future we will incur expenses such as those we have excluded in calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by any unusual or nonrecurring items.

-iii-

SUMMARY

The following summary highlights information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements included elsewhere in this prospectus. This summary is not complete and may not contain all of the information that may be important to you. You should read the entire prospectus, including the “Risk Factors” section and our consolidated financial statements and notes to those statements, before making an investment decision.

Unless otherwise noted, “we,” “us,” “our” and the “Company” mean, for periods after the Merger (as defined below), CKE Inc. and its consolidated subsidiaries, including CKE Restaurants, Inc. (“CKE Restaurants^®”), and for the periods prior to the Merger, CKE Restaurants and its consolidated subsidiaries. “CKE” means CKE Inc. but not its subsidiaries.

We operate on a retail accounting calendar. Our fiscal year ends on the last Monday in January and typically has 13 four-week accounting periods. For clarity of presentation, we generally label all fiscal year ends as if the fiscal year ended January 31 (e.g., the fiscal year ended January 30, 2012, is referred to as fiscal 2012 or the fiscal year ended January 31, 2012). References made to our fiscal year ended January 31, 2011, or fiscal 2011, refer to the Predecessor twenty-four weeks ended July 12, 2010 and the Successor twenty-nine weeks ended January 31, 2011. The first quarter of our fiscal year has four periods, or 16 weeks. All other quarters generally have three periods, or 12 weeks. Our fiscal year ended January 31, 2011, contained 53 weeks, with the one additional week included in our fourth quarter.

Unless otherwise indicated, the information contained in this prospectus assumes that (i) the underwriters’ option to purchase up to additional shares will not be exercised, (ii) each share of common stock outstanding immediately prior to the -for-one stock split will have been split into shares of common stock and (iii) the number of our authorized shares of capital stock will have been increased to shares of common stock and shares of preferred stock pursuant to our amended and restated certificate of incorporation.

Home of the Big, Juicy Burger

We are one of the world’s largest operators and franchisors of quick service restaurants (“QSR”) with 3,243 owned or franchised locations operating in 42 states and 25 foreign countries primarily under our Carl’s Jr.^® and Hardee’s^® brands. We offer innovative, premium products that we develop to appeal to “young, hungry guys” but that also appeal to a broad demographic base of individuals who aspire to be youthful. We believe that our target demographic of 18 to 34 year old males who enjoy premium food at a reasonable price makes up a large portion of the global QSR market, which is currently estimated to generate $225 billion in sales annually ($141 billion in the United States). Specifically, younger males account for almost one quarter of all QSR visits and have the highest frequency of any demographic group at almost 17 visits per month. Our focus on this customer type is anchored by our menu of high quality, premium products, and is enhanced through our edgy, breakthrough advertising. We are the fifth largest Hamburger QSR operator globally with a large and rapidly growing international presence that is focused on fast growing emerging markets.

At the end of fiscal 2012, our system-wide restaurant portfolio consisted of:


	Carl’s Jr.		Hardee’s		Other		Total
Company-operated		423		469		—		892
Domestic franchised		693		1,226		9		1,928
International franchised		197		226		—		423

Total		1,313		1,921		9		3,243

Our primary brands, Carl’s Jr. and Hardee’s, both have a rich heritage dating back over 50 years, when Carl Karcher opened the first Carl’s Jr. restaurant in 1956 and Wilbur Hardee opened the first Hardee’s restaurant in 1960. Carl’s Jr. and Hardee’s are both well recognized for their high-quality product offerings, and both brands have leading market shares in their respective geographies. A recent Sandelman Quick Track report ranked us #1 or #2 in taste or flavor of food and quality of ingredients. Although we operate under two brands, the management, menus, operations, marketing campaigns and logos of our two primary brands are substantially similar. We are evolving into a national chain operating under two banners because each has long-standing brand equity in their respective markets. The brands often market identical new products with identical advertising campaigns and use national cable to promote these products in ads that identify both brands.

Our business objective is to continue growing our average unit volumes (“AUV”) and expanding both Carl’s Jr. and Hardee’s in new and existing markets throughout the world by leveraging our unique brand positioning, high-quality product offering, compelling restaurant economics and established global footprint. Our business strategy focuses on the growth of our franchise restaurant base, which provides a more stable, capital efficient income stream. From the end of fiscal 2007 through the end of fiscal 2012, we have grown our franchise restaurants from 1,904 units (64% of total) to 2,351 units (72% of total), and we have grown our international restaurants by a 12% compound annual growth rate from 238 units (8% of total) to 423 units (13% of total) over the same period. For fiscal 2012, we generated total revenue of $1.3 billion, Adjusted EBITDA of $165.9 million and a net loss of $19.3 million. See Note 5 under “—Summary Historical and Pro Forma Financial and Other Data” for an explanation of Adjusted EBITDA and a reconciliation to net (loss) income.

What We Have Accomplished

Guided by our revitalization plan and strong executive team leadership, our recent accomplishments include:

•

Remodeled or developed over 90% of our company-operated restaurants over the past seven years;

•

Achieved a seven percentage point improvement in customer satisfaction scores across our concepts from fiscal 2007 to fiscal 2012;

•

Opened over 560 new restaurants system wide since fiscal 2007;

•

Signed a robust pipeline of over 800 franchise development commitments with over 500 signed in the last three years;

•

Since the end of fiscal 2007, franchised units have increased from 64% to 72% of total units;

•

Increased our international restaurant base by 78% from 238 units in 13 foreign countries at the end of fiscal 2007 to 423 units in 25 foreign countries at the end of fiscal 2012;

•

Achieved positive blended same-store sales at company-operated restaurants for the most recent six consecutive quarters, including an increase of 3.5% in blended same-store sales for fiscal 2012. Prior to the economic downturn, we posted six consecutive fiscal years of blended same-store sales growth from fiscal 2004 to fiscal 2009; and

•

Exhibited a long track-record of AUV growth. As seen in the table below, the blended AUV at company-operated restaurants has grown from $832,000 in fiscal 2001 to $1,257,000 in fiscal 2012, an increase of $425,000, and over the same period we have increased our blended AUV in every year except fiscal 2010.

LOGO

One Powerful Concept, Two Global Brands

We operate one global restaurant platform. The management, menus, operations, marketing campaigns and logos of our two primary brands are substantially similar. However, we have chosen to capitalize on the strong heritage and loyal customer base of Carl’s Jr. and Hardee’s by maintaining both brands. The brands often market identical new products with identical advertising campaigns and use national cable to promote these products in advertisements that identify both brands.


		Carl’s Jr. has a total of 1,313 company-operated and franchised restaurants located in 14 states and 14 foreign countries. Domestic Carl’s Jr. restaurants are predominantly located in the Western United States, with a growing presence in Texas. International Carl’s Jr. restaurants are located primarily in Mexico, with a growing presence in the rest of Latin America, Russia and Asia. Carl’s Jr. focuses on selling its signature products, such as the Western Bacon Cheeseburger^® and a full line of 100% Black Angus Beef Six Dollar Burgers^®, and on developing innovative and exciting premium products, including the Steakhouse Six Dollar Burger^®, Hand-Breaded Chicken Tenders^™ and its line of Charbroiled Turkey Burgers. As of the end of fiscal 2012, 543 of the domestic Carl’s Jr. restaurants were dual-branded with our Green Burrito^® Mexican-inspired concept.

		We believe that Carl’s Jr. is widely regarded by our customers as the premium choice for lunch and dinner in the QSR industry, with approximately 85% of fiscal 2012 company-operated restaurants revenue coming from the lunch and dinner day parts. Recently, Carl’s Jr. expanded its breakfast offering through the successful launch of Hardee’s breakfast menu featuring its quintessential Made From Scratch Biscuits™. We believe that substantial opportunity exists to further build the brand by capturing greater market share during the breakfast day part at our existing restaurants through offering Hardee’s breakfast menu. We initially tested the biscuit rollout in select markets in fiscal 2011 and then launched a larger scale rollout of these products in the second half of fiscal 2012. As of the end of fiscal 2012, approximately 44% of our domestic restaurants offered this premium breakfast product line, including 68% of our company-operated locations. The launch of Hardee’s breakfast menu, featuring Made From Scratch Biscuits, at Carl’s Jr. is another meaningful step in nationalizing our brands, and we expect the rollout to be essentially complete by the end of the first quarter of fiscal 2014.


		As of the end of fiscal 2012, approximately 68% of Carl’s Jr. restaurants were franchised and the remaining 32% were company-operated. Approximately 15% of Carl’s Jr. restaurants were located outside of the U.S. at the end of fiscal 2012, compared to 8% at the end of fiscal 2007. We expect the Carl’s Jr. brand to be the primary driver of our international expansion in Asia, Latin America and Europe over the next several years.

		Hardee’s has a total of 1,921 company-operated and franchised restaurants located in 30 states and 11 foreign countries. Domestic Hardee’s restaurants are located predominantly in the Southeastern and Midwestern United States, with a growing international presence in the Middle East and Central Asia. Hardee’s primarily focuses on selling its signature products, such as its line of 100% Black Angus Beef Thickburgers^® and Made From Scratch Biscuits and on developing inventive and exciting premium products, such as the Steakhouse Thickburger^®, Hand-Breaded Chicken Tenders, the Monster Biscuit^® and its line of Charbroiled Turkey Burgers.

		We believe that Hardee’s is widely regarded by our customers as the best choice for breakfast in the QSR industry, with approximately 48% of fiscal 2012 company-operated restaurants revenue coming from breakfast. We also believe that substantial opportunity exists to further build the brand by capturing greater market share during the lunch and dinner day parts at our existing restaurants through offering new, high-quality products in conjunction with Carl’s Jr. and expanding the number of dual-branded locations with our Red Burrito^® Mexican-inspired concept. At the end of fiscal 2012, 295 of the domestic Hardee’s restaurants were dual-branded with Red Burrito.

		As of the end of fiscal 2012, approximately 76% of Hardee’s restaurants were franchised and the remaining 24% were company-operated. From the end of fiscal 2007 to the end of fiscal 2012, Hardee’s international restaurants grew from 8% to 12% of the system primarily as a result of continued expansion in the Middle East and Central Asia, where Hardee’s has been very successful and where we expect it to continue to grow.

Why We Are “The Star”

We attribute our success in the QSR industry to the following strengths:

Leader in the Premium Segment of the QSR Industry with Two Strong, Global Brands

Our two primary brands, Carl’s Jr. and Hardee’s, are uniquely positioned to appeal to our target audience of “young, hungry guys” and those who aspire to be youthful. Both brands hold strong positions in their respective markets. We believe that our intense focus on our target audience affords us a competitive advantage, as many competitors in the QSR industry focus on the family market which we view as more competitive and over saturated. We are known for our high-quality, great-tasting products that serve the premium segment of the QSR industry. A recent Sandelman Quick-Track report ranked us #1 or #2 in taste or flavor of food and quality of ingredients. We have a strong market position in all day parts with Hardee’s dominant at breakfast and both Carl’s Jr. and Hardee’s having strong lunch and dinner offerings. Hardee’s breakfast offerings are differentiated by its signature Made From Scratch Biscuits, which have historically helped make the brand known as the best choice for breakfast in the QSR industry. We recently introduced Hardee’s breakfast menu and its quintessential Made From Scratch Biscuits at Carl’s Jr. In markets where biscuits were introduced at least one year ago,

breakfast sales have increased from 12% of total sales in fiscal 2010 prior to the rollout to 18% of total sales in fiscal 2012. Menu innovation, a focus on our targeted audience and an emphasis on quality and value have allowed us to maintain our differentiated, premium position and avoid extensive price discounting. We believe that our unique, edgy advertising campaigns also help build our brands. Our advertising is generally intended to create buzz around our promotional product offerings as well as emphasize the quality and taste of our premium menu items.

Established and Rapidly Growing International Presence

Since establishing our first international restaurant in 1978, our international strategy has been focused on high growth emerging markets. We have been particularly focused on growing our international presence since our CEO took the leadership position in fiscal 2001. We had 423 units franchised in 25 foreign countries at the end of fiscal 2012, which compares to 238 franchised units in 13 foreign countries at the end of fiscal 2007. During fiscal 2012, our international franchisees opened a total of 72 restaurants outside of the United States, eclipsing our domestic development totals for the first time in our history. This included the opening of locations in seven countries in which we had not previously operated. We expect this trend to continue and the number of international restaurant openings to grow given our successful track record. Currently, we have franchise development commitments to build over 425 new international units. As of the end of fiscal 2012, we had Carl’s Jr. franchised restaurants in American Samoa, Canada, China, Costa Rica, Ecuador, Indonesia, Malaysia, Mexico, New Zealand, Panama, Russia, Singapore, Turkey and Vietnam and Hardee’s franchised restaurants in Bahrain, Egypt, Jordan, Kazakhstan, Kuwait, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia and the United Arab Emirates.

LOGO

Attractive Restaurant-Level Economics Drives Franchisee Development

We believe that the economic returns from opening new restaurants offer a compelling investment opportunity. Over the past several years, we have redesigned our domestic restaurant prototypes at both Carl’s Jr. and Hardee’s to reduce the initial building construction costs for new restaurants while maintaining the expected performance from our new company-operated restaurants. The cost to develop a new Carl’s Jr. or Hardee’s restaurant, excluding land value, generally ranges from $950,000 to $1,350,000. We believe that our franchisees can achieve attractive returns from new restaurant development as demonstrated by our signing of over 500 new franchise development commitments during the last three years. In addition, our franchisees have opened a total of 240 new restaurants over the past three years, including 113 openings in fiscal 2012,

representing the highest number of openings over the past decade. These 113 franchise restaurant openings in fiscal 2012 represented 96% of the total new restaurant openings for the year and further increased the percentage of our system that is franchised. We believe that the performance and overall health of our franchise network continues to be strong and is evidenced by our collection of greater than 99% of our royalties during fiscal 2012.

Attractive Free Cash Flow Generation

Our strong restaurant-level economics, stable and growing franchise base and optimized asset base, as a result of our nearly completed capital program and refranchising, results in attractive cash flow generation. Over the past seven years, we have focused on improving the customer experience through the remodeling of our company-operated restaurant base. By the end of fiscal year 2012, more than 90% of our company-operated restaurants had been remodeled or recently developed. We have also focused on optimizing our asset base and improving our return on capital through new franchise unit openings and a refranchising program. With over 2,350 franchised units domestically and internationally, we have a strong franchisee network that generated approximately $94 million of royalties from franchises in fiscal 2012. The shift to a franchise model allows for a more stable business since we are less impacted by changes in restaurant level profitability, including the impact of commodity costs. Further, the franchise model will allow us to significantly expand our global footprint with minimal investment. Since we have remodeled or developed over 90% of our company-operated restaurants in the past seven years, reduced the construction costs required to refresh our restaurants and shifted to a predominantly franchised model, we expect future capital expenditure requirements to be modest relative to prior years. Capital expenditures in fiscal 2012 decreased to $52 million from $117 million in fiscal year 2007.

Proven Management Team Has Longstanding History with CKE

Our management team has been together at CKE Restaurants since fiscal 2001 and has an average of 25 years experience in the restaurant industry. During their tenure, our AUV has increased by 51%. Since our CEO took the leadership position in fiscal 2001, our franchise restaurants have increased from 47% of total units to 72% in fiscal 2012. The management team has also significantly accelerated international unit development over the past few years.

How We Plan to Feed More “Young, Hungry Guys” Globally

We believe there are significant opportunities to grow our brands globally, further enhance the profitability of our operations, and deliver stockholder value by executing the following strategies:

Continue Our International Growth

We have demonstrated a strong track record of growing our brands into new international markets over the past five years. Since the end of fiscal 2007, the total number of international franchise units has grown by a compound annual growth rate of 12% including an increase of nearly 18% during fiscal 2012. In addition, we have expanded into a total of 25 foreign countries compared to 13 at the end of fiscal 2007. We have invested in and developed the necessary infrastructure to support and continue growing our international operations. To date, our international development strategy has been primarily focused on high growth, emerging markets in Asia, Latin America and Russia for Carl’s Jr. and the Middle East and Central Asia for Hardee’s. We plan to continue expansion in these and new international markets through the use of development agreements. We expect to accelerate franchise growth in a number of new markets with significant growth coming from Brazil, Canada, China and Russia. The recent signing of a 100 restaurant development agreement with a new franchisee in Brazil is an example of our continued progress in achieving this goal. At the end of fiscal 2012, we had 25 international franchise development agreements representing commitments to build over 425 restaurants. We entered into approximately 80% of these development agreements in the last three years.

Accelerate Our Domestic Franchise Development

In addition to international openings, we are focused on growing our overall franchise base in the U.S. Franchises provide a more stable, capital efficient income stream in the form of royalties, which are insulated from fluctuations in restaurant-level costs and profitability and do not require incremental capital expenditures from our company. Increasing our scale by adding system-wide restaurants will also enable us to leverage our corporate infrastructure over a larger restaurant base. Franchising also expands the brands’ marketing reach as franchisees are required to contribute to advertising both nationally and locally. Our overall mix of franchise restaurants has increased from 64% of system restaurants at the end of fiscal 2007 to 72% at the end of fiscal 2012, with approximately 82% of our total franchise restaurants located in the U.S. We believe our overall franchise mix will continue to increase since our attractive restaurant-level economics continue to entice franchisees to open new restaurants, and we expect the number of new franchise restaurant openings to significantly exceed the number of company-operated restaurant openings. We believe our system-wide mix can exceed 80% franchised over the long-term as we work with both existing and new franchisees to develop new restaurants. Domestically, we continue to focus on developing certain existing markets, such as Texas, and expanding into new and underpenetrated markets, such as the Northeastern United States. At the end of fiscal 2012, we had 49 domestic franchise development agreements representing commitments to build over 375 restaurants.

Continue to Increase Same-Store Sales and Free Cash Flow

We intend to continue building on our comparable store sales growth momentum through the following initiatives:

Continue developing and offering innovative products: We believe we have historically had a strong track record of developing new and innovative products targeted towards “young, hungry guys” and plan to drive comparable store sales growth through utilizing this expertise. We intend to continue developing and promoting our quintessential big, juicy, delicious and decadent burgers supplemented by our best-in-class chicken products and healthful products such as our industry leading turkey burgers. We have introduced successful new products at both brands including our lines of 100% Black Angus Beef Burgers, Hardee’s Made From Scratch Biscuits, Hand-Scooped Ice Cream Shakes and Malts^®, Charbroiled Turkey Burgers and Hand-Breaded Chicken products. While maintaining our “young, hungry guys” focus, we plan to continue to develop and increase customer awareness of our healthful products which have historically included our Charbroiled Chicken Sandwiches and Premium Entrée Salads. More recently, we partnered with Men’s Health and the creators of the bestselling Eat This, Not That! ^® brand to develop a line of Charbroiled Turkey Burgers that all have less than 500 calories.

Expand breakfast offering and cross roll-out of popular items: We have regularly and successfully rolled out popular items from one of our brands to the other since both concepts have similar positionings that cater to “young, hungry guys.” Currently, our lunch and dinner menus at both brands are centered around our line of high-quality, 100% Black Angus Beef Burgers and other distinctive sandwiches. More recently, we have rolled out new products such as our line of Charbroiled Turkey Burgers and Hand-Breaded Chicken Tenders concurrently at both brands. We believe Hardee’s is regarded as a leading choice for breakfast in the QSR industry, with approximately 48% of fiscal 2012 company-operated restaurant revenue coming from breakfast. Hardee’s breakfast menu can attribute much of its success to its industry-first Made From Scratch Biscuits and biscuit breakfast sandwiches. Recently, Carl’s Jr. launched the roll-out of Hardee’s Made From Scratch Biscuits in the Los Angeles market in the second half of fiscal 2012 after successfully completing the launch of these premium breakfast products in selected other markets. We anticipate having these products at substantially all of our company-operated Carl’s Jr. restaurants and at approximately 70% of the total domestic Carl’s Jr. restaurants by the end of fiscal 2013. During the year after the introduction of Hardee’s Made From Scratch Biscuits at select Carl’s Jr. locations, the share of sales occurring at breakfast increased by 45%. We believe Hardee’s breakfast menu is a logical extension of Carl’s Jr.’s offerings that can increase our sales and overall market share in the breakfast hours.

Emphasize and capitalize on our unique brand positioning: We believe our new product introductions are enhanced through edgy, breakthrough advertising, high visibility sports sponsorships in major markets and a creative internet presence. By introducing new products at both brands simultaneously, we have also been able to more efficiently purchase national cable television media, which has not only increased our media presence in our well-penetrated markets, but also provided a solid base of media in our under-penetrated and newer markets, which we believe will help establish demand in potential future expansion markets. In addition, our plans for continued use and focus on digital marketing, including social media and mobile channels, help to increase overall brand awareness, drive traffic into our restaurants and effectively reach our target demographic of “young, hungry guys.” As of the end of fiscal 2012, our digital following included approximately 1.5 million followers on Facebook and over 500,000 downloads of our iPhone and Android mobile applications.

Capitalize on dual-branding opportunities: As of the end of fiscal 2012, 53% of our company-operated units were dual-branded with the Green Burrito and Red Burrito concepts, and we believe there is an opportunity to increase the number of dual-branded company-operated locations in the future. In addition, we believe there is an opportunity for our royalties to increase as our franchisees continue to dual-brand their locations with the Green Burrito and Red Burrito concepts. In particular, we believe that there is an attractive opportunity for our Hardee’s franchisees to dual-brand additional locations based on the financial results from recent conversions at company-operated Hardee’s units and the fact that only approximately 6% of our 1,226 domestic franchised Hardee’s restaurants were dual-branded at the end of fiscal 2012. With respect to the performance of recent company-operated dual-branded conversions, 47 company-operated Hardee’s restaurants were converted to dual-branded locations with Red Burrito in fiscal 2011. In fiscal 2012, these restaurants achieved a 6.5% increase in sales relative to the brand’s benchmark performance. The increase in sales also translated to an increase in profitability and greater than a 40% cash-on-cash return on the capital invested to convert these restaurants.

Continued focus on operational excellence: We also plan to remain focused on our core restaurant fundamentals of quality, service and cleanliness. From fiscal 2007 through fiscal 2012, we spent approximately $145 million on a significant remodeling of our company-operated restaurants, which we believe has improved the customer experience. Restaurants that have been remodeled have demonstrated significantly improved sales and customer satisfaction scores as reflected by a seven percentage point improvement in customer satisfaction scores across our concepts from fiscal 2007 to fiscal 2012. We also stand to benefit as franchisees continue to remodel their restaurants, as the anticipated sales lift from franchise remodels increases the royalty payments to our company. Currently, only 60% of our franchised units have been remodeled or developed over the past seven years compared to 90% of our company-operated restaurants. We expect that approximately 85% of the franchised restaurants in the U.S. will be remodeled by the end of fiscal 2014, and we expect these improvements will further benefit our customer satisfaction scores and overall brand image.

Merger and Related Transactions

On July 12, 2010, we acquired CKE Restaurants pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). CKE Restaurants merged with a wholly-owned subsidiary of ours (the “Merger”), and became our wholly-owned subsidiary.

In connection with the Merger, investment funds managed by Apollo Management VII, L.P. (the “Apollo Funds”), and members of our senior management invested in our equity, and CKE Restaurants issued $600.0 million aggregate principal amount of senior secured second lien notes (the “Senior Secured Notes”) and entered into a $100.0 million senior secured revolving credit facility (the “Credit Facility”), which was undrawn at closing. These transactions, including the Merger and payment of costs related to these transactions, are collectively referred to as the “Transactions.”

Subsequently, on March 14, 2011, CKE completed an offering of $200.0 million of its 10.50%/11.25% senior unsecured PIK toggle notes due March 14, 2016 (the “Toggle Notes,” and collectively with the Senior Secured Notes, the “Notes”).

Our Principal Stockholders

The Apollo Funds and our management own their equity interests in us through a holding company, the selling stockholder in this offering, which owns all of our issued and outstanding shares.

Our principal stockholders are the Apollo Funds, investment funds managed by Apollo Management VII, L.P. (“Apollo Management”), an affiliate of Apollo Management, L.P., which we collectively refer to in this prospectus as “Apollo.” Apollo will beneficially own % or shares of our common stock after this offering, assuming the underwriters do not exercise their option to purchase up to additional shares. Apollo Investment Fund VII, L.P. is an investment fund with committed capital, along with its parallel investment funds, of approximately $14.7 billion. Apollo Management, L.P., is an affiliate of Apollo Global Management, LLC, a leading global alternative asset manager with offices in New York, Los Angeles, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai. As of March 31, 2012, Apollo Global Management, LLC and its subsidiaries had assets under management of approximately $86 billion across all of their businesses.

We currently have a management services agreement with Apollo Management for advisory services. In fiscal 2012, we incurred $2.5 million in fees and out-of-pocket expenses under this agreement, which Apollo Management intends to terminate upon completion of this offering. Under the terms of the agreement, upon its termination, Apollo Management will receive a fee of $ million (plus any unreimbursed expenses) from us. See “Certain Relationships and Related Party Transactions—Management Services Fee” for more detail regarding our arrangements with Apollo.

Risk Factors

Investing in our common stock involves substantial risk. Our ability to execute our strategy is also subject to certain risks. The risks described under the heading “Risk Factors” immediately following this summary may cause us not to realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. If any of the risks or the risks described under the heading “Risk Factors” were to occur, you may lose part or all of your investment. You should carefully consider all the information in this prospectus, including matters set forth under the heading “Risk Factors” before making an investment decision.

Additional Information

Our principal executive offices are located at 6307 Carpinteria Avenue, Suite A, Carpinteria, California, 93013, and our telephone number is (805) 745-7500.

CKE Inc. was incorporated in Delaware on April 15, 2010 to effect the Transactions.

The Offering

Issuer

CKE Inc.

Common stock offered by us

shares.

Common stock offered by selling stockholder

shares.

Common stock to be outstanding immediately after the offering

shares.

Underwriters’ option to purchase additional shares of common stock in this offering

We and the selling stockholder have granted to the underwriters a 30-day option to purchase up to and additional shares, respectively, at the initial public offering price less underwriting discounts and commissions.

Common stock voting rights

Each share of our common stock will entitle its holder to one vote.

Dividend policy

We currently intend to retain all future earnings, if any, for use in the operation of our business and to fund future growth. The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements, including our indebtedness. See “Dividend Policy.”

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $ million after deducting the estimated underwriting discounts and commissions and other expenses of $ million payable by us, assuming the shares are offered at $ per share, which represents the midpoint of the range set forth on the front cover of this prospectus. We intend to use these net proceeds (i) to repay a portion of the outstanding Toggle Notes and/or a portion of the Senior Secured Notes and to pay the related early redemption premiums and accrued interest, (ii) to pay Apollo Management or its affiliates a fee of $ million (plus any unreimbursed expenses) upon the consummation of this offering in connection with the termination of our management services agreement, as described under “Certain Relationships and Related Party Transactions—Management Services Fee” and (iii) for general corporate purposes. We will not receive any proceeds from the sale of our common stock by the selling stockholder. For sensitivity analyses as to the offering price and other information, see “Use of Proceeds.”

NYSE symbol

“CK”

Risk factors

You should carefully read and consider the information set forth under “Risk Factors” beginning on page 17 of this prospectus and all other information set forth in this prospectus before deciding to invest in our common stock.

Except as otherwise indicated, all of the information in this prospectus assumes:

•

the for one stock split described below has been completed;

•

no exercise of the underwriters’ option to purchase up to additional shares of common stock;

•

an initial offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus; and

•

our amended and restated certificate of incorporation and amended and restated bylaws are in effect, pursuant to which the provisions described under “Description of Capital Stock” will become operative.

Prior to completion of this offering, we will effect a stock split whereby our stockholder will receive shares of common stock for each share it currently holds. The number of shares of common stock to be outstanding after completion of this offering is based on shares of our common stock to be sold by us and the selling stockholder in this offering and, except where we state otherwise, the information with respect to our common stock we present in this prospectus does not give effect to shares of common stock reserved for future issuance under our Stock Incentive Plan (as defined in “Executive Compensation—Stock Incentive Plan”).

Summary Historical and Pro Forma Financial and Other Data

The summary historical financial data for the fiscal year ended January 31, 2012, the twenty-nine weeks ended January 31, 2011, the twenty-four weeks ended July 12, 2010 and the fiscal year ended January 31, 2010 and as of January 31, 2012 and 2011 have been derived from our Consolidated Financial Statements, including the related notes thereto, which have been audited by KPMG LLP, an independent registered public accounting firm, and are included elsewhere in this prospectus. Periods ended on or prior to July 12, 2010, reflect the consolidated results of our subsidiary, CKE Restaurants, prior to the Merger, and the periods beginning after July 12, 2010 reflect the results of CKE and its consolidated subsidiaries after the Merger. We refer to the financial statements prior to the Merger as “Predecessor” and to those after the Merger as “Successor.” We also present summary pro forma consolidated financial information for the fiscal year ended January 31, 2011, which combines the Predecessor twenty-four weeks ended July 12, 2010 and the Successor twenty-nine weeks ended January 31, 2011, adjusted to give effect to the Transactions as if they had occurred on January 26, 2010, the first day of our fiscal year ended January 31, 2011. See “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this prospectus for further discussion. The pro forma adjustments relate primarily to interest expense, share-based compensation expense, transaction-related costs and depreciation and amortization.

The following data should be read in conjunction with “Risk Factors,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Selected Historical and Pro Forma Financial Information and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes thereto included elsewhere in this prospectus.


	Successor			Pro Forma⁽¹⁾			Predecessor
	Fiscal Year Ended January 31, 2012⁽²⁾			Fiscal Year Ended January 31, 2011⁽²⁾			Fiscal Year Ended January 31, 2010⁽²⁾
	(dollars in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Company-operated restaurants	$	1,122,430		$	1,099,284		$	1,084,474
Franchised restaurants and other		157,897			233,518			334,259

Total revenue		1,280,327			1,332,802			1,418,733

Operating cost and expenses:
Restaurant operating costs		939,615			911,020			881,397
Franchise restaurants and other		81,372			158,916			254,124
Advertising		65,061			64,128			64,443
General and administrative		130,858			133,810			134,579
Facility action charges, net		(6,018	)		2,273			4,695
Other operating expenses (income), net⁽³⁾		545			(3,442	)		—

Total operating costs and expenses		1,211,433			1,266,705			1,339,238

Operating income		68,894			66,097			79,495
Interest expense⁽⁴⁾		(98,124	)		(79,842	)		(19,254	)
Other (expense) income, net		(1,658	)		2,279			2,935

(Loss) income before income taxes		(30,888	)		(11,466	)		63,176
Income tax (benefit) expense		(11,609	)		(4,391	)		14,978

Net (loss) income	$	(19,279	)	$	(7,075	)	$	48,198

Net (loss) income per share (basic and diluted)


	Successor			Pro Forma⁽¹⁾			Predecessor
	Fiscal Year Ended January 31, 2012⁽²⁾			Fiscal Year Ended January 31, 2011⁽²⁾			Fiscal Year Ended January 31, 2010⁽²⁾
	(dollars in thousands)
Other Financial Data:
Adjusted EBITDA⁽⁵⁾	$	165,878		$	164,947		$	166,974
Adjusted EBITDA margin⁽⁵⁾		13.0	%		12.4	%		11.8	%
Total capital expenditures	$	52,423		$	63,098		$	102,428
Cash paid for interest, net of amounts capitalized		72,944						19,590


	Fiscal Year Ended January 31, 2012			Fiscal Year Ended January 31, 2011			Fiscal Year Ended January 31, 2010
	(dollars in thousands)
Other Operating Data:
System restaurant sales:
Company-operated restaurants	$	1,122,430		$	1,099,284		$	1,084,474
Franchised Carl’s Jr. and Hardee’s restaurants⁽⁶⁾		2,481,092			2,367,172			2,240,175

Total system restaurant sales	$	3,603,522		$	3,466,456		$	3,324,649

Blended company-operated average unit volume (trailing-52 weeks)	$	1,257		$	1,207		$	1,206
Blended company-operated same store sales		3.5	%		(0.8	)%		(3.9	)%
Restaurants open (at end of fiscal year):
Company-operated		892			890			898
Domestic franchised		1,928			1,910			1,905
International franchised		423			359			338

Total restaurants		3,243			3,159			3,141

International franchise restaurants as % of total restaurants (at end of fiscal year)		13.0	%		11.4	%		10.8	%
Number of foreign countries with restaurants (at end of fiscal year)		25			18			16


	Successor
	January 31, 2012		January 31, 2011
	(dollars in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	64,585	$	42,586
Total assets		1,478,087		1,496,166
Total long-term debt and capital lease obligations, including current portion		764,703		638,532
Stockholder’s equity		219,895		424,769

(1)

The summary pro forma financial data for the fiscal year ended January 31, 2011, has been derived from our financial results for the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010, adjusted to reflect the pro forma effect of the Transactions as if they had occurred on January 26, 2010. See “Unaudited Pro Forma Condensed Consolidated Financial Information.” Summary historical consolidated statements of operations data for the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010 is provided in the following table.


	Successor			Predecessor
	Twenty-Nine Weeks Ended January 31, 2011			Twenty-Four Weeks Ended July 12, 2010
	(dollars in thousands, except per share amounts)
Revenue:
Company-operated restaurants	$	598,753		$	500,531
Franchised restaurants and other		80,355			151,588

Total revenue		679,108			652,119

Operating cost and expenses:
Restaurant operating costs		495,909			414,171
Franchise restaurants and other		39,464			115,120
Advertising		34,481			29,647
General and administrative^(a)		84,833			59,859
Facility action charges, net		1,683			590
Other operating expenses, net^(b)		20,003			10,249

Total operating costs and expenses		676,373			629,636

Operating income		2,735			22,483
Interest expense^(c)		(43,681	)		(8,617	)
Other (expense) income, net		1,645			(13,609	)

(Loss) income before income taxes		(39,301	)		257
Income tax (benefit) expense		(11,411	)		7,772

Net (loss) income^(d)	$	(27,890	)	$	(7,515	)

Net (loss) income per share (basic and diluted)

(a)

The Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010 include $10,587 and $1,521, respectively, of share-based compensation expense related to the acceleration of vesting of stock options and awards in connection with the Merger.

(b)

Other operating expenses, net includes transaction-related costs of $20,003 and $13,691 for the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010, respectively. Additionally, the Predecessor twenty-four weeks ended July 12, 2010 includes a gain of $3,442 on the sale of our Carl’s Jr. distribution center assets on July 2, 2010.

(c)

The Predecessor twenty-four weeks ended July 12, 2010 includes $3,113 of interest expense related to changes in the fair value of our Predecessor interest rate swap agreements.

(d)

The Predecessor twenty-four weeks ended July 12, 2010 includes a termination fee of $14,283 related to a prior merger agreement.

(2)

Our fiscal year is 52 or 53 weeks, ending the last Monday in January. For clarity of presentation, we generally label all fiscal years presented as if the fiscal year ended January 31. The pro forma fiscal year ended January 31, 2011 contains 53 weeks; all other fiscal years presented contain 52 weeks.

(3)	Other operating expenses (income), net consists of transaction-related costs of $545 for fiscal 2012 and a gain of $3,442 on the sale of our Carl’s Jr. distribution center assets on July 2, 2010 in pro forma fiscal 2011.

(4)	Fiscal 2010 includes $6,803 of interest expense related to changes in the fair value of our Predecessor interest rate swap agreements.

(5)

non-cash and other items described below. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by total revenue. We believe that the presentation of Adjusted EBITDA provides investors with a meaningful measure of operating performance, and we have historically used it for planning purposes. Adjusted EBITDA is not a measurement of operating performance computed in accordance with U.S. GAAP and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with U.S. GAAP. Adjusted EBITDA may not be comparable to similarly titled measures of other companies. See “Non-GAAP Financial Measures.”

A reconciliation of net (loss) income to Adjusted EBITDA is provided below.


	Successor			Pro Forma			Predecessor
	Fiscal Year Ended January 31, 2012			Fiscal Year Ended January 31, 2011^(a)			Fiscal Year Ended January 31, 2010
	(dollars in thousands)
Net (loss) income	$	(19,279	)	$	(7,075	)	$	48,198
Interest expense		98,124			79,842			19,254
Income tax (benefit) expense		(11,609	)		(4,391	)		14,978
Depreciation and amortization		82,044			77,780			71,064
Facility action charges, net		(6,018	)		2,273			4,695
Gain on sale of distribution center assets		—			(3,442	)		—
Transaction-related costs^(b)		545			—			823
Management fees^(c)		2,490			2,541			—
Share-based compensation expense		4,593			4,774			8,156
Losses on asset and other disposals		1,801			6,500			2,341
Difference between U.S. GAAP rent and cash rent		2,690			2,360			989
Cost savings^(d)		—			970			1,510
Other, net^(e)		10,497			2,815			(5,034	)

Adjusted EBITDA	$	165,878		$	164,947		$	166,974

(a)

Pro forma fiscal 2011 contained 53 weeks. We estimate the extra week resulted in additional Adjusted EBITDA of approximately $2,000.

(b)

Transaction-related costs include investment banking, legal, and other costs related to the Merger, as well as costs related to the termination of a prior merger agreement.

(c)

Represents the amounts associated with the management services agreement with Apollo Management for on-going investment banking, consulting, and financial planning services, which are included in general and administrative expense.

(d)

Cost savings reflects pro-forma cost savings amounts expected to be realized as a result of becoming a privately held company.

(e)

Other, net includes the net impact of purchase accounting, early extinguishment of debt, executive retention bonus, severance costs and disposition business expense. For the fiscal year ended January 31, 2012, other, net also includes a charge of $1,976 related to the out-of-period Insurance Reserve Adjustment described in more detail in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus. For the pro forma fiscal year ended January 31, 2011 and the fiscal year ended January 31, 2010, other, net also includes an adjustment to remove the Adjusted EBITDA associated with our Carl’s Jr. distribution centers, which we sold on July 2, 2010.

(6)	Franchised restaurant operations are not included in our Consolidated Statements of Operations; however, franchised restaurants revenues result in royalties and rental revenues, which are included in franchised restaurants and other revenue.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth below as well as the other information contained in this prospectus before investing in our common stock. The risks described below are not the only risks facing us. Any of the following risks, and any additional risks or uncertainties not currently known to us or those we currently view as immaterial, could materially and adversely affect our business, financial condition, results of operations or cash flows. In such a case, you may lose part or all of your original investment.

Risks Relating to our Business

Our success depends on our ability to compete with others.

The foodservice industry is intensely competitive with respect to the quality and value of food products offered, service, price, convenience, and dining experience. We compete with major restaurant chains, some of which dominate the QSR industry. Our competitors also include a variety of mid-price, full-service casual-dining restaurants, health and nutrition-oriented restaurants, delicatessens and prepared food restaurants, take-out food service companies, fast food restaurants, supermarkets and convenience stores. In addition to competing with such companies for customers, we also must compete with them for access to qualified employees and management personnel, suitable restaurant locations and capable franchisees. Many of our competitors have substantially greater brand recognition, as well as greater financial, marketing, operating and other resources than we have, which may give them competitive advantages with respect to some or all of these areas of competition. Some of our competitors have engaged and may continue to engage in substantial price discounting in response to the ongoing economic weakness and uncertainty, which may adversely impact our sales and operating results. As our competitors expand operations and marketing campaigns, we expect competition to intensify. Such increased competition could have a material adverse effect on our consolidated financial position and results of operations.

Changes in consumer preferences and perceptions, economic, market and other conditions could adversely affect our operating results.

The QSR industry is affected by changes in economic conditions, consumer preferences and spending patterns, demographic trends, consumer perceptions of food safety, weather, traffic patterns, the type, number and location of competing restaurants, and other factors. Multi-location foodservice businesses such as ours can also be materially and adversely affected by publicity resulting from poor food quality, food tampering, illness, injury or other health concerns or operating issues stemming from one or a limited number of restaurants. We can be similarly affected by consumer concerns with respect to the nutritional value of quick-service food.

In addition, the ongoing economic weakness and uncertainty may cause changes in consumer preferences, and if such economic conditions persist for an extended period of time, this may result in consumers making long-lasting changes to their spending behaviors. A number of our major competitors have been increasing their “value item” offerings and implementing certain pricing promotions for various other menu items. If consumer preference continues to shift towards these “value items,” it may become necessary for us to implement temporary promotional pricing offerings. If we implement such promotional offerings, our operating margins may be adversely impacted. Any promotional offerings or temporary price cuts implemented by us are not expected to represent a permanent change in our business strategy, and would only be temporary in duration.

Factors such as interest rates, inflation, gasoline prices, commodity costs, labor and benefits costs, legal claims, and the availability of management and hourly employees also affect restaurant operations and administrative expenses. In particular, increases in interest rates may impact land and construction costs and the cost and availability of borrowed funds, and thereby adversely affect our ability and our franchisees’ ability to finance new restaurant development and improve existing restaurants. In addition, inflation can cause increased commodity and labor and benefits costs and can increase our operating expenses.

Changes in food, packaging and supply costs could adversely affect our results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in food, packaging and supply costs. We, along with our franchisees, purchase large quantities of food, packaging and supplies; and like all restaurant companies, we are susceptible to increases in food, packaging and supply costs as a result of factors beyond our control, such as general economic conditions, significant variations in supply and demand, seasonal fluctuations, weather conditions, food safety concerns, food-borne diseases, fluctuations in the value of the U.S. dollar, commodity market speculation and government regulations. Since we have a higher concentration of company-operated restaurants than many of our competitors, we may have greater volatility in our operating costs than those competitors who are more heavily franchised.

The predominant food commodities purchased by our restaurants include beef, chicken, potatoes, pork, dairy, cheese, produce, wheat flour and soybean oil. The cost of food commodities has increased markedly over the last two years, resulting in upward pricing pressure on many of our raw ingredients, and thereby increasing our food costs. Furthermore, we expect that there may be additional pricing pressure on some of our key ingredients, most notably beef, during fiscal 2013. Material increases in the prices of the ingredients most critical to our menu, particularly beef, could adversely affect our operating results or cause us to consider changes to our product delivery strategy and adjustments to our menu pricing.

We depend on a limited number of key suppliers to deliver quality products to us at moderate prices.

Our profitability is dependent on, among other things, our continuing ability to offer premium-quality food at moderate prices. Our Carl’s Jr. and Hardee’s restaurants depend on the distribution services of Meadowbrook Meat Company, Inc. (“MBM”), a third party, national distributor of food and other products. MBM is responsible for delivering food, packaging and other products from our suppliers to our restaurants on a frequent and routine basis. MBM also provides distribution services to nearly all of our domestic Carl’s Jr. and Hardee’s franchisees. Pursuant to the terms of our distribution agreements, we are obligated to purchase substantially all of our specified product requirements from MBM through June 30, 2017.

Our suppliers may be adversely impacted by the ongoing economic weakness and uncertainty, such as increased commodity prices, increased fuel costs, tight credit markets and various other factors. As a result, our suppliers may seek to change the terms on which they do business with us in order to lessen the impact of any current and future economic challenges on their businesses. If we are forced to renegotiate the terms upon which we conduct business with our suppliers or find alternative suppliers to provide key products or services, it could adversely impact our financial condition or results of operations.

In addition, the ongoing economic weakness and uncertainty have forced some food suppliers to seek financing in order to stabilize their businesses, and others have ceased operations completely. If MBM or a large number of other suppliers suspend or cease operations, we may have difficulty keeping our restaurants fully supplied with the high quality ingredients we require. If we were forced to suspend serving one or more of our menu items that could have a significant adverse impact on our restaurant traffic and our public perception, which would be harmful to our business.

Our financial results may be impacted by our ability to successfully enter new markets, select appropriate restaurant locations, construct new restaurants, complete remodels or renew leases with desirable terms.

Our growth strategy includes opening new restaurants in markets, including international markets, where we have relatively few or no existing restaurants. There can be no assurance that we will be able to successfully expand or acquire critical market presence for our brands in new geographical markets either in the United States or abroad. Consumer characteristics and competition in new markets may differ substantially from those in the markets where we currently operate. Additionally, we may be unable to identify appropriate locations, develop brand recognition, successfully market our products or attract new customers. It may also be difficult for us to

recruit and retain qualified personnel to manage restaurants. Should we not succeed in entering new markets, there may be adverse impacts to our growth strategy and to our consolidated financial position and results of operations.

Our strategic plan, and a component of our business strategy, includes the construction of new restaurants and the remodeling of existing restaurants. We face competition from other restaurant operators, retail chains, companies and developers for desirable site locations, which may adversely affect the cost, implementation and timing of our expansion plans. If we experience delays in the construction or remodel processes, we may be unable to complete such activities at the planned cost, which would adversely affect our future results of operations. Additionally, we cannot guarantee that such remodels will increase the revenues generated by these restaurants or that any such increases will be sustainable. Likewise, we cannot be sure that the sites we select for new restaurants will result in restaurants whose sales results meet our expectations.

We lease a substantial number of our restaurant properties. The terms of our leases and subleases vary in length, with primary terms (i.e., before consideration of option periods) expiring on various dates through fiscal 2036. We do not expect the expiration of these leases to have a material impact on our operations in any particular year, as the expiration dates are staggered over a number of years and many of the leases contain renewal options. As our leases and available option periods expire, we will need to negotiate new leases with our landlords for those leased restaurants that we intend to continue operating. If we are unable to negotiate acceptable lease terms for them, we may decide to close the restaurants, or the new lease terms may negatively impact our consolidated results of operations.

Our business may be adversely impacted by economic conditions and the geographic concentration of our restaurants.

Our financial condition and results of operations are dependent upon consumer confidence and discretionary spending, which are influenced by general economic conditions and other factors, including the ongoing macroeconomic challenges in the U.S. and elsewhere in the world. Negative consumer sentiment in the wake of the recent economic recession has been widely reported over the past three years and, according to some economic forecasts, may continue during fiscal 2013. Our sales may decline during this period of economic uncertainty, or during future economic downturns, which can be caused by various factors such as high gasoline prices, increasing commodity prices, high unemployment rates, declining home prices or tight credit markets. Any material decline in consumer confidence or discretionary spending could cause our financial results to decline.

In addition, unfavorable macroeconomic trends or developments concerning factors such as increased food, commodity, fuel, utilities, labor and benefits costs may also adversely affect our financial condition and results of operations. Current or future economic conditions may prevent us from increasing prices to address increased costs without negatively impacting our sales or market share. If we were unable to raise prices or alter our product mix in order to recover increased costs for food, packaging, fuel, utilities, wages, clothing and equipment, our profitability would be negatively affected.

We have a geographic concentration of restaurants in certain states and regions, which can cause economic conditions in particular areas to have a disproportionate impact on our overall results of operations. As of January 31, 2012, we and our franchisees operated restaurants in 42 states and 25 foreign countries. By number of restaurants, our domestic operations are most concentrated in California, North Carolina and Virginia, and our international franchisees are most concentrated in Mexico and the Middle East. Adverse economic conditions in states or regions that contain a high concentration of Carl’s Jr. and Hardee’s restaurants could have a material adverse impact on our results of operations in the future. In particular, continuing high unemployment rates in California, especially among our core customer demographic of young men, has had, and may continue to have, a negative impact on our results of operations.

Our success depends on our ability to attract and retain certain key personnel.

We believe that our success will depend, in part, on continuing services from the members of our key senior management team. The failure by us to retain members of our senior management team could adversely affect our ability to successfully execute key strategic business decisions and negatively impact the profitability of our business. Additionally, our success may depend on our ability to attract and retain additional skilled senior management personnel.

Our success depends on our franchisees’ participation in our strategy.

Our franchisees are an integral part of our business. We may be unable to successfully implement our brand strategies if our franchisees do not actively participate in such implementation. The failure of our franchisees to focus on the fundamentals of restaurant operations, such as quality, service and cleanliness, would have a negative impact on our success. It may be more difficult for us to monitor our international franchisees’ implementation of our brand strategies due to our lack of personnel in the markets served by such franchisees.

If we fail to successfully implement our growth strategy, which includes opening new domestic and international restaurants, our ability to increase our revenues and operating profits could be adversely affected.

Our growth strategy relies in part upon new restaurant development by existing and new franchisees, or by us. We and our franchisees face many challenges in opening new restaurants, including:

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availability of financing;

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selection and availability of suitable restaurant locations;

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competition for restaurant sites;

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negotiation of acceptable lease and financing terms;

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securing required domestic or foreign governmental permits and approvals;

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consumer preferences in new geographic regions and acceptance of our products;

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employment and training of qualified personnel;

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impact of inclement weather, natural disasters and other acts of nature; and

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general economic and business conditions.

In particular, because the majority of our new restaurant development is likely to be funded by franchisee investment, our growth strategy is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance such development. We do not provide our franchisees with direct financing and therefore their ability to access borrowed funds generally depends on their independent relationships with various financial institutions. If our franchisees (or prospective franchisees) are not able to obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the development of new restaurants, and our future growth could be adversely affected.

To the extent we or our franchisees are unable to open new restaurants as we anticipate, our revenue growth would be limited to growth in comparable store sales. Our failure to add a significant number of new restaurants or grow comparable store sales would adversely affect our ability to increase our revenues and operating income and could materially and adversely impact our business and operating results.

Our financial results are affected by the financial results of our franchisees.

We receive royalties and other fees from our franchisees. As a result, our financial results are impacted by the operational and financial success of our franchisees, including their implementation of our strategic plans,

and their ability to secure adequate financing. If our franchisees continue to be impacted by the continuing weak economic conditions, and they are unable to secure adequate sources of financing, their financial health may worsen, our collection rates may decline and we may be required to assume the responsibility for additional lease payments on franchised restaurants, offer extended payment terms or make other concessions. Additionally, refusal on the part of franchisees to renew their franchise agreements may result in decreased royalties. Entering into restructured franchise agreements may result in reduced franchise royalty rates in the future. Furthermore, if our franchisees are not able to obtain the financing necessary to complete planned remodel and construction projects, they may be forced to postpone or cancel such projects.

The financial conditions of our international franchisees may also be adversely impacted by political, economic or other changes in the global markets in which they operate. As a result, the royalties we receive from our international franchisees may be affected by recessionary or expansive trends in international markets, increasing labor costs in certain international markets, changes in applicable tax laws, changes in inflation rates, changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds, expropriation of private enterprises, political and economic instability and other external factors.

Our business depends on the willingness of vendors and service providers to supply us with goods and services pursuant to customary credit arrangements which may not be available to us in the future.

Like many companies in the foodservice industry, we purchase goods and services from trade creditors pursuant to customary credit arrangements. Changes in our capital structure, or other factors outside our control, may cause trade creditors to change our customary credit arrangements. If we are unable to maintain or obtain trade credit from vendors and service providers on terms favorable to us, or at all, or if vendors and service providers are unable to obtain trade credit or factor their receivables, then we may not be able to execute our business plan, develop or enhance our products or services, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse affect on our business. In addition, the tightening of trade credit could limit our available liquidity.

Our international operations are subject to various risks and uncertainties, and there is no assurance that they will be successful.

An important component of our growth strategy involves increasing our net restaurant count in international markets. The execution of this growth strategy depends upon the opening of new restaurants by our existing international franchisees and by new international franchisees. We and our current or future franchisees face many risks and uncertainties in opening new restaurants internationally, including economic and political conditions, differing cultures and consumer preferences, diverse government regulations and tax systems, securing acceptable suppliers, difficulty in collecting our royalties and longer payment cycles, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements, the selection and availability of suitable restaurant locations, currency regulation and fluctuation, and other external factors.

In addition, our current international franchisees may be unwilling or unable to increase their investment in our system by opening new restaurants. Moreover, our international growth also depends upon the availability of prospective franchisees or joint venture partners with the experience and financial resources to be effective operators of our restaurants. There can be no assurance that we will be able to identify future international franchisees who meet our criteria, or that, once identified, they will successfully implement their expansion plans.

Events reported in the media, such as incidents involving food-borne illnesses or food tampering, whether accurate or not, could reduce the production and supply of important food products, cause damage to our reputation and adversely affect our sales and profitability.

Reports, whether true or not, of food-borne illnesses, such as those caused by E. coli, Listeria or Salmonella, in addition to Avian Influenza (commonly known as bird flu) and Bovine Spongiform Encephalopathy (commonly known as BSE or mad cow disease), and injuries caused by food tampering have, in the past, severely impacted the production and supply of certain food products, including beef and poultry. A reduction in the supply of such food products could have a material effect on the price at which we could obtain them, particularly in an environment of already inflated commodity prices. Failure to procure food products, such as beef or poultry, at reasonable terms and prices or any reduction in consumption of such food products by consumers could have a material adverse effect on our consolidated financial condition and results of operations.

In addition, reports, whether or not true, of food-borne illnesses or the use of hormones, antibiotics or pesticides in the production of certain food products may cause consumers to reduce or avoid consumption of such food products. Our brands’ reputations are important assets to us, and any such reports could damage our brands’ reputations and immediately and severely hurt sales and profits. If customers become ill from food-borne illnesses or food tampering, we could be forced to temporarily close some, or all, of our restaurants. While we have implemented a quality assurance program that is designed to verify that the food products prepared in our restaurants are prepared in a manner which complies with, or exceeds, all regulatory standards for food safety, there can be no assurance that we can detect or prevent all incidences of food-borne illnesses or food tampering. In addition, instances of food-borne illnesses or food tampering occurring at the restaurants of competitors, could, by resulting in negative publicity about the QSR industry, adversely affect our sales on a local, regional, or national basis.

Our operations are seasonal and heavily influenced by weather conditions.

Weather, which is unpredictable, can adversely impact our sales. Harsh weather conditions may discourage customers from dining out and result in lost opportunities for our restaurants. For example, a heavy snowstorm can leave an entire metropolitan area snowbound, resulting in a reduction in sales. Our first and fourth quarters, most notably the fourth quarter, include winter months when there is historically a lower level of sales. Because a significant portion of our restaurant operating costs is fixed or semi-fixed in nature, the loss of sales during these periods adversely impacts our profitability. These adverse, weather-driven events have a more pronounced impact on our Hardee’s restaurants. For these reasons, sequential quarter-to-quarter comparisons may not be a good indication of our performance or how we may perform in the future.

Our business may suffer due to our inability to hire and retain qualified personnel and due to higher labor costs.

Our restaurant-level workforce requires large numbers of both entry-level and skilled employees. From time to time, we have had difficulty hiring and maintaining qualified restaurant management personnel. In addition, due to the labor-intensive nature of our business, increases in minimum wage levels have negatively impacted our labor costs, and further increases in minimum wage levels could have additional negative effects on our consolidated results of operations.

Higher health care costs could adversely affect our business.

We offer access to healthcare benefits to certain of our employees. Changes in legislation may cause us to provide health insurance to employees on terms that differ significantly from our existing programs. We will be impacted by the passage of the U.S. Patient Protection and Affordable Care Act (the “Act”). Under the Act, we may be required to amend our health care plans to, among other things, provide affordable coverage, as defined in the Act, to all employees, or otherwise be subject to a payment per employee based on the affordability criteria

in the Act, cover adult children of our employees to age 26, delete lifetime limits, and delete pre-existing condition limitations. Many of these requirements will be phased in over a period of time. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care costs could have a material adverse effect on our business, financial condition and results of operations.

Our business may be impacted by increased insurance and/or self-insurance costs.

From time to time, we have been negatively affected by increases in both workers’ compensation and general liability insurance and claims expense due to our claims experience and rising healthcare costs. Although we seek to manage our claims to prevent increases, such increases can occur unexpectedly and without regard to our efforts to limit them. If such increases occur, we may be unable to pass them along to the consumer through product price increases, resulting in decreased operating results.

We are subject to certain health, employment, environmental and other government regulations, and failure to comply with existing or future government regulations could expose us to litigation, damage to our reputation and lower profits.

We, and our franchisees, are subject to various federal, state and local laws. The successful development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations. Restaurant operations are also subject to licensing and regulation by state and local departments relating to health, food preparation, sanitation and safety standards, federal and state labor and immigration law (including applicable minimum wage requirements, overtime pay practices, working and safety conditions and citizenship requirements), federal and state laws prohibiting discrimination and other laws regulating the design and operation of facilities, such as the Americans with Disabilities Act of 1990 (“ADA”). If we fail to comply with any of these laws, we may be subject to governmental action or litigation, and our reputation could be harmed. Injury to our reputation could negatively impact our operating results.

In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition and advertising practices in the food industry, particularly among restaurants. As a result, we have recently become subject to regulatory initiatives in the area of nutrition disclosure including requirements to provide information about the nutritional content of our food products.

The operation of our franchise system is also subject to franchise laws and regulations enacted by a number of states and rules promulgated by the U.S. Federal Trade Commission. Any future legislation regulating franchise relationships may negatively affect our operations, particularly our relationships with our franchisees. Failure to comply with new or existing franchise laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales.

We are subject to the Fair Labor Standards Act (“FLSA”), which governs such matters as minimum wage, overtime and other working conditions, along with the ADA, various family leave mandates and a variety of other laws enacted, or rules and regulations promulgated, by federal, state and local governmental authorities that govern these and other employment matters. We have experienced and expect further increases in payroll expenses as a result of federal and state mandated increases in the minimum wage. In addition, our vendors may be affected by higher minimum wage standards, which may increase the price of goods and services they supply to us.

We are also subject to various federal, state and local environmental laws and regulations that govern discharges to air and water, as well as handling and disposal practices for solid and hazardous wastes. These laws may also impose liability for damages from and the costs of cleaning up sites of spills, disposals or other releases of hazardous materials. We may be responsible for environmental conditions or contamination relating to our

restaurants and the land on which our restaurants are located, regardless of whether we lease or own the restaurant or land in question and regardless of whether such environmental conditions were created by us or by a prior owner or tenant. The costs of any cleanup could be significant and could have a material adverse effect on our consolidated financial position and results of operations.

We may not be able to adequately protect our intellectual property, which could decrease the value of our brands and products.

The success of our business depends on the continued ability to use existing trademarks, service marks and other components of our brands in order to increase brand awareness and further develop branded products. All of the steps we have taken to protect our intellectual property may not be adequate.

We are subject to litigation in the ordinary course of business that could adversely affect us.

We may be subject to claims, including class action lawsuits, filed by customers, franchisees, employees, suppliers, landlords and others in the ordinary course of business. Significant claims may be expensive to defend and may divert time and money away from our operations causing adverse impacts to our operating results. In addition, adverse publicity or a substantial judgment against us could negatively impact our brand reputation resulting in further adverse impacts to our financial condition and results of operations.

In addition, the restaurant industry has been subject to claims that relate to the nutritional content of food products, as well as claims that the menus and practices of restaurant chains have led to the obesity of some customers. We may also be subject to this type of claim in the future and, even if we are not specifically named, publicity about these matters may harm our reputation and have adverse impacts on our financial condition and results of operations.

A significant failure, interruption or security breach of our computer systems or information technology may adversely affect our business.

We are significantly dependent upon our computer systems and information technology to properly conduct our business. A significant failure or interruption of service, or a breach in security of our computer systems could cause reduced efficiency in operations, loss of data and business interruptions, and significant capital investment could be required to rectify the problems. In addition, any security breach involving our point of sale or other systems could result in loss of consumer confidence and potential costs associated with consumer fraud.

Catastrophic events may disrupt our business.

Unforeseen events, including war, terrorism and other international conflicts, public health issues, and natural disasters such as hurricanes, earthquakes, or other adverse weather and climate conditions, whether occurring in the U.S. or abroad, could disrupt our operations, disrupt the operations of franchisees, distributors, suppliers or customers, or result in political or economic instability. These events could reduce demand for our products or make it difficult or impossible to receive products from our distributors or suppliers.

Risks Relating to Our Indebtedness

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations under our Notes and Credit Facility.

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under the Toggle Notes (which are obligations

of CKE only), the Senior Secured Notes (which are obligations of CKE Restaurants and its subsidiaries only) and the Credit Facility. Our high degree of leverage could have important consequences for our creditors and stockholders, including:

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increasing our vulnerability to adverse economic, industry or competitive developments;

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requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;

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exposing us to the risk of increased interest rates because certain of our borrowings, including borrowings under our Credit Facility, will be at variable rates of interest;

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making it more difficult for us to satisfy our obligations with respect to our indebtedness, including the Notes, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the indenture governing the Notes and the agreements governing such other indebtedness;

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restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

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limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and

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limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.

Despite our high indebtedness level, we are still able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

We may be able to incur substantial additional indebtedness in the future. Although the indentures governing the Notes and the Credit Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If new debt is added to our and our subsidiaries’ existing debt levels, the related risks that we now face would increase. In addition, the indentures governing the Notes do not prevent us from incurring obligations that do not constitute indebtedness under the indentures.

Our debt agreements contain restrictions that limit our flexibility in operating our business.

Our Credit Facility and the indentures governing the Notes contain various covenants that limit our ability to engage in specified types of transactions. For example, the indentures contain covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of our restricted subsidiaries to:

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incur or guarantee additional debt or issue certain preferred equity;

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pay dividends on or make distributions to holders of our common stock or make other restricted payments;

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sell certain assets;

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create or incur liens on certain assets to secure debt;

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make certain investments;

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designate subsidiaries as unrestricted subsidiaries;

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consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; or

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enter into certain transactions with affiliates.

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with any of the covenants in the indentures governing the Notes or the Credit Facility, we could be in default under one or more of these agreements. In the event of such a default:

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the lenders under our Credit Facility could elect to terminate their commitments thereunder and cease making further loans to us;

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the holders of such indebtedness could elect to declare all the indebtedness thereunder to be immediately due and payable, together with accrued and unpaid interest, which would prevent us from using our cash flows for other purposes;

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if we are unable to pay amounts outstanding and declared immediately due and payable, the holders of such indebtedness could proceed against the collateral granted to them to secure the indebtedness; and

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we could ultimately be forced into bankruptcy or liquidation.

We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. As a result, we may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. In addition, because our subsidiaries conduct all of our operations, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to CKE Restaurants or CKE, as the case may be, to pay such indebtedness. While the indentures governing the Notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to CKE Restaurants and CKE, these limitations are subject to certain qualifications and exceptions. In particular, the indenture governing the Senior Secured Notes and the Credit Facility contain restrictions on the ability of CKE Restaurants to make distributions to CKE, which restrictions may prevent CKE Restaurants from making distributions to CKE in an amount sufficient to enable CKE to repay the Toggle Notes when the Toggle Notes mature in 2016 or to enable CKE to pay interest on those Toggle Notes in cash. In the event that CKE Restaurants or CKE does not receive distributions from their respective subsidiaries, CKE Restaurants or CKE, as the case may be, may be unable to make required principal and interest payments on their respective indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the Notes. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments and the indentures governing the Notes may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

Risks Related to This Offering

There is no existing market for our common stock and we do not know if one will develop, which could impede your ability to sell your shares and may depress the market price of our common stock.

There has not been a public market for our common stock prior to this offering. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that

market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the common stock will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. See “Underwriting.” Consequently, you may be unable to sell our common stock at prices equal to or greater than the price you pay in this offering.

Apollo controls us, and its interests may conflict with or differ from your interests as a stockholder.

After the consummation of this offering, Apollo will beneficially own approximately % of our common stock, assuming the underwriters do not exercise their option to purchase additional shares, or % if the underwriters exercise their option in full. As a result, Apollo will continue to have the ability to prevent any transaction that requires the approval of our stockholders, including the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets.

The interests of Apollo could conflict with or differ from your interests as a holder of our common stock. For example, the concentration of ownership held by Apollo could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination that you as a stockholder may otherwise view favorably. Apollo is in the business of making or advising on investments in companies and holds, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. They may also pursue acquisitions that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.

Our certificate of incorporation will provide that we expressly renounce any interest or expectancy in any business opportunity, transaction or other matter in which Apollo Management or any of its members, directors, employees or other affiliates (the “Apollo Group”) participates or desires or seeks to participate in, even if the opportunity is one that we would reasonably be deemed to have pursued if given the opportunity to do so. The renouncement does not apply to any business opportunities that are presented to an Apollo Group member solely in such person’s capacity as a member of our board of directors and with respect to which no other member of the Apollo Group independently receives notice or otherwise identifies such business opportunity prior to us becoming aware of it, or if the business opportunity is initially identified by the Apollo Group solely through the disclosure of information by or on behalf of us.

So long as Apollo continues to beneficially own a significant amount of our equity, even if such amount is less than 50%, it may continue to be able to strongly influence or effectively control our decisions. For example, our bylaws will require the approval of a majority of the directors nominated by Apollo Management voting on the matter for certain important matters, including mergers and acquisitions, issuances of equity and the incurrence of debt, so long as Apollo beneficially owns at least 33¹/3% of our outstanding common stock. See “Management—Apollo Approval of Certain Matters and Rights to Nominate Certain Directors,” “Certain Relationships and Related Party Transactions—Nominating Agreement” and “Description of Capital Stock—Certain Anti-Takeover, Limited Liability and Indemnification Provisions—Apollo Approval Rights.”

We will be a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements.

Upon the closing of this offering, Apollo will continue to control a majority of our voting common stock. As a result, we will be a “controlled company” within the meaning of the New York Stock Exchange corporate governance standards. Under the rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain New York Stock Exchange corporate governance requirements, including:

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the requirement that we have a majority of independent directors on our board of directors;

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the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

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the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Following this offering, we intend to utilize the foregoing exemptions from the New York Stock Exchange corporate governance requirements. As a result, we will not have a majority of independent directors nor will our nominating and corporate governance and compensation committees consist entirely of independent directors and we will not be required to have an annual performance evaluation of the nominating and corporate governance and compensation committees. See “Management.” Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

The price of our common stock may fluctuate significantly and you could lose all or part of your investment.

Volatility in the market price of our common stock may prevent you from being able to sell your common stock at or above the price you paid for your common stock. The market price for our common stock could fluctuate significantly for various reasons, including:

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our operating and financial performance and prospects;

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changes in earnings estimates or recommendations by securities analysts who track our common stock or industry;

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market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

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the number of shares to be publicly traded after this offering; and

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sales of common stock by us, our stockholder, the Apollo Funds or its affiliated funds or members of our management team.

In addition, the stock market has experienced significant price and volume fluctuations in recent years. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industries. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.

We currently have no plans to pay regular dividends on our common stock, so you may not receive funds without selling your common stock.

We currently have no plans to pay regular dividends on our common stock. Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions applying to the payment of dividends, and other considerations that our board of directors deems relevant. The terms of our Credit Facility and the indentures governing the Notes include limitations on our ability to pay dividends and/or the ability of our subsidiaries to pay dividends to us. Accordingly, you may have to sell some or all of your common stock in order to generate cash flow from your investment.

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.

We may sell additional shares of common stock in subsequent public offerings or otherwise, including to finance acquisitions. We have authorized shares of common stock, of which shares will be

outstanding upon consummation of this offering. The outstanding share number includes shares that we or the selling stockholder are selling in this offering, which may be resold immediately in the public market. The remaining outstanding shares are restricted from immediate resale under the lock-up agreements with the underwriters described in the “Underwriting” section of this prospectus, but may be sold into the market in the near future. These shares will become available for sale following the expiration of the lock-up agreements, which, without the prior consent of , is days after the date of this prospectus, subject to certain exceptions. Immediately after the expiration of the lock-up period, the shares will be eligible for resale under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), subject to volume limitations.

As soon as practicable after the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of our common stock reserved for issuance under our Stock Incentive Plan, our new long-term incentive plan. Accordingly, shares of our common stock registered under such registration statement may become available for sale in the open market upon grants under the plan, subject to vesting restrictions, Rule 144 limitations applicable to our affiliates and the contractual lock-up provisions described below.

We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock (including any shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.

Our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares.

Provisions of our certificate of incorporation and bylaws may make it more difficult for, or prevent a third party from, acquiring control of us without the approval of our board of directors. These provisions include:

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having a classified board of directors;

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establishing limitations on the removal of directors;

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prohibiting cumulative voting in the election of directors;

•

empowering only the board to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise, and requiring that, as long as Apollo continues to beneficially own at least 33¹/3% of our common stock, any vacancy resulting from the death, removal or resignation of an Apollo Management designee be filled by a majority of the remaining directors nominated by Apollo Management;

•

as long as Apollo continues to beneficially own more than 50.1% of our common stock, granting Apollo Management the right to increase the size of our board of directors and to fill the resulting vacancies at any time;

•

authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;

•

prohibiting stockholders from acting by written consent or calling a special meeting if less than 50.1% of our outstanding common stock is beneficially owned by Apollo;

•

requiring the approval of a majority of the directors nominated by Apollo Management voting on the matter to approve certain business combinations and certain other significant matters so long as Apollo beneficially owns at least 33¹/3% of our common stock; and

•

establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

Our issuance of shares of preferred stock could delay or prevent a change in control of us. Our board of directors has the authority to cause us to issue, without any further vote or action by the stockholders, shares of

preferred stock, par value $0.01 per share, in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The issuance of shares of our preferred stock may have the effect of delaying, deferring or preventing a change in control without further action by the stockholders, even where stockholders are offered a premium for their shares.

Our bylaws will also require the approval of a majority of directors nominated by Apollo Management voting on the matter for certain important matters, including mergers and acquisitions, issuances of equity and the incurrence of debt, as long as Apollo beneficially owns at least 33¹/3% of our outstanding common stock. In addition, as long as Apollo beneficially owns a majority of our outstanding common stock, Apollo Management will be able to control all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and certain corporate transactions. See “Management—Apollo Approval of Certain Matters and Rights to Nominate Certain Directors.” Together, these charter, bylaw and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant common stock beneficially owned by Apollo and its rights to nominate a specified number of directors in certain circumstances, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of us, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

You will experience an immediate and substantial dilution in the net tangible book deficit of the common stock you purchase.

We expect to have a net tangible book deficit after this offering of $ per share. Based on an assumed initial public offering price of $ per share, the midpoint of the estimated offering range set forth on the cover page of this prospectus, you will experience immediate and substantial dilution of approximately $ per share in net tangible book deficit of the common stock you purchase in this offering. See “Dilution,” including the discussion of the effects on dilution from a change in the price of this offering.

The additional requirements of having a class of publicly traded equity securities may strain our resources and distract management.

Even though CKE Restaurants currently files reports with the SEC, after the consummation of this offering, we will be subject to additional reporting requirements of the Securities Exchange Act of 1934 (“the Exchange Act”), the Sarbanes-Oxley Act of 2002, (the “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”). The Dodd-Frank Act, effects comprehensive changes to public company governance and disclosures in the United States and will subject us to additional federal regulation. We cannot predict with any certainty the requirements of the regulations ultimately adopted or how the Dodd-Frank Act and such regulations will impact the cost of compliance for a company with publicly traded common stock. We are currently evaluating and monitoring developments with respect to the Dodd-Frank Act and other new and proposed rules and cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a company with publicly traded common stock and these new rules and regulations will

make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control for financial reporting. These requirements may place a strain on our systems and resources. Under Section 404 of the Sarbanes-Oxley Act, we will be required to include a report of management on our internal control over financial reporting in our Annual Reports on Form 10-K. After consummation of this offering, our independent public accountants auditing our financial statements must attest to the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 10-K for our fiscal year ending January 31, 2014. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. If we are unable to conclude that our disclosure controls and procedures and internal control over financial reporting are effective, or if our independent public accounting firm is unable to provide us with an unqualified report on our internal control over financial reporting in future years, investors may lose confidence in our financial reports and our stock price may decline.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes statements relating to our future plans and developments, financial goals and operating performance that are based on our current beliefs and assumptions. These statements constitute “forward looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Such statements are subject to risks and uncertainties that are often difficult to predict, are beyond our control, and which may cause results to differ materially from expectations. Factors that could cause our results to differ materially from those described include, but are not limited to:

•

our ability to compete with other restaurants, supermarkets and convenience stores for customers, employees, restaurant locations and franchisees;

•

changes in consumer preferences, perceptions and spending patterns;

•

changes in food, packaging and supply costs;

•

the ability of our key suppliers to continue to deliver premium-quality products to us at moderate prices;

•

our ability to successfully enter new markets, complete construction of new restaurants and complete remodels of existing restaurants;

•

changes in general economic conditions and the geographic concentration of our restaurants, which may affect our business;

•

our ability to attract and retain key personnel;

•

our franchisees’ willingness to participate in our strategy;

•

risks associated with implementing our growth strategy;

•

the operational and financial success of our franchisees;

•

the willingness of our vendors and service providers to supply us with goods and services pursuant to customary credit arrangements;

•

risks associated with operating in international locations;

•

the effect of the media’s reports regarding food-borne illnesses, food tampering and other health-related issues on our reputation and our ability to procure or sell food products;

•

the seasonality of our operations;

•

the effect of increasing labor costs including healthcare related costs;

•

increased insurance and/or self-insurance costs;

•

our ability to comply with existing and future health, employment, environmental and other government regulations;

•

our ability to adequately protect our intellectual property;

•

the adverse affect of litigation in the ordinary course of business;

•

a significant failure, interruption or security breach of our computer systems or information technology;

•

catastrophic events, including war, terrorism and other international conflicts, public health issues or natural causes;

•

our substantial leverage, which could limit our ability to raise capital, react to economic changes or meet obligations under our indebtedness;

•

the effect of restrictive covenants in the indentures governing the Notes and the Credit Facility on our business;

•

the potentially conflicting interests of our controlling stockholder and our creditors; and

•

other factors as discussed under the caption “Risk Factors” in this prospectus.

Investors are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and other factors that may affect our future plans and developments, financial goals, operating performance, and the value of our securities. As a result of these and other factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the impact may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

The forward looking statements in this prospectus speak only as of the date of this prospectus. We expressly disclaim any obligation to publicly update or revise any forward looking statement, whether to conform such statement to actual results or as a result of changes in our opinions or expectations, new information, future events or otherwise, in each case except as required by law.

USE OF PROCEEDS

Assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, we estimate that we will receive net proceeds from this offering of approximately $ million, after deducting underwriting discounts and commissions and other estimated expenses of $ million payable by us. We will not receive any net proceeds from the sale by the selling stockholder. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

We intend to use the net proceeds that we receive (i) to repay a portion of the Toggle Notes and/or a portion of the Senior Secured Notes and to pay the related early redemption premiums and accrued interest, (ii) to pay Apollo Management or its affiliates a fee of $ million (plus any unreimbursed expenses) upon the consummation of this offering in connection with the termination of our management services agreement, as described under “Certain Relationships and Related Party Transactions—Management Services Fee” and (iii) for general corporate purposes.

DIVIDEND POLICY

We currently intend to retain all future earnings, if any, for use in the operation of our business and to fund future growth. In addition, our Credit Facility and the indentures governing the Notes limit our ability to pay dividends or other distributions on our common stock. See “Description of Indebtedness.” The decision whether to pay dividends will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements.

CAPITALIZATION

The following table sets forth our capitalization as of January 31, 2012:

•

on an actual basis;

•

on an as adjusted basis giving effect to our sale of shares of common stock in this offering at an assumed offering price of $ , which is the midpoint of the range listed on the cover page of this prospectus, and our expected use of the net proceeds of this offering.

You should read this table in conjunction with our financial statements and related notes for the fiscal year ended January 31, 2012, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Use of Proceeds” included elsewhere in this prospectus.


	As of January 31, 2012
	Actual			As Adjusted⁽¹⁾
	(dollars in thousands, except par values)
Cash and cash equivalents	$	64,585		$

Long-term debt and capital lease obligations:
Toggle Notes⁽²⁾	$	198,093		$
Senior Secured Notes⁽³⁾		523,252
Borrowing under Credit Facility⁽⁴⁾		—
Capital lease obligations		42,969
Other indebtedness		389

Total long-term debt and capital lease obligations		764,703

Stockholders’ equity:
Common stock, $0.01 par value; 100 shares authorized, issued and outstanding, actual; shares issued; as adjusted⁽⁵⁾		—
Additional paid-in capital		457,252
Accumulated deficit		(237,357	)

Total stockholders’ equity		219,895

Total capitalization	$	984,598		$

(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus) would increase (decrease) each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

(2)

The $201,365 aggregate principal amount of the Toggle Notes is reduced by the remaining original issue discount of $3,272 as of January 31, 2012, that will accrete and be recorded to interest expense through the maturity of the Toggle Notes. The Toggle Notes exclude the $9,948 principal amount of Toggle Notes purchased by CKE Restaurants since these Toggle Notes were constructively retired at the time of purchase.

(3)	The $532,122 aggregate principal amount of the Senior Secured Notes is reduced by the remaining original issue discount of $8,870 as of January 31, 2012, that will accrete and be recorded to interest expense through the maturity of the Senior Secured Notes.

(4)	The Credit Facility provides for facility loans, swingline loans and letters of credit, in an aggregate amount of up to $100,000. As of January 31, 2012, we had no outstanding loan borrowings, $30,913 of outstanding letters of credit, and remaining availability of $69,087 under the Credit Facility.

(5)	We intend to complete a for one stock split of our common stock prior to the completion of this offering. All share amounts have been retroactively adjusted to give effect to this stock split.

DILUTION

Dilution is the amount by which the offering price paid by the purchasers of the common stock to be sold in this offering exceeds the net tangible book value (deficit) per share of common stock after the offering. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date. There will be shares of our common stock reserved for future awards under our Stock Incentive Plan as of the consummation of this offering.

Our net tangible book deficit as of January 31, 2012 was $422.1 million, or $ per share. After giving effect to the receipt and our intended use of approximately $ million of estimated net proceeds from our sale of shares of common stock in this offering at an assumed offering price of $ per share, which represents the midpoint of the range set forth on the front cover of this prospectus, our adjusted net tangible book deficit as of January 31, 2012 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma net tangible book value (deficit) of $ per share to our existing stockholder and an immediate dilution of $ per share to new investors purchasing shares of common stock in the offering. The following table illustrates this substantial and immediate per share dilution to new investors:


		Per Share
Assumed initial public offering price per share		$
Net tangible book value (deficit) before the offering

Increase per share attributable to investors in the offering

Pro forma net tangible book value (deficit) after the offering

Dilution per share to new investors		$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) our pro forma net tangible book value (deficit) by $ million, the as adjusted net tangible book value (deficit) per share after this offering by $ per share and the dilution per share to new investors in this offering by $ , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

The following table summarizes on an as adjusted basis as of January 31, 2012, giving effect to:

•

the total number of shares of common stock purchased from us;

•

the total consideration paid to us, assuming an initial public offering price of $ per share (before deducting the estimated underwriting discount and commissions and offering expenses payable by us in connection with this offering); and

•

the average price per share paid by our existing stockholder and by new investors purchasing shares in this offering:


	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholder				%	$			%	$
Investors in the offering				%				%

Total			100	%	$		100	%	$

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus) would increase (decrease) total consideration paid by new investors and the average price per share by $ and $ , respectively, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and without deducting underwriting discounts and commissions and estimated expenses payable by us.

The tables and calculations above also assume no exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise their option to purchase additional shares in full, then new investors would purchase shares, or approximately % of shares outstanding, the total consideration paid by new investors would increase to $ , or % of the total consideration paid (based on the midpoint of the range set forth on the cover page of this prospectus), and the additional dilution per share to new investors would be $ .

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Our operating results for the fiscal year ended January 31, 2011 include the Predecessor twenty-four weeks ended July 12, 2010 and the Successor twenty-nine weeks ended January 31, 2011. Since the Merger occurred during our fiscal year ended January 31, 2011, we have included this unaudited pro forma condensed consolidated financial information as a supplemental disclosure to assist in comparing our results of operations between periods. The following unaudited pro forma condensed consolidated statement of operations for the fiscal year ended January 31, 2011 is based on our historical Consolidated Financial Statements appearing elsewhere in this prospectus and gives effect to the Transactions as if they had occurred on January 26, 2010, the first day of our fiscal year ended January 31, 2011.

The unaudited pro forma adjustments are based upon available information and certain assumptions that are factually supportable and that we believe are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial information is presented for information purposes only and does not purport to represent what our actual consolidated results of operations would have been had the Transactions actually occurred on the date indicated, nor are they necessarily indicative of our future consolidated results of operations. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the information contained in “Selected Historical and Pro Forma Financial Information and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited Consolidated Financial Statements and related notes appearing elsewhere in this prospectus. All pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed consolidated financial information.

All references to “Predecessor” relate to CKE Restaurants and its consolidated subsidiaries for periods prior to the Merger. All references to “Successor” relate to CKE and its consolidated subsidiaries for periods subsequent to the Merger. References to “we,” “us,” “our,” and the “Company” relate to the Predecessor for the periods prior to the Merger and to the Successor for periods subsequent to the Merger. The acquisition of CKE Restaurants was accounted for as a business combination using the acquisition method of accounting, whereby the purchase price was allocated to the assets and liabilities based on the estimated fair value of assets acquired and liabilities assumed at the date of acquisition.

CKE INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statement of Operations

(dollars in thousands, except per share amounts)


	Successor			Predecessor			Pro Forma Adjustments			Pro Forma
	Twenty-Nine Weeks Ended January, 31, 2011			Twenty-Four Weeks Ended July 12, 2010			Pro Forma Adjustments			Fiscal 2011
Revenue:
Company-operated restaurants	$	598,753		$	500,531		$	—		$	1,099,284
Franchised restaurants and other		80,355			151,588			1,575	^(1)(2)(3)		233,518

Total revenue		679,108			652,119			1,575			1,332,802

Operating costs and expenses:
Restaurant operating costs		495,909			414,171			940	⁽¹⁾⁽²⁾		911,020
Franchised restaurants and other		39,464			115,120			4,332	⁽¹⁾⁽²⁾		158,916
Advertising		34,481			29,647			—			64,128
General and administrative		84,833			59,859			(10,882	)^(1)(2)(3)		133,810
Facility action charges, net		1,683			590			—			2,273
Other operating expenses (income), net		20,003			10,249			(33,694	)⁽³⁾		(3,442	)

Total operating costs and expenses		676,373			629,636			(39,304	)		1,266,705

Operating income		2,735			22,483			40,879			66,097
Interest expense		(43,681	)		(8,617	)		(27,544	)⁽⁴⁾		(79,842	)
Other income (expense), net		1,645			(13,609	)		14,243	^(1)(2)(3)		2,279

(Loss) income before income taxes		(39,301	)		257			27,578			(11,466	)
Income tax (benefit) expense		(11,411	)		7,772			(752	)⁽⁵⁾		(4,391	)

Net (loss) income	$	(27,890	)	$	(7,515	)	$	28,330		$	(7,075	)

Net loss per share (basic and diluted)
Weighted average shares outstanding (basic and diluted)

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

(Dollars in thousands)

(1) Reflects the adjustment to depreciation and amortization to each of the respective statement of operations line items resulting from the acquisition accounting fair value adjustments and estimated useful lives assigned to property and equipment and intangible assets and liabilities. The useful lives used in preparing this pro forma financial information are consistent with the useful lives disclosed in our consolidated financial statements included elsewhere in this prospectus. The pro forma net increase to depreciation and amortization expense of $2,196 was adjusted in the following statement of operations line items:


	Pro Forma Adjustments
Increase in franchised restaurants and other revenue	$	1,590
Increase in restaurant operating costs		231
Increase in franchised restaurants and other expense		4,030
Decrease in general and administrative expense		(385	)
Increase in other income (expense), net		90

(2) Reflects adjustments to straight-line rent expense based on a re-assessment of remaining lease terms on the first day of the fiscal year ended January 31, 2011, adjustments to capital lease rental payments as a result of changes to reflect the revised fair values of capital lease obligations and the removal of historical income recognized for deferred rent to each of the respective statement of operations line items:


	Pro Forma Adjustments
Increase in franchised restaurants and other revenue	$	192
Increase in restaurant operating costs		709
Increase in franchised restaurants and other expense		302
Increase in general and administrative expense		329
Decrease in other income (expense), net		(130	)

(3) Represents the following items:


			Pro Forma Adjustments
Decrease in franchised restaurants and other revenue	^(a	⁾	$	(207	)
Decrease in general and administrative expense	^(b	⁾		(13,182	)
Increase in general and administrative expense	^(c	⁾		1,075
Increase in general and administrative expense	^(d	⁾		1,281
Decrease in other operating expenses (income), net	^(e	⁾		(33,694	)
Increase in other income (expense), net	^(e	⁾		14,283

(a)	Represents the removal of historical revenue recognized for deferred development fees received in advance of restaurant openings.

(b)

Represents the adjustment to share-based compensation expense to reverse the expense recorded for the acceleration of options and awards in connection with the Merger, to reverse the expense recorded under our Predecessor share-based compensation plans and to add the expense associated with the post-merger share-based compensation plan. See “Executive Compensation—Compensation Discussion and Analysis for Fiscal 2012—Elements of Executive Compensation—Equity Incentive Compensation.”

(c)	Represents the impact on compensation expense for the retention bonuses provided to our executive officers. See “Executive Compensation—Compensation Discussion and Analysis for Fiscal 2012—Elements of Executive Compensation—Retention Bonus.”

(d)	Represents management fees to be paid to Apollo Management. See “Certain Relationships and Related Party Transactions—Management Services Fee.”

(e)	Represents the removal of historical costs related to the Transactions.

(4) Pro forma adjustments were made to record incremental interest expense arising as a result of the Transactions, including the amortization of original issue discount on our Senior Secured Notes, the amortization of deferred financing costs, estimated fees under our Credit Facility and the revised fair values of capital lease obligations.

(5) Pro forma adjustments were recorded to adjust our estimated effective income tax rate to our statutory income tax rate of 38.3% for the fiscal year ended January 31, 2011.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION AND OTHER DATA

The selected financial information for the fiscal year ended January 31, 2012, the twenty-nine weeks ended January 31, 2011, the twenty-four weeks ended July 12, 2010 and the fiscal year ended January 31, 2010 and as of January 31, 2012 and 2011 have been derived from our Consolidated Financial Statements, including the related notes thereto, which have been audited by KPMG LLP, an independent registered public accounting firm, and are included elsewhere in this prospectus. The selected financial information for the fiscal years ended January 31, 2009 and 2008 and as of January 31, 2010, 2009 and 2008, have been derived from our consolidated financial statements, including the related notes thereto, which are not included in this prospectus. Periods ended on or prior to July 12, 2010 reflect the consolidated results of our subsidiary, CKE Restaurants, prior to the Merger, and the periods beginning after July 12, 2010 reflect the results of CKE and its consolidated subsidiaries after the Merger. We refer to the financial statements prior to the Merger as “Predecessor” and to those after the Merger as “Successor”. We also present selected pro forma consolidated financial information for the fiscal year ended January 31, 2011, which combines the Predecessor twenty-four weeks ended July 12, 2010 and the Successor twenty-nine weeks ended January 31, 2011, adjusted to give effect to the Transactions as if they had occurred on January 26, 2010, the first day of our fiscal year ended January 31, 2011. See “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this prospectus for further discussion. The pro forma adjustments relate primarily to interest expense, share-based compensation expense, transaction-related costs and depreciation and amortization.

The following information should be read in conjunction with “Risk Factors,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.


	Successor			Pro Forma			Successor			Predecessor
	Fiscal Year Ended January 31, 2012⁽¹⁾			Fiscal Year Ended January 31, 2011⁽¹⁾			Twenty- Nine Weeks Ended January 31, 2011⁽¹⁾			Twenty- Four Weeks Ended July 12, 2010⁽¹⁾			Fiscal Year Ended January 31, 2010⁽¹⁾			Fiscal Year Ended January 31, 2009⁽¹⁾			Fiscal Year Ended January 31, 2008⁽¹⁾
	(dollars in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Company-operated restaurants	$	1,122,430		$	1,099,284		$	598,753		$	500,531		$	1,084,474		$	1,131,312		$	1,201,577
Franchised restaurants and other		157,897			233,518			80,355			151,588			334,259			351,398			333,057

Total revenue	$	1,280,327		$	1,332,802		$	679,108		$	652,119		$	1,418,733		$	1,482,710		$	1,534,634

Operating income⁽²⁾	$	68,894		$	66,097		$	2,735		$	22,483		$	79,495		$	84,020		$	88,327
Interest expense⁽³⁾		(98,124	)		(79,842	)		(43,681	)		(8,617	)		(19,254	)		(28,609	)		(33,033	)
Income tax (benefit) expense		(11,609	)		(4,391	)		(11,411	)		7,772			14,978			21,533			24,659
(Loss) income from continuing operations⁽⁴⁾		(19,279	)		(7,075	)		(27,890	)		(7,515	)		48,198			36,956			35,072
(Loss) earnings per share from continuing operations (basic and diluted)
Other Financial Data:
Adjusted EBITDA⁽⁵⁾	$	165,878		$	164,947		$	90,231		$	74,716		$	166,974		$	170,965		$	172,894
Adjusted EBITDA margin⁽⁵⁾		13.0	%		12.4	%		13.3	%		11.5	%		11.8	%		11.5	%		11.3	%
Total capital expenditures	$	52,423		$	63,098		$	29,360		$	33,738		$	102,428		$	116,513		$	133,816
Cash paid for interest, net of amounts capitalized		72,944						53,374			8,299			19,590			21,753			20,235


	Fiscal Year Ended January 31,
	2012			2011			2010			2009			2008
	(dollars in thousands)
Other Operating Data:
System restaurant sales:
Company-operated restaurants	$	1,122,430		$	1,099,284		$	1,084,474		$	1,131,312		$	1,201,577
Franchised Carl’s Jr. and Hardee’s restaurants⁽⁶⁾		2,481,092			2,367,172			2,240,175			2,209,235			2,049,896

Total system restaurant sales	$	3,603,522		$	3,466,456		$	3,324,649		$	3,340,547		$	3,251,473

Blended company-operated average unit volume (trailing-52 weeks)	$	1,257		$	1,207		$	1,206		$	1,232		$	1,162
Blended company-operated same store sales		3.5	%		(0.8	)%		(3.9	)%		1.7	%		1.5	%
Restaurants open (at end of fiscal year):
Company-operated		892			890			898			899			967
Domestic franchised		1,928			1,910			1,905			1,901			1,834
International franchised		423			359			338			316			282

Total restaurants		3,243			3,159			3,141			3,116			3,083

International franchise restaurants as % of total restaurants		13.0	%		11.4	%		10.8	%		10.1	%		9.1	%
Number of foreign countries with restaurants		25			18			16			14			14


	Successor				Predecessor
	January 31, 2012		January 31, 2011		January 31, 2010		January 31, 2009		January 31, 2008
	(dollars in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	64,585	$	42,586	$	18,246	$	17,869	$	19,993
Total assets		1,478,087		1,496,166		823,543		804,687		791,711
Total long-term debt and capital lease obligations, including current portion		764,703		638,532		329,008		357,450		392,036
Stockholders’ equity		219,895		424,769		236,175		194,276		145,242

(1)

Our fiscal year is 52 or 53 weeks, ending the last Monday in January. For clarity of presentation, we generally label all fiscal years presented as if the fiscal year ended January 31. Pro forma fiscal 2011 and the combined Successor twenty-nine weeks ended January 31, 2011 and Predecessor twenty-four weeks ended July 12, 2010, contain 53 weeks; all other fiscal years presented contain 52 weeks.

(2)

Fiscal 2012, pro forma fiscal 2011, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010, fiscal 2010, fiscal 2009 and fiscal 2008 include $(6,018), $2,273, $1,683, $590, $4,695, $4,139 and $(577), respectively, of facility action charges, net, which are included in operating income. Additionally, $10,587 and $1,521 of share-based compensation expense related to the acceleration of vesting of stock options and awards in connection with the Merger are included in operating income for the Successor twenty-nine weeks ended January 31, 2011 and Predecessor twenty-four weeks ended July 12, 2010, respectively. Operating income also includes transaction-related costs of $545, $20,003 and $13,691 for fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010, respectively, and a gain of $3,442 on the sale of our Carl’s Jr. distribution center assets in pro forma fiscal 2011 and the Predecessor twenty-four weeks ended July 12, 2010.

(3)	The Predecessor twenty-four weeks ended July 12, 2010, fiscal 2010, fiscal 2009 and fiscal 2008 include $3,113, $6,803, $9,010 and $11,380, respectively, of interest expense related to changes in the fair value of our Predecessor interest rate swap agreements.

(4)	The Predecessor twenty-four weeks ended July 12, 2010 includes a termination fee of $14,283 related to a prior merger agreement.

(5)

“Adjusted EBITDA” represents income (loss) before income taxes, interest income and expense, asset impairments, facility action charges, depreciation and amortization, management fees, pro-forma cost savings as a result of becoming privately held, the effects of acquisition accounting adjustments, and certain non-cash and other items described below. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by total revenue. See “Non-GAAP Financial Measures.”

A reconciliation of net (loss) income to Adjusted EBITDA is provided below.


	Successor			Pro Forma			Predecessor
	Fiscal Year Ended January 31, 2012			Fiscal Year Ended January 31, 2011^(a)			Fiscal Year Ended January 31, 2010			Fiscal Year Ended January 31, 2009			Fiscal Year Ended January 31, 2008
	(dollars in thousands)
Net (loss) income	$	(19,279	)	$	(7,075	)	$	48,198		$	36,956		$	31,076
Interest expense		98,124			79,842			19,254			28,609			33,055
Income tax (benefit) expense		(11,609	)		(4,391	)		14,978			21,533			26,612
Depreciation and amortization		82,044			77,780			71,064			63,497			64,102
Facility action charges, net		(6,018	)		2,273			4,695			4,139			(1,282	)
Gain on sale of distribution center assets		—			(3,442	)		—			—			—
Transaction-related costs^(b)		545			—			823			—			—
Management fees^(c)		2,490			2,541			—			—			—
Share-based compensation expense		4,593			4,774			8,156			12,534			11,378
Losses on asset and other disposals		1,801			6,500			2,341			2,353			4,429
Difference between U.S. GAAP rent and cash rent		2,690			2,360			989			2,729			2,902
Cost savings^(d)		—			970			1,510			1,470			1,535
Other, net^(e)		10,497			2,815			(5,034	)		(2,855	)		(913	)

Adjusted EBITDA	$	165,878		$	164,947		$	166,974		$	170,965		$	172,894

(a)

Pro forma fiscal 2011 contained 53 weeks. We estimate the extra week resulted in additional adjusted EBITDA of approximately $2,000.

(b)

Transaction-related costs include investment banking, legal, and other costs related to the Merger, as well as costs related to the termination of a prior merger agreement.

(c)

(d)

Cost savings reflects pro-forma cost savings amounts expected to be realized as a result of becoming a privately held company.

(e)

Other, net includes the net impact of purchase accounting, early extinguishment of debt, executive retention bonus, severance costs and disposition business expense. For the fiscal year ended January 31, 2012, other, net also includes a charge of $1,976 related to the out-of-period Insurance Reserve Adjustment described in more detail in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus. For the pro forma fiscal year ended January 31, 2011 and the fiscal years ended January 31, 2010, 2009 and 2008, other, net also includes an adjustment to remove the Adjusted EBITDA associated with our Carl’s Jr. distribution centers, which we sold on July 2, 2010.

(6)	Franchised restaurant operations are not included in our Consolidated Statements of Operations; however, franchised restaurants revenues result in royalties and rental revenues, which are included in franchised restaurants and other revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

•

Overview

•

Trends and Uncertainties

•

Operating Review

•

Liquidity and Capital Resources

•

Long-Term Obligations

•

Critical Accounting Policies and Estimates

•

New Accounting Pronouncements

•

Presentation of Non-GAAP Measures

•

Impact of Inflation

•

Quantitative and Qualitative Disclosures About Market Risk

The MD&A should be read in conjunction with “Cautionary Notice Regarding Forward-Looking Statements,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Selected Historical and Pro Forma Financial and Other Data” and the Consolidated Financial Statements and related notes included elsewhere in this prospectus.

All dollar amounts, except per share amounts, presented in this MD&A are in thousands, unless the context indicates otherwise.

Overview

We are an owner, operator and franchisor of QSRs in the United States and 25 other countries, operating principally under the Carl’s Jr. and Hardee’s brand names. As of January 31, 2012, we operated 892 restaurants and our franchisees operated 1,928 domestic and 423 international restaurants, primarily under the Carl’s Jr. and Hardee’s brands. Domestic Carl’s Jr. restaurants are predominately located in the Western United States, primarily in California, with a growing presence in Texas. International Carl’s Jr. restaurants are located primarily in Mexico, with a growing presence in the rest of Latin America, Russia and Asia. Hardee’s restaurants are located predominately throughout the Southeastern and Midwestern United States, with a growing international presence in the Middle East and Central Asia.

We derive our revenue primarily from sales at company-operated restaurants and from our franchisees. Franchise restaurants and other revenue includes franchise and royalty fees, rental revenue under real property leases and revenue from the sale of equipment to our franchisees. Restaurant operating expenses consist primarily of food and packaging costs, payroll and other employee benefits and occupancy and other operating expenses of company-operated restaurants. Franchise operating costs include depreciation expense or lease payments on properties leased or subleased to our franchisees, the cost of equipment sold to franchisees and franchise administrative support. Our revenue and expenses are directly affected by the number and sales volume of company-operated restaurants and, to a lesser extent, by the number and sales volume of franchised restaurants.

On July 2, 2010, we sold to MBM our Carl’s Jr. distribution center assets located in Ontario, California and Manteca, California. Prior to the sale of our Carl’s Jr. distribution center assets on July 2, 2010, we derived sales from food and packaging products to Carl’s Jr. franchisees and incurred the associated franchise operating costs for food and packaging products.

Merger Agreement

On July 12, 2010, we acquired CKE Restaurants pursuant to the Merger Agreement, with CKE Restaurants becoming our wholly-owned subsidiary through the Merger.

The aggregate consideration for all equity securities of CKE Restaurants was $704,065, including $10,587 of post-combination share-based compensation expense, and the total debt assumed and refinanced in connection with the Merger was $270,487. The Merger was funded by (i) equity contributions from the Apollo Funds of $436,645, (ii) equity contributions from our senior management of $13,355, and (iii) proceeds of $588,510 from the issuance of our $600,000 Senior Secured Notes. In addition, we entered into our $100,000 Credit Facility, which was undrawn at closing.

The aforementioned transactions, including the Merger and payment of costs related to these transactions, are collectively referred to as the “Transactions.”

During fiscal 2012, we completed the acquisition accounting for the Merger and retrospectively adjusted post-combination amounts previously reported to reflect our final accounting for the Merger. See Note 2 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further discussion.

Subsequently, on March 14, 2012, CKE completed an offering of $200,000 of its Toggle Notes.

Presentation of Historical and Pro Forma Operating Results

Since the Merger occurred on July 12, 2010, our operating results for the three years ended January 31, 2012 discussed in this prospectus include both Successor and Predecessor periods. The operating results for the Predecessor periods reflect the consolidated results of our subsidiary, CKE Restaurants, prior to the Merger. Operating results for Successor periods reflect the results of CKE and its consolidated subsidiaries after the Merger. Due to the significant impact of acquisition accounting and Merger related expenses, most notably interest expense, share-based compensation expense and transaction-related costs, on our consolidated operating results, there is a lack of comparability between Successor and Predecessor periods. Accordingly, we have separately discussed our consolidated results of operations for each period.

In addition, within this MD&A we have included pro forma condensed consolidated financial information for the fiscal year ended January 31, 2011, which combines the Predecessor twenty-four weeks ended July 12, 2010 and Successor twenty-nine weeks ended January 31, 2011, adjusted to give effect to the Transactions as if they had occurred on January 26, 2010, the first day of our fiscal year ended January 31, 2011. See “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this prospectus for further discussion. We have also included a supplemental discussion comparing our condensed consolidated results of operations for fiscal 2012 with such pro forma results of operations for fiscal 2011 within this MD&A. See “—Fiscal 2012 Compared with Pro Forma Fiscal 2011.”

With respect to the results of operations for Carl’s Jr. and Hardee’s, we have prepared our discussion by combining the results of operations for the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010 and comparing the combined results for fiscal 2011 to both fiscal 2012 and fiscal 2010. Although this combined presentation of our brand-level information does not comply with U.S. GAAP, we believe that it provides a meaningful method of comparison because the impact of acquisition accounting and the Merger related expenses referred to above is less significant on the brand-level

operating results. The combined brand-level operating results have not been prepared on a pro forma basis under applicable regulations and may not reflect the actual results we would have achieved absent the Transactions and may not be predictive of future results of operations.

Fiscal 2011 Additional Week

Our fiscal year ends on the last Monday in January in each year, which resulted in an extra week during fiscal 2011. As a result, our fourth quarter and fiscal year ended January 31, 2011 included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended January 30, 2012. The fiscal year ended January 25, 2010 included 52 weeks.

Within this MD&A, management has estimated the impact of the additional week on our operating results by analyzing the last accounting period of fiscal 2011, excluding the impact of certain year-end and quarter-end adjustments, and making various assumptions that management deemed reasonable and appropriate.

Fiscal 2012 Highlights

Highlights from fiscal 2012 include:

•

Our system-wide restaurant count for our two major brands increased by 86 restaurants, marking our fifth straight year of net restaurant growth.

•

Our franchisees opened 72 international and 41 domestic restaurants, and we opened 5 domestic company-operated restaurants.

•

We, through our franchisees, opened restaurants in seven new countries.

•

Blended same-store sales for company-operated restaurants increased 3.5%.

•

Blended average unit volumes for company-operated restaurants increased to $1,257.

•

We signed development agreements with 17 new and three existing franchisees representing commitments to build over 300 restaurants domestically and internationally over the next seven years.

•

We remodeled 65 company-operated restaurants.

•

Our domestic franchisees remodeled 284 restaurants.

•

We completed a combined 67 dual-branded Green Burrito and Red Burrito company-operated restaurant conversions, and our domestic franchisees completed 45 dual-branded restaurant conversions.

•

Consolidated revenue of $1,280,327 for fiscal 2012 benefited from an increase in company-operated same-store sales and an increase in the number of our franchised restaurants. Consolidated revenue for fiscal 2012 was unfavorably impacted by the sale of our Carl’s Jr. distribution center assets on July 2, 2010.

•

Operating income of $68,894 for fiscal 2012 was primarily comprised of operating income generated by our Carl’s Jr. and Hardee’s operating segments of $30,232 and $38,687, respectively. Operating income for fiscal 2012 includes a charge of $1,976 in the Hardee’s operating segment related to the out-of-period Insurance Reserve Adjustment described in more detail in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

•

Consolidated company-operated restaurant-level adjusted EBITDA margin⁽¹⁾ of 16.8% for fiscal 2012 was unfavorably impacted by increases in commodity costs and by the Insurance Reserve Adjustment, which were partially offset by favorability in other components of labor costs. Excluding the Insurance Reserve Adjustment, consolidated company-operated restaurant-level adjusted EBITDA margin for fiscal 2012 was 17.0%.

•

Consolidated franchise restaurant adjusted EBITDA⁽¹⁾ of $84,204 for fiscal 2012 benefited from royalties generated from the increase in our franchised restaurant count and was adversely impacted by higher franchise administrative costs to support our long-term growth strategy.

•

We extinguished through redemptions and open market purchases a total of $67,878 of the principal amount of our Senior Secured Notes and $9,948 of the principal amount of our Toggle Notes.

•

We received proceeds of $67,454 from the sale and leaseback of 47 restaurant properties⁽²⁾.

⁽¹⁾	Refer to definitions of company-operated restaurant-level non-GAAP measures and franchise restaurant adjusted EBITDA within the subheading “Presentation of Non-GAAP Measures” in this MD&A.

⁽²⁾	See Note 11 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for additional discussion of sale and leaseback transactions.

Trends and Uncertainties

The following represent some of the most significant trends and uncertainties that management believes could reasonably be expected to impact our future plans and developments, financial goals and operating performance. This section should be read in conjunction with “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors.”

•

The continuing economic uncertainty affecting consumer confidence and discretionary spending may cause long-term changes in the preferences and perceptions of our customers;

•

The cost of food commodities has increased markedly over the last two years and we expect that there may be additional pricing pressure on some of our key ingredients, most notably beef, during fiscal 2013, which may adversely affect our operating results or cause us to consider changes to our product delivery strategy and adjustments to our menu pricing;

•

We expect to continue to grow our restaurant base, and as of January 31, 2012, we have entered into 78 franchise development agreements representing commitments to build over 800 restaurants domestically and internationally over the next ten years;

•

Changes in employment and other governmental regulations could result in additional costs to us and cause adverse impacts on our future operating results; and

•

Changes in consumer focus on nutrition, food content and food safety could result in loss of market share and adversely impact our operating results.

Operating Review

The following tables present the change in our restaurant portfolios, consolidated and by brand, for fiscal 2012 and 2011:


	Company- operated			Domestic Franchised			International Franchised			Total
Consolidated:
Open as of January 31, 2010		898			1,905			338			3,141
New		7			32			30			69
Closed		(15	)		(27	)		(9	)		(51	)

Open as of January 31, 2011		890			1,910			359			3,159
New		5			41			72			118
Closed		(6	)		(20	)		(8	)		(34	)
Divested		—			(3	)		—			(3	)
Acquired		3			—			—			3

Open as of January 31, 2012		892			1,928			423			3,243



	Company- operated			Domestic Franchised			International Franchised			Total
Carl’s Jr.:
Open as of January 31, 2010		422			666			136			1,224
New		7			20			19			46
Closed		(6	)		(12	)		(3	)		(21	)

Open as of January 31, 2011		423			674			152			1,249
New		3			25			48			76
Closed		(3	)		(6	)		(3	)		(12	)
Divested		—			—			—			—
Acquired		—			—			—			—

Open as of January 31, 2012		423			693			197			1,313


	Company- operated			Domestic Franchised			International Franchised			Total
Hardee’s:
Open as of January 31, 2010		475			1,228			202			1,905
New		—			12			11			23
Closed		(9	)		(14	)		(6	)		(29	)

Open as of January 31, 2011		466			1,226			207			1,899
New		2			16			24			42
Closed		(2	)		(13	)		(5	)		(20	)
Divested		—			(3	)		—			(3	)
Acquired		3			—			—			3

Open as of January 31, 2012		469			1,226			226			1,921


	Successor			Pro Forma			Successor			Predecessor
	Fiscal 2012			Fiscal 2011⁽¹⁾			Twenty-Nine Weeks Ended January 31, 2011			Twenty-Four Weeks Ended July 12, 2010			Fiscal 2010
Revenue:
Company-operated restaurants	$	1,122,430		$	1,099,284		$	598,753		$	500,531		$	1,084,474
Franchised restaurants and other		157,897			233,518			80,355			151,588			334,259

Total revenue		1,280,327			1,332,802			679,108			652,119			1,418,733

Operating costs and expenses:
Restaurant operating costs		939,615			911,020			495,909			414,171			881,397
Franchised restaurants and other		81,372			158,916			39,464			115,120			254,124
Advertising		65,061			64,128			34,481			29,647			64,443
General and administrative		130,858			133,810			84,833			59,859			134,579
Facility action charges, net		(6,018	)		2,273			1,683			590			4,695
Other operating expenses (income), net		545			(3,442	)		20,003			10,249			—

Total operating costs and expenses		1,211,433			1,266,705			676,373			629,636			1,339,238

Operating income		68,894			66,097			2,735			22,483			79,495
Interest expense		(98,124	)		(79,842	)		(43,681	)		(8,617	)		(19,254	)
Other (expense) income, net		(1,658	)		2,279			1,645			(13,609	)		2,935

(Loss) income before income taxes		(30,888	)		(11,466	)		(39,301	)		257			63,176
Income tax (benefit) expense		(11,609	)		(4,391	)		(11,411	)		7,772			14,978

Net (loss) income	$	(19,279	)	$	(7,075	)	$	(27,890	)	$	(7,515	)	$	48,198

Company-operated restaurant-level adjusted EBITDA⁽²⁾:
Company-operated restaurants revenue	$	1,122,430		$	1,099,284		$	598,753		$	500,531		$	1,084,474
Less: restaurant operating costs		(939,615	)		(911,020	)		(495,909	)		(414,171	)		(881,397	)
Add: depreciation and amortization expense		70,994			66,393			35,750			30,412			63,096
Less: advertising expense		(65,061	)		(64,128	)		(34,481	)		(29,647	)		(64,443	)

Company-operated restaurant-level adjusted EBITDA	$	188,748		$	190,529		$	104,113		$	87,125		$	201,730

Company-operated restaurant-level adjusted EBITDA margin		16.8	%		17.3	%		17.4	%		17.4	%		18.6	%
Franchise restaurant adjusted EBITDA⁽²⁾
Franchised restaurants and other revenue	$	157,897		$	233,518		$	80,355		$	151,588		$	334,259
Less: franchised restaurants and other expense		(81,372	)		(158,916	)		(39,464	)		(115,120	)		(254,124	)
Add: depreciation and amortization expense		7,679			8,094			4,266			1,388			3,130

Franchise restaurant adjusted EBITDA	$	84,204		$	82,696		$	45,157		$	37,856		$	83,265

(1)	Refer to discussion of unaudited pro forma condensed consolidated statement of operations for fiscal 2011 within “Unaudited Pro Forma Condensed Consolidated Financial Information.”

(2)	Refer to definitions of company-operated restaurant-level non-GAAP measures and franchise restaurant adjusted EBITDA within the subheading “Presentation of Non-GAAP Measures” in this MD&A.

Fiscal 2012 Compared with Pro Forma Fiscal 2011

Total Revenue

Total revenue decreased $52,475, or 3.9%, to $1,280,327 during fiscal 2012, as compared to pro forma fiscal 2011. The decrease was primarily due to a decrease of $86,891 of distribution center revenue resulting from the sale of our Carl’s Jr. distribution center assets on July 2, 2010 and the impact of fiscal 2011 containing one additional week. We estimate the additional week added approximately $22,000 to revenue in pro forma fiscal 2011. These decreases were partially offset by increases in company-operated same-store sales, which increases were 1.9% and 5.2% for Carl’s Jr. and Hardee’s, respectively. Total revenue, excluding both the Carl’s Jr. distribution center revenue and the estimated impact of the additional week in pro forma fiscal 2011, increased by $56,416, or 4.6%.

Restaurant Operating Costs

Restaurant operating costs increased $28,595, or 3.1%, to $939,615 during fiscal 2012, as compared to pro forma fiscal 2011. Restaurant operating costs as a percentage of company-operated restaurants revenue increased from 82.9% for pro forma fiscal 2011 to 83.7% for fiscal 2012. This increase in restaurant operating costs as a percentage of company-operated restaurants revenue was primarily due to a 120 basis point increase in food and packaging costs, which was partially offset by a 20 basis point decrease in payroll and other employee benefits expense and a 20 basis point decrease in occupancy and other expense. Payroll and other employee benefits expense for fiscal 2012 includes a charge of $1,976 related to the out-of-period Insurance Reserve Adjustment described in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Franchised Restaurants and Other Expense

Franchised restaurants and other expense decreased $77,544, or 48.8%, to $81,372 in fiscal 2012, as compared to pro forma fiscal 2011. This decrease is mainly due to an $86,170 decrease in distribution center costs resulting from the sale of our Carl’s Jr. distribution center assets on July 2, 2010. This decrease was partially offset by an increase of $5,877 in our Hardee’s equipment distribution center costs related directly to the increase in the Hardee’s equipment distribution center revenues and increased franchise operations and administration costs to support our long-term growth strategy.

Advertising Expense

Advertising expense as a percentage of company-operated restaurants revenue of 5.8% for fiscal 2012 was consistent with pro forma fiscal 2011.

General and Administrative Expense

General and administrative expense decreased $2,952, or 2.2%, to $130,858 in fiscal 2012, as compared to pro forma fiscal 2011. This decrease was primarily due to the write-off of $3,501 of capitalized software costs during pro forma fiscal 2011 that did not recur in fiscal 2012. This decrease was partially offset by an increase in bonus expense, which is based on our performance relative to executive management and operations bonus criteria.

Facility Action Charges, Net

During fiscal 2012, net facility action charges was a gain of $6,018, which resulted primarily from a gain of $6,595 related to a lease termination and a gain of $1,024 related to an eminent domain transaction. These gains were partially offset by asset impairment charges of $766 and discount amortization of $479 related to the estimated liability for closed restaurants. For pro forma fiscal 2011, net facility action charges were $2,273, which primarily consisted of charges to adjust the estimated liability for closed restaurants of $905, asset impairment charges of $681, discount amortization of $470 related to the estimated liability for closed restaurants and charges for new restaurant closures of $462.

See Note 16 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for additional detail of the components of facility action charges, net.

Other Operating Expenses (Income), Net

Other operating expenses, net of $545 for fiscal 2012 was comprised entirely of transaction-related costs for accounting, legal and other costs associated with the Transactions. Other operating income, net for pro forma fiscal 2011 of $3,442 was comprised entirely of the gain on sale of our Carl’s Jr. distribution center assets.

Interest Expense

Interest expense increased $18,282, or 22.9%, in fiscal 2012, as compared with pro forma fiscal 2011, due primarily to interest expense related to our Toggle Notes that were issued during fiscal 2012. This increase was partially offset by the impact of reduced interest expense related to our Senior Secured Notes as a result of the early extinguishment of $67,878 of the principal amount of these notes during fiscal 2012.

Other (Expense) Income, Net

During fiscal 2012, we recorded $1,658 of other expense, net as compared to $2,279 of other income, net for pro forma fiscal 2011. The change in other (expense) income, net is primarily attributable to a loss of $2,976 recorded on the early extinguishment of portions of our Senior Secured Notes and Toggle Notes in fiscal 2012.

Discussion of Consolidated Operating Results

Total Revenue

Total revenue for fiscal 2012 was $1,280,327, which was primarily comprised of revenue generated by our Carl’s Jr. and Hardee’s operating segments of $657,900 and $621,782, respectively. Carl’s Jr. and Hardee’s company-operated same-store sales for fiscal 2012 were 1.9% and 5.2%, respectively. During fiscal 2012, Carl’s Jr. and Hardee’s total revenue as a percentage of total consolidated revenue was 51.4% and 48.6%, respectively.

Total revenue for the Successor twenty-nine weeks ended January 31, 2011 was $679,108, which was primarily comprised of revenue generated by our Carl’s Jr. and Hardee’s operating segments of $353,492 and $325,213, respectively. During the Successor twenty-nine weeks ended January 31, 2011, Carl’s Jr. and Hardee’s total revenue as a percentage of total consolidated revenue was 52.1% and 47.9%, respectively.

Total revenue for the Predecessor twenty-four weeks ended July 12, 2010 was $652,119, which was primarily comprised of revenue generated by our Carl’s Jr. and Hardee’s operating segments of $383,234 and $268,523, respectively. During the Predecessor twenty-four weeks ended July 12, 2010, Carl’s Jr. and Hardee’s total revenue as a percentage of total consolidated revenue was 58.8% and 41.2%, respectively. Our Carl’s Jr. distribution centers, which were sold on July 2, 2010, generated revenues of $86,891, or 13.3% of total revenue, during the period.

Total revenue for fiscal 2010 was $1,418,733, which was primarily comprised of revenue generated by our Carl’s Jr. and Hardee’s operating segments of $852,479 and $565,462, respectively. During fiscal 2010, Carl’s Jr. and Hardee’s total revenue as a percentage of total consolidated revenue was 60.1% and 39.9%, respectively. Our Carl’s Jr. distribution centers generated revenues of $192,188, or 13.5% of total revenue, during fiscal 2010.

Restaurant Operating Costs

During fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, restaurant operating costs were $939,615, $495,909, $414,171 and $881,397, respectively. Restaurant operating costs as a percentage of company-operated restaurants revenue were

83.7%, 82.8%, 82.7% and 81.3% for fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, respectively. Restaurant operating costs for fiscal 2012 includes a charge of $1,976 related to the out-of-period Insurance Reserve Adjustment described in more detail in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Franchised Restaurants and Other Expense

During fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, franchised restaurants and other expense was $81,372, $39,464, $115,120 and $254,124, respectively. Franchised restaurants and other expense as a percentage franchised restaurants and other revenue was 51.5%, 49.1%, 75.9% and 76.0% for fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, respectively. Our Carl’s Jr. distribution centers, which were sold on July 2, 2010, represented $86,170 and $189,346 of our franchised restaurants and other expense during the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, respectively.

Advertising Expense

During fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, advertising expense was $65,061, $34,481, $29,647 and $64,443, respectively. Advertising expense as a percentage of company-operated restaurants revenue was 5.8%, 5.8%, 5.9% and 5.9% for fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, respectively.

General and Administrative Expense

During fiscal 2012, general and administrative expense was $130,858, or 10.2% as a percentage of total revenue. Our general and administrative expense for fiscal 2012 was favorably impacted by lower share-based compensation expense and unfavorably impacted by management service fees paid to Apollo Management and bonus expense, which is based on our performance relative to executive management and operations bonus criteria.

During the Successor twenty-nine weeks ended January 31, 2011, general and administrative expense was $84,833, or 12.5% as a percentage of total revenue. General and administrative expense for the Successor twenty-nine weeks ended January 31, 2011 was unfavorably impacted by share-based compensation expense of $10,587 associated with the acceleration of vesting of stock options and restricted stock awards in connection with the Merger and a charge of $3,501 related to the write-off of capitalized software costs. General and administrative expense during the period benefited from lower bonus expense, which is based on our performance relative to executive management and operations bonus criteria.

During the Predecessor twenty-four weeks ended July 12, 2010, general and administrative expense was $59,859, or 9.2% as a percentage of total revenue. General and administrative expense for the Predecessor twenty-four weeks ended July 12, 2010 was unfavorably impacted by share-based compensation expense of $1,521 associated with the acceleration of vesting of stock options and awards in connection with the Merger and favorably impacted by lower bonus expense, which is based on our performance relative to executive management and operations bonus criteria.

During fiscal 2010, general and administrative expense was $134,579, or 9.5% as a percentage of total revenue. General and administrative expense for fiscal 2010 was unfavorably impacted by higher share-based compensation expense and higher bonus expense, which is based on our performance relative to executive management and operations bonus criteria.

Facility Action Charges, Net

During the Successor twenty-nine weeks ended January 31, 2011, net facility action charges were $1,683, which primarily consisted of charges to adjust the estimated liability for closed restaurants of $870, asset impairment charges of $364 and discount amortization of $272 related to the estimated liability for closed restaurants.

During the Predecessor twenty-four weeks ended July 12, 2010, net facility action charges were $590, which primarily consisted of charges for new restaurant closures of $363, asset impairment charges of $317, and discount amortization of $198 related to the estimated liability for closed restaurants, which were partially offset by net gains of $323.

During fiscal 2010, net facility action charges were $4,695 and primarily consisted of asset impairment charges of $3,480, charges to adjust the estimated liability for closed restaurants of $393, charges for new restaurant closures of $525 and discount amortization of $392 related to the estimated liability for closed restaurants.

Other Operating Expenses, Net

During fiscal 2012, other operating expenses, net consisted of transaction-related costs of $545 for accounting, legal and other costs associated with the Transactions.

During the Successor twenty-nine weeks ended January 31, 2011, other operating expenses, net consisted of transaction-related costs of $20,003 for accounting, investment banking, legal and other costs associated with the Transactions.

During the Predecessor twenty-four weeks ended July 12, 2010, other operating expenses, net consisted of transaction-related costs of $13,691 for accounting, investment banking, legal and other costs associated with the Transactions, partially offset by a gain of $3,442 on the sale of our Carl’s Jr. distribution center assets.

During fiscal 2010, we did not incur any other operating expenses.

Interest Expense

In connection with the Transactions, we issued $600,000 of Senior Secured Notes. In addition, we issued $200,000 of Toggle Notes during fiscal 2012. As a result of the issuance of the Notes, our interest expense is significantly higher in the Successor periods.

Interest expense for fiscal 2012 of $98,124 primarily consisted of interest of $65,131 incurred on our Senior Secured Notes, interest of $19,898 on our Toggle Notes, $4,821 of amortization of deferred financing costs and discount on notes, and $4,755 of interest related to capital lease obligations.

Interest expense for the Successor twenty-nine weeks ended January 31, 2011 of $43,681 primarily consisted of interest of $37,710 incurred on our Notes, $2,089 of amortization of deferred financing costs and discount on notes, and $3,039 of interest related to capital lease obligations.

Interest expense for the Predecessor twenty-four weeks ended July 12, 2010 of $8,617 primarily consisted of charges of $3,113 recorded to adjust the carrying value of our Predecessor interest rate swap agreements to fair value, interest of $2,338 associated with our Predecessor senior credit facility and $2,318 of interest related to capital lease obligations.

Interest expense for fiscal 2010 was $19,254, which primarily consisted of charges of $6,803 recorded to adjust the carrying value of our Predecessor interest rate swap agreements to fair value, $5,380 of interest related to capital lease obligations and interest of $5,174 associated with our Predecessor senior credit facility.

Other (Expense) Income, Net

During fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011, the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, other (expense) income, net was $(1,658), $1,645, $(13,609) and $2,935, respectively. Other (expense) income, net for fiscal 2012 included a loss of $4,188 on the early extinguishment of $67,878 of the principal amount of our Senior Secured Notes and a gain of $1,212 on the early extinguishment of $9,948 of the principal amount of our Toggle Notes. During the Predecessor twenty-four weeks ended July 12, 2010, other (expense) income, net included a termination fee for a prior merger agreement of $9,283 and $5,000 in reimbursable costs.

Income Tax (Benefit) Expense

Income tax (benefit) expense consisted of the following:


	Successor						Predecessor
	Fiscal 2012			Twenty-Nine Weeks Ended January 31, 2011			Twenty-Four Weeks Ended July 12, 2010		Fiscal 2010
Federal income taxes	$	(12,799	)	$	(10,957	)	$	5,479	$	27,078
State income taxes		(453	)		(1,271	)		1,694		(13,130	)
Foreign income taxes		1,643			817			599		1,030

Income tax (benefit) expense	$	(11,609	)	$	(11,411	)	$	7,772	$	14,978

Our effective income tax rates generally differ from the federal statutory rate primarily as a result of state income taxes, changes in our valuation allowance, and certain expenses that are nondeductible for income tax purposes, the impact of which can vary significantly from year to year. Our effective income tax rate is also impacted by the amount of federal and state income tax credits we are able to generate and by the relative amounts of income we earn in various state and foreign jurisdictions. Refer to additional discussion in Note 21 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

As of January 31, 2012, we maintained a valuation allowance of $10,975 against a portion of our deferred income tax assets related to certain state net operating loss (“NOL”) carryforwards and a portion of our state income tax credits. Realization of the tax benefit of such deferred income tax assets may remain uncertain for the foreseeable future, even if we generate consolidated taxable income, since certain deferred income tax assets are subject to various limitations and may only be used to offset income of certain entities and in certain jurisdictions.

As of January 31, 2012, we have federal NOL carryforwards of approximately $35,852. As of January 31, 2012, we have federal alternative minimum tax (“AMT”) credit, general business tax credit and foreign tax credit carryforwards of approximately $26,274, which we expect to utilize to offset federal income taxes that would otherwise be payable in future years. As of January 31, 2012, we have recognized $1,493 of net deferred income tax assets related to our state income tax credit carryforwards and $12,296 of net deferred income tax assets related to our state NOL carryforwards, which represent our expected future tax savings from such carryforwards.

Carl’s Jr.


	Successor			Successor / Predecessor			Successor			Predecessor
	Fiscal 2012			Fiscal 2011			Twenty- Nine Weeks Ended January 31, 2011			Twenty- Four Weeks Ended July 12, 2010			Fiscal 2010
Company-operated restaurants revenue	$	598,234		$	592,904		$	321,525		$	271,379		$	604,937
Franchised restaurants and other revenue		59,666			143,822			31,967			111,855			247,542

Total revenue		657,900			736,726			353,492			383,234			852,479

Restaurant operating costs:
Food and packaging		181,149			173,158			93,403			79,755			170,703
Payroll and other employee benefits		170,678			167,149			90,321			76,828			165,831
Occupancy and other		150,570			149,678			82,962			66,716			145,566

Total restaurant operating costs		502,397			489,985			266,686			223,299			482,100

Franchised restaurants and other expense		32,824			115,569			17,534			98,035			214,971
Advertising expense		36,065			35,116			18,496			16,620			36,730
General and administrative expense		62,083			68,143			39,620			28,523			63,032
Facility action charges, net		(5,701	)		534			366			168			2,219
Gain on sale of distribution center assets		—			(3,442	)		—			(3,442	)		—

Operating income	$	30,232		$	30,821		$	10,790		$	20,031		$	53,427

Company-operated average unit volume (trailing-52 weeks)	$	1,411		$	1,375								$	1,438
Domestic franchise-operated average unit volume (trailing-52 weeks)		1,091			1,095									1,123
Company-operated same-store sales increase (decrease)		1.9	%		(4.8	)%								(6.2	)%
Domestic franchise-operated same-store sales decrease		(0.9	)%		(3.5	)%								(5.6	)%
Company-operated same-store transaction increase (decrease)		0.6	%		(3.7	)%								(4.2	)%
Company-operated average check (actual $)	$	6.97		$	6.85								$	6.91
Restaurant operating costs as a percentage of company-operated restaurants revenue:
Food and packaging		30.3	%		29.2	%								28.2	%
Payroll and other employee benefits		28.5	%		28.2	%								27.4	%
Occupancy and other		25.2	%		25.2	%								24.1	%
Total restaurant operating costs		84.0	%		82.6	%								79.7	%
Advertising expense as a percentage of company-operated restaurants revenue		6.0	%		5.9	%								6.1	%
Company-operated restaurant-level adjusted EBITDA⁽¹⁾:
Company-operated restaurants revenue	$	598,234		$	592,904		$	321,525		$	271,379		$	604,937
Less: restaurant operating costs		(502,397	)		(489,985	)		(266,686	)		(223,299	)		(482,100	)
Add: depreciation and amortization expense		34,366			32,557			17,723			14,834			31,113
Less: advertising expense		(36,065	)		(35,116	)		(18,496	)		(16,620	)		(36,730	)

Company-operated restaurant-level adjusted EBITDA	$	94,138		$	100,360		$	54,066		$	46,294		$	117,220

Company-operated restaurant-level adjusted EBITDA margin		15.7	%		16.9	%		16.8	%		17.1	%		19.4	%
Franchise restaurant adjusted EBITDA⁽¹⁾:
Franchised restaurants and other revenue	$	59,666		$	143,822		$	31,967		$	111,855		$	247,542
Less: franchised restaurants and other expense		(32,824	)		(115,569	)		(17,534	)		(98,035	)		(214,971	)
Add: depreciation and amortization expense		3,419			2,666			1,914			752			1,889

Franchise restaurant adjusted EBITDA	$	30,261		$	30,919		$	16,347		$	14,572		$	34,460

(1)	Refer to definitions of company-operated restaurant-level non-GAAP measures and franchise restaurant adjusted EBITDA within the subheading “Presentation of Non-GAAP Measures” in this MD&A.

Hardee’s


	Successor			Successor / Predecessor			Successor			Predecessor
	Fiscal 2012			Fiscal 2011			Twenty- Nine Weeks Ended January 31, 2011			Twenty- Four Weeks Ended July 12, 2010			Fiscal 2010
Company-operated restaurants revenue	$	524,084		$	506,153		$	277,110		$	229,043		$	479,289
Franchised restaurants and other revenue		97,698			87,583			48,103			39,480			86,173

Total revenue		621,782			593,736			325,213			268,523			565,462

Restaurant operating costs:
Food and packaging		163,197			151,700			82,858			68,842			138,939
Payroll and other employee benefits		155,155			153,819			83,321			70,498			147,407
Occupancy and other		118,722			114,244			62,866			51,378			112,635

Total restaurant operating costs		437,074			419,763			229,045			190,718			398,981

Franchised restaurants and other expense		48,548			39,015			21,930			17,085			39,149
Advertising expense		28,996			29,012			15,985			13,027			27,713
General and administrative expense		68,774			76,480			45,214			31,266			71,383
Facility action charges, net		(297	)		1,685			1,316			369			2,476

Operating income	$	38,687		$	27,781		$	11,723		$	16,058		$	25,760

Company-operated average unit volume (trailing-52 weeks)	$	1,117		$	1,054								$	1,002
Domestic franchise-operated average unit volume (trailing-52 weeks)		1,059			1,013									976
Company-operated same-store sales increase (decrease)		5.2	%		4.4	%								(0.9	)%
Domestic franchise-operated same-store sales increase (decrease)		4.0	%		3.4	%								(0.3	)%
Company-operated same-store transaction increase		0.7	%		1.3	%								0.8	%
Company-operated average check (actual $)	$	5.38		$	5.16								$	5.03
Restaurant operating costs as a percentage of company-operated restaurants revenue:
Food and packaging		31.1	%		30.0	%								29.0	%
Payroll and other employee benefits		29.6	%		30.4	%								30.8	%
Occupancy and other		22.7	%		22.6	%								23.5	%
Total restaurant operating costs		83.4	%		82.9	%								83.2	%
Advertising expense as a percentage of company-operated restaurants revenue		5.5	%		5.7	%								5.8	%
Company-operated restaurant-level adjusted EBITDA⁽¹⁾:
Company-operated restaurants revenue	$	524,084		$	506,153		$	277,110		$	229,043		$	479,289
Less: restaurant operating costs		(437,074	)		(419,763	)		(229,045	)		(190,718	)		(398,981	)
Add: depreciation and amortization expense		36,628			33,605			18,027			15,578			31,983
Less: advertising expense		(28,996	)		(29,012	)		(15,985	)		(13,027	)		(27,713	)

Company-operated restaurant-level adjusted EBITDA	$	94,642		$	90,983		$	50,107		$	40,876		$	84,578

Company-operated restaurant-level adjusted EBITDA margin		18.1	%		18.0	%		18.1	%		17.8	%		17.6	%
Franchise restaurant adjusted EBITDA⁽¹⁾:
Franchised restaurants and other revenue	$	97,698		$	87,583		$	48,103		$	39,480		$	86,173
Less: franchised restaurants and other expense		(48,548	)		(39,015	)		(21,930	)		(17,085	)		(39,149	)
Add: depreciation and amortization expense		4,260			2,988			2,352			636			1,241

Franchise restaurant adjusted EBITDA	$	53,410		$	51,556		$	28,525		$	23,031		$	48,265

(1)	Refer to definitions of company-operated restaurant-level non-GAAP measures and franchise restaurant adjusted EBITDA within the subheading “Presentation of Non-GAAP Measures” in this MD&A.

Fiscal 2012 Compared with Fiscal 2011

Carl’s Jr.

Company-Operated Restaurants Revenue

Revenue from company-operated Carl’s Jr. restaurants increased $5,330, or 0.9%, to $598,234 during fiscal 2012, as compared to the prior fiscal year. This increase was primarily due to the 1.9% increase in company-operated same-store sales, which was partially offset by the impact of fiscal 2011 containing one additional week. We estimate the additional week added approximately $10,855 to company-operated restaurants revenue in fiscal 2011.

Company-Operated Restaurant-Level Adjusted EBITDA Margin

The changes in company-operated restaurant-level adjusted EBITDA margin are summarized as follows:


Company-operated restaurant-level adjusted EBITDA margin for fiscal 2011	16.9	%
Increase in food and packaging costs	(1.1	)
Payroll and other employee benefits:
Increase in workers’ compensation expense	(0.3	)
Occupancy and other (excluding depreciation and amortization):
Decrease in repairs and maintenance expense	0.3
Decrease in general liability insurance expense	0.2
Increase in credit card and banking fees	(0.2	)
Increase in advertising expense	(0.1	)

Company-operated restaurant-level adjusted EBITDA margin for fiscal 2012	15.7	%

Food and Packaging Costs

Food and packaging costs increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to fiscal 2011, due primarily to increased commodity costs for beef, cheese and oil products.

Labor Costs

Workers’ compensation expense increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to fiscal 2011, due primarily to unfavorable claims reserve adjustments in fiscal 2012 as a result of actuarial analyses of outstanding claims reserves contrasted with favorable claims reserve adjustments in fiscal 2011.

Occupancy and Other Costs

Repairs and maintenance expense decreased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to fiscal 2011, due primarily to decreased spending on contract services, repairs of restaurant equipment and building maintenance in the current fiscal year.

Depreciation and amortization expense increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to the prior fiscal year, due primarily to the impact of fixed asset additions and acquisition accounting.

Franchised Restaurants


	Successor		Successor / Predecessor		Successor		Predecessor
	Fiscal 2012		Fiscal 2011		Twenty-Nine Weeks Ended January 31, 2011		Twenty-Four Weeks Ended July 12, 2010
Franchised restaurants and other revenue:
Royalties	$	34,685	$	33,483	$	18,415	$	15,068
Distribution centers—food, packaging and supplies		—		86,891		—		86,891
Rent and other occupancy		22,573		22,559		13,138		9,421
Franchise fees		2,408		889		414		475

Total franchised restaurants and other revenue	$	59,666	$	143,822	$	31,967	$	111,855

Franchised restaurants and other expense:
Administrative expense (including provision for bad debts)	$	11,678	$	8,898	$	5,706	$	3,192
Distribution centers—food, packaging and supplies		—		86,170		—		86,170
Rent and other occupancy		21,146		20,501		11,828		8,673

Total franchised restaurants and other expense	$	32,824	$	115,569	$	17,534	$	98,035

Franchised restaurants and other revenue decreased $84,156, or 58.5%, to $59,666 in fiscal 2012, as compared to fiscal 2011. Distribution center sales of food, packaging and supplies to franchisees decreased by $86,891, due to the sale of our Carl’s Jr. distribution center assets on July 2, 2010. Franchise fee revenues increased by $1,519, or 170.9%, to $2,408 in fiscal 2012 due primarily to an increase in the number of franchised restaurant openings in fiscal 2012 as compared to fiscal 2011. Royalty revenues increased $1,202, or 3.6%, due primarily to the net increase of 64 franchised restaurants since the end fiscal 2011, partially offset by a 0.9% decrease in domestic franchise-operated same-store sales and the impact of fiscal 2011 containing an additional week.

Franchised restaurants and other expense decreased $82,745, or 71.6%, to $32,824 in fiscal 2012, as compared to fiscal 2011. This decrease is mainly due to an $86,170 decrease in distribution center costs resulting from the sale of our Carl’s Jr. distribution center assets. This decrease was partially offset by an increase of $2,780 in administrative expense from the prior fiscal year, primarily caused by an increase of $1,154 in amortization expense related to the franchise agreement intangible asset recorded in connection with the Merger and increased franchise operations and administration costs related to our international growth strategy.

Hardee’s

Company-Operated Restaurants Revenue

Revenue from company-operated restaurants increased $17,931 or 3.5%, to $524,084 in fiscal 2012 as compared to fiscal 2011. The increase is primarily due to the 5.2% increase in company-operated same-store sales, which was partially offset by the impact of fiscal 2011 containing one additional week. We estimate the additional week added approximately $8,954 to company-operated restaurants revenue in fiscal 2011.

Company-Operated Restaurant-Level Adjusted EBITDA Margin

The changes in company-operated restaurant-level adjusted EBITDA margin are summarized as follows:


Company-operated restaurant-level adjusted EBITDA margin for fiscal 2011	18.0	%
Increase in food and packaging costs	(1.2	)
Payroll and other employee benefits:
Decrease in labor costs, excluding workers’ compensation	1.0
Increase in workers’ compensation expense	(0.2	)
Occupancy and other (excluding depreciation and amortization):
Decrease in utilities expense	0.2
Other, net	0.1
Decrease in advertising expense	0.2

Company-operated restaurant-level adjusted EBITDA margin for fiscal 2012	18.1	%

Food and Packaging Costs

Food and packaging costs increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to the prior fiscal year, mainly due to an increase in commodity costs for beef, pork and oil products.

Labor Costs

Labor costs, excluding workers’ compensation expense, decreased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to fiscal 2011, due primarily to more efficient use of labor in the restaurants and sales leverage resulting from the same-store sales increase.

Workers’ compensation expense increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to fiscal 2011, primarily due to a charge of $1,976 related to the out-of-period Insurance Reserve Adjustment described in more detail in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Occupancy and Other Costs

Depreciation and amortization expense increased as a percentage of company-operated restaurants revenue during fiscal 2012, as compared to the prior fiscal year, due primarily to fixed asset additions and acquisition accounting, partially offset by sales leverage resulting from the same-store sales increase.

Franchised Restaurants


	Successor		Successor / Predecessor		Successor		Predecessor
	Fiscal 2012		Fiscal 2011		Twenty-Nine Weeks Ended January 31, 2011		Twenty-Four Weeks Ended July 12, 2010
Franchised restaurants and other revenue:
Royalties	$	58,574	$	55,486	$	30,784	$	24,702
Distribution centers—equipment		24,927		18,884		9,664		9,220
Rent and other occupancy		13,036		12,349		7,162		5,187
Franchise fees		1,161		864		493		371

Total franchised restaurants and other revenue	$	97,698	$	87,583	$	48,103	$	39,480

Franchised restaurants and other expense:
Administrative expense (including provision for bad debts)	$	12,518	$	9,987	$	5,960	$	4,027
Distribution centers—equipment		24,937		19,060		9,854		9,206
Rent and other occupancy		11,093		9,968		6,116		3,852

Total franchised restaurants and other expense	$	48,548	$	39,015	$	21,930	$	17,085

Franchised restaurants and other revenue increased $10,115, or 11.5%, to $97,698 during fiscal 2012 as compared to fiscal 2011. Distribution center revenues increased $6,043, or 32.0%, primarily due to an increase in equipment sales to franchisees. Royalty revenues increased $3,088, or 5.6%, as compared to the prior fiscal year, due primarily to a net increase of 19 franchised restaurants since the end of fiscal 2011 and a 4.0% increase in our domestic franchise-operated same-store sales, partially offset by the impact of fiscal 2011 containing an additional week. Rent and other occupancy revenue increased $687, or 5.6%, primarily due to the impact of the amortization of favorable and unfavorable leases, which were recorded in connection with the Merger.

Franchised restaurants and other expense increased $9,533, or 24.4%, to $48,548 in fiscal 2012 as compared to fiscal 2011. Distribution center expenses increased $5,877, or 30.8%, resulting directly from the increase in distribution center sales to franchisees. The increase in administrative expense of $2,531 was primarily due to increased franchise operations and administration costs to support our long-term growth strategy and an increase of $864 in amortization expense related to the franchise agreement intangible asset recorded in connection with the Merger. Rent and other occupancy expense increased $1,125, or 11.3%, due primarily to the impact of the amortization of favorable and unfavorable leases, which were recorded in connection with the Merger.

Fiscal 2011 Compared with Fiscal 2010

Carl’s Jr.

Company-Operated Restaurants Revenue

Revenue from company-operated restaurants decreased $12,033 or 2.0%, to $592,904 during fiscal 2011, as compared to the prior year. This decrease was primarily due to the 4.8% decrease in company-operated same-store sales, which was partially offset by the impact of fiscal 2011 containing one additional week and the revenues generated from new company-operated restaurants opened since the end of fiscal 2010. We estimate the additional week added approximately $10,855 to company-operated restaurants revenue in fiscal 2011. Sales at Carl’s Jr. were negatively impacted during fiscal 2011 by the continued weakness in the overall economy and the resulting impact on unemployment rates and consumer spending, particularly in California where we had more than 360 company-operated Carl’s Jr. restaurants.

Company-Operated Restaurant-Level Adjusted EBITDA Margin

The changes in company-operated restaurant-level adjusted EBITDA margin are summarized as follows:


Company-operated restaurant-level adjusted EBITDA margin for fiscal 2010	19.4	%
Increase in food and packaging costs	(1.0	)
Payroll and other employee benefits:
Increase in labor costs, excluding workers’ compensation	(0.7	)
Increase in workers’ compensation expense	(0.1	)
Occupancy and other (excluding depreciation and amortization):
Increase in rent expense	(0.6	)
Increase in property tax expense	(0.1	)
Other, net	(0.2	)
Decrease in advertising expense	0.2

Company-operated restaurant-level adjusted EBITDA margin for fiscal 2011	16.9	%

Food and Packaging Costs

Food and packaging costs increased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, due primarily to increased commodity costs for beef, pork and cheese products.

Labor Costs

Labor costs, excluding workers’ compensation, increased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, due primarily to the deleveraging impact of the decrease in same-store sales and the relatively fixed nature of restaurant management costs.

Occupancy and Other Costs

Rent expense increased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, due mainly to impacts of acquisition accounting related to the Merger and the deleveraging impact of the decrease in same-store sales and the relatively fixed nature of rent expense.

Depreciation and amortization expense increased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, mainly due to impacts of acquisition accounting related to the Merger, asset additions related to remodels, new store openings and equipment upgrades, as well as the deleveraging impact of the decrease in same-store sales and the relatively fixed nature of depreciation and amortization expense.

Franchised Restaurants


	Successor		Predecessor		Successor / Predecessor		Predecessor
	Twenty-Nine Weeks Ended January 31, 2011		Twenty-Four Weeks Ended July 12, 2010		Fiscal 2011		Fiscal 2010
Franchised restaurants and other revenue:
Royalties	$	18,415	$	15,068	$	33,483	$	32,346
Distribution centers—food, packaging and supplies		—		86,891		86,891		192,188
Rent and other occupancy		13,138		9,421		22,559		21,674
Franchise fees		414		475		889		1,334

Total franchised restaurants and other revenue	$	31,967	$	111,855	$	143,822	$	247,542

Franchised restaurants and other expense:
Administrative expense (including provision for bad debts)	$	5,706	$	3,192	$	8,898	$	6,560
Distribution centers—food, packaging and supplies		—		86,170		86,170		189,346
Rent and other occupancy		11,828		8,673		20,501		19,065

Total franchised restaurants and other expense	$	17,534	$	98,035	$	115,569	$	214,971

Franchised restaurants and other revenue decreased by $103,720, or 41.9%, to $143,822 in fiscal 2011, as compared to the prior year. Distribution center sales of food, packaging and supplies to franchisees decreased by $105,297, due to the sale of our Carl’s Jr. distribution center assets on July 2, 2010. Royalty revenues increased by $1,137, or 3.5%, due to a net increase of 24 franchised restaurants in fiscal 2011 and the additional week included in fiscal 2011, partially offset by a decrease of 3.5% in franchise-operated same-store sales. Additionally, franchise fee revenues decreased by $445, or 33.4%, due to a reduction in new store franchise fees and development fees as a result of certain deferred revenue balances being written off in acquisition accounting.

Franchised restaurants and other expense decreased by $99,402, or 46.2%, to $115,569 in fiscal 2011, as compared to fiscal 2010. This decrease is mainly due to a $103,176 decrease in distribution center costs resulting from the sale of our Carl’s Jr. distribution center assets. This decrease was partially offset by an increase of $2,338 in administrative expense caused primarily by $1,346 of amortization expense related to franchise agreements recorded in connection with the Merger. Rent and other occupancy expense in fiscal 2011 includes amortization expense of $838 related to favorable and unfavorable leases recorded in connection with the Merger.

Hardee’s

Company-Operated Restaurants Revenue

Revenue from company-operated restaurants increased $26,864, or 5.6%, to $506,153 in fiscal 2011 from fiscal 2010. The increase is primarily due to the 4.4% increase in company-operated same-store sales and the additional week included in fiscal 2011, partially offset by the net decrease of nine restaurants during fiscal 2011. We estimate the additional week added approximately $8,954 to company-operated restaurants revenue in fiscal 2011. Our successful promotion of premium products such as the Hand-Breaded Chicken Tenders and popular breakfast items including Biscuit Holes and Made from Scratch Biscuits helped to offset the negative impacts caused by continued economic weakness.

Company-Operated Restaurant-Level Adjusted EBITDA Margin

The changes in company-operated restaurant-level adjusted EBITDA margin are summarized as follows:


Company-operated restaurant-level adjusted EBITDA margin for fiscal 2010	17.6	%
Increase in food and packaging costs	(1.0	)
Payroll and other employee benefits:
Decrease in labor costs, excluding workers’ compensation	0.6
Increase in workers’ compensation expense	(0.2	)
Occupancy and other (excluding depreciation and amortization):
Decrease in utilities expense	0.4
Decrease in repairs and maintenance expense	0.2
Decrease in general liability insurance	0.1
Other, net	0.2
Decrease in advertising expense	0.1

Company-operated restaurant-level adjusted EBITDA margin for fiscal 2011	18.0	%

Food and Packaging Costs

Food and packaging costs increased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to the prior year, mainly due to an increase in commodity costs for pork, beef, cheese and dairy products.

Labor Costs

Labor costs, excluding workers’ compensation expense, decreased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, due primarily to the favorable impact from additional sales leverage and favorable employer payroll tax legislation, partially offset by the impact of minimum wage rate increases that took place in the second quarter of fiscal 2010.

Occupancy and Other Costs

Utilities expense decreased as a percentage of company-operated restaurants revenue during fiscal 2011, as compared to fiscal 2010, mainly due a decrease in natural gas rates and sales leverage caused by the increase in company-operated same-store sales.

Franchised Restaurants


	Successor		Predecessor		Successor / Predecessor		Predecessor
	Twenty-Nine Weeks Ended January 31, 2011		Twenty-Four Weeks Ended July 12, 2010		Fiscal 2011		Fiscal 2010
Franchised restaurants and other revenue:
Royalties	$	30,784	$	24,702	$	55,486	$	51,557
Distribution centers—equipment		9,664		9,220		18,884		21,630
Rent and other occupancy		7,162		5,187		12,349		11,922
Franchise fees		493		371		864		1,064

Total franchised restaurants and other revenue	$	48,103	$	39,480	$	87,583	$	86,173


Franchised restaurants and other expense:
Administrative expense (including provision for bad debts)	$	5,960	$	4,027	$	9,987	$	9,297
Distribution centers—equipment		9,854		9,206		19,060		21,199
Rent and other occupancy		6,116		3,852		9,968		8,653

Total franchised restaurants and other expense	$	21,930	$	17,085	$	39,015	$	39,149

Franchised restaurants and other revenue increased $1,410, or 1.6%, to $87,583 during fiscal 2011, as compared to fiscal 2010. This increase is mainly due to an increase in royalty revenues of $3,929, or 7.6%, which is due primarily to an increase in royalties resulting from the 3.4% increase in franchise-operated same-store sales and the additional week included in fiscal 2011. This increase was partially offset by the decline in distribution centers revenues of $2,746 resulting from decreases in equipment sales to franchisees associated with new restaurants and equipment sales to third parties.

Franchised restaurants and other expense decreased by $134, or 0.3%, to $39,015 in fiscal 2011, as compared to fiscal 2010. This decrease is mainly due to a decrease of $2,139 in distribution centers expense resulting from the decrease in distribution centers sales to franchisees and third parties. This decrease was partially offset by an increase of $690 in administrative expense resulting from an increase of $1,023 in amortization expense related to franchise agreements recorded in connection with the Merger. Rent and other occupancy expense includes amortization expense of $596 in fiscal 2011 related to favorable and unfavorable leases recorded in connection with the Merger.

Liquidity and Capital Resources

Overview

Our cash requirements consist principally of our food and packaging purchases; labor, and occupancy costs; capital expenditures for restaurant remodels, new restaurant construction and replacement of equipment; debt service requirements; advertising expenditures; and general and administrative expenses. In addition, we may elect to redeem up to $60,000 of the principal amount of our Senior Secured Notes at a redemption price of 103% of the principal amount of the Senior Secured Notes being redeemed during each of the twelve month periods commencing July 15, 2012 and July 15, 2013. We expect that our cash on hand and future cash flows from operations will provide sufficient liquidity to allow us to meet our operating and capital requirements and service our existing debt. As of January 31, 2012, we had $64,585 in cash and cash equivalents and $69,087 in available commitments under our Credit Facility to help meet our operating and capital requirements.

We believe our most significant cash uses during the next 12 months will be for capital expenditures, debt service requirements and the partial redemption of our Senior Secured Notes. Based on our current capital

spending projections, we expect capital expenditures to be between $60,000 and $70,000 for fiscal 2013. Assuming the aggregate outstanding principal amount of our Senior Secured Notes remains unchanged from January 31, 2012, we will be required to make semi-annual interest payments on our Senior Secured Notes of approximately $30,264. We are not required to make cash interest payments on our Toggle Notes during fiscal 2013. As discussed below, our Credit Facility matures on July 12, 2015, our Senior Secured Notes mature on July 15, 2018 and our Toggle Notes mature on March 14, 2016.

Credit Facility

Our Credit Facility provides for senior secured revolving facility loans, swingline loans and letters of credit, in an aggregate amount of up to $100,000. The Credit Facility bears interest at a rate equal to, at our option, either: (1) the higher of Morgan Stanley’s “prime rate” plus 2.75% or the federal funds rate, as defined in our Credit Facility, plus 3.25%, or (2) the LIBOR plus 3.75%. The Credit Facility matures on July 12, 2015, at which time all outstanding revolving facility loans and accrued and unpaid interest must be repaid. As of January 31, 2012, we had no outstanding loan borrowings, $30,913 of outstanding letters of credit, and remaining availability of $69,087 under our Credit Facility.

All obligations under the Credit Facility are unconditionally guaranteed by CKE and by CKE Restaurants’ existing and future wholly-owned domestic subsidiaries. In addition, all obligations are secured by CKE Restaurants’ common stock, substantially all of CKE Restaurants’ material owned assets and substantially all of the material owned assets of the subsidiary guarantors.

Pursuant to the terms of our Credit Facility, during each fiscal year, the capital expenditures of CKE Restaurants and its consolidated subsidiaries cannot exceed the sum of (1) the greater of (i) $100,000 and (ii) 8.5% of CKE Restaurants’ consolidated gross total tangible assets as of the end of such fiscal year plus, without duplication, (2) 10% of certain assets acquired in permitted acquisitions during such fiscal year (the “Acquired Assets Amount”) and (3) 5% of the Acquired Assets Amount for the preceding fiscal year, calculated on a cumulative basis. In addition, the annual base amount of permitted capital expenditures may be increased by an amount equal to any cumulative credit (as defined in the Credit Facility) which we elect to apply for this purpose and may be carried-back and/or carried-forward subject to the terms set forth in the Credit Facility.

The Credit Facility contains covenants that restrict the ability of CKE Restaurants and its consolidated subsidiaries to: incur additional indebtedness; pay dividends on its capital stock or redeem, repurchase or retire its capital stock or indebtedness; make investments, loans, advances and acquisitions; create restrictions on the payment of dividends or other amounts to us from our subsidiaries; sell assets, including capital stock of our subsidiaries; consolidate or merge; create liens; enter into sale and leaseback transactions; amend, modify or permit the amendment or modification of any senior secured second lien note documents; engage in certain transactions with our affiliates; issue capital stock; create subsidiaries; and change the business conducted by CKE Restaurants or its subsidiaries.

The terms of our Credit Facility also include financial performance covenants applicable to CKE Restaurants and its consolidated subsidiaries, which include a maximum secured leverage ratio and a specified minimum interest coverage ratio. Our Credit Facility defines CKE Restaurants’ consolidated secured leverage ratio as the ratio of its: (1) Total Secured Debt plus eight times Net Rent less Unrestricted Cash and Permitted Investments; over (2) Adjusted EBITDAR, each as defined in our Credit Facility. In determining CKE Restaurants’ consolidated Total Secured Debt for the purpose of these financial covenants, we include the Senior Secured Notes and its other long-term secured debt, capital lease obligations and the portion of the proceeds from financing method sale-leaseback transactions equal to the net book value of the associated properties. As of January 31, 2012, the net book value of the assets associated with financing method sale-leaseback transactions was $48,722. See “—Sale-Leaseback Transactions” below and Note 11 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further discussion of these sale-leaseback transactions. Our Credit Facility defines CKE Restaurants’ consolidated interest coverage ratio as the ratio of its Adjusted

EBITDA to its Cash Interest Expense, each as defined in our Credit Facility. As of January 31, 2012, these financial performance covenants did not limit our ability to draw on the remaining availability of $69,087 under our Credit Facility.

We were in compliance with the covenants of our Credit Facility as of January 31, 2012.

The terms of our Credit Facility are not impacted by any changes in our credit rating. We believe the key company-specific factors affecting our ability to maintain our existing debt financing relationships and to access such capital in the future are our present and expected levels of profitability, cash flows from operations, capital expenditures, asset collateral bases and the level of our Adjusted EBITDA relative to our debt obligations. In addition, as noted above, our Credit Facility includes significant restrictions on future financings including, among others, limits on the amount of indebtedness CKE Restaurants and its consolidated subsidiaries may incur or which may be secured by any of the assets of CKE Restaurants and its consolidated subsidiaries.

Senior Secured Second Lien Notes

In connection with the Merger, on July 12, 2010, CKE Restaurants issued $600,000 aggregate principal amount of the Senior Secured Notes in a private placement to qualified institutional buyers. These Senior Secured Notes were exchanged in December 2010 for substantially identical Senior Secured Notes that were registered with the SEC. The Senior Secured Notes are guaranteed by each domestic subsidiary of CKE Restaurants and are secured by a second priority lien on all assets of CKE Restaurants and its subsidiaries that secure the Credit Facility. During fiscal 2012, we extinguished through redemptions (in accordance with the terms of the indenture governing the Senior Secured Notes) and an open market purchase a total of $67,878 of the principal amount of the Senior Secured Notes for cash payments of $69,685, plus $1,264 of accrued and unpaid interest. Subsequent to the redemptions and purchase, and as of January 31, 2012, the principal amount of the Senior Secured Notes outstanding was $532,122. The Senior Secured Notes bear interest at a rate of 11.375% per annum, payable semi-annually in arrears on January 15 and July 15. As of January 31, 2012, the carrying value of the Senior Secured Notes was $523,252, which is presented net of the remaining unamortized original issue discount of $8,870. The Senior Secured Notes mature on July 15, 2018.

In accordance with the indenture governing the Senior Secured Notes, we may be required to make offers to repurchase the Senior Secured Notes with a portion of the net proceeds received from sale-leaseback transactions by CKE Restaurants and its consolidated subsidiaries. Pursuant to these requirements, on December 1, 2011, we commenced a tender offer to purchase up to $27,871 of the principal amount of the Senior Secured Notes (“Tender Offer”) at a redemption price of 103%. The Tender Offer expired on December 29, 2011, with no Senior Secured Notes tendered.

The indenture governing the Senior Secured Notes contains restrictive covenants that limit CKE Restaurants’ and its guarantor subsidiaries’ ability to, among other things: incur or guarantee additional debt or issue certain preferred equity; pay dividends, make capital stock distributions or other restricted payments; make certain investments; sell certain assets; create or incur liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; enter into certain transactions with affiliates; and designate subsidiaries as unrestricted subsidiaries. Failure to comply with these covenants constitutes a default and may lead to the acceleration of the principal amount and accrued but unpaid interest on the Senior Secured Notes.

We were in compliance with the covenants included in the indenture governing the Senior Secured Notes as of January 31, 2012.

We may redeem the Senior Secured Notes prior to the maturity date based upon the following conditions: (1) prior to July 15, 2013, we may redeem up to 35% of the original aggregate principal amount of the Senior Secured Notes with the proceeds of certain equity offerings, including this offering, at a redemption price of 111.375% of the aggregate principal amount of the Senior Secured Notes being redeemed plus accrued and

unpaid interest, (2) during each of the 12-month periods beginning July 15, 2012 and July 15, 2013, we may redeem up to $60,000 of the aggregate principal amount of the Senior Secured Notes at a redemption price of 103% of the aggregate principal amount of the Senior Secured Notes being redeemed plus accrued and unpaid interest, (3) on or after July 15, 2014, we may redeem all or any portion of the Senior Secured Notes during the 12-month periods commencing July 15, 2014, July 15, 2015, July 15, 2016 and July 15, 2017 and thereafter at redemption prices of 105.688%, 102.844%, 101.422% and 100%, respectively, of the aggregate principal amount of the Senior Secured Notes being redeemed plus accrued and unpaid interest, and (4) prior to July 15, 2014, we may redeem all or any portion of the Senior Secured Notes at a price equal to 100% of the aggregate principal amount of the Senior Secured Notes being redeemed plus a make-whole premium and accrued and unpaid interest. Upon a change in control, the holders of the Senior Secured Notes each have the right to require us to redeem their Senior Secured Notes at a redemption price of 101% of the aggregate principal amount of the Senior Secured Notes being redeemed plus accrued and unpaid interest.

Senior Unsecured PIK Toggle Notes

On March 14, 2011, CKE issued $200,000 aggregate principal amount of the Toggle Notes. The net proceeds, after payment of offering expenses, were distributed to our corporate parent. The Toggle Notes were issued with an original issue discount of 1.885%, or $3,770. The interest on the Toggle Notes, which is payable semi-annually on March 15 and September 15 of each year, can be paid (1) entirely in cash, at a rate of 10.50% (“Cash Interest”), (2) entirely by increasing the principal amount of the Toggle Notes or by issuing new Toggle Notes for the entire amount of the interest payment, at a rate per annum equal to the cash interest rate of 10.50% plus 0.75% (“PIK Interest”) or (3) with a 25%/75%, 50%/50% or 75%/25% combination of Cash Interest and PIK Interest.

During fiscal 2012, we made our September 15, 2011 interest payment on the Toggle Notes, in the amount of $11,313, entirely in PIK Interest. In addition, CKE Restaurants purchased, in open market transactions, a total of $9,948 principal amount of the Toggle Notes (the “Purchased Toggle Notes”) for $8,362, which represents a weighted average price of 84.06% of the principal amount of the Purchased Toggle Notes, during fiscal 2012. For accounting purposes, the Purchased Toggle Notes were constructively retired at the time of purchase. As of January 31, 2012, the remaining aggregate principal amount of the Toggle Notes outstanding was $201,365. The carrying value of the Toggle Notes as of January 31, 2012, was $198,093, which is presented net of the remaining unamortized original issue discount on the Toggle Notes of $3,272. We paid the March 15, 2012, and will pay the September 15, 2012, interest payments entirely in PIK Interest.

The indenture governing the Toggle Notes contains restrictive covenants that limit our and our subsidiaries’ ability to, among other things: incur or guarantee additional debt or issue certain preferred equity; pay dividends, make capital distributions or other restricted payments; make certain investments; sell certain assets; create or incur liens on certain assets to secure debt; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into certain transactions with affiliates; and designate subsidiaries as unrestricted subsidiaries. Failure to comply with these covenants constitutes a default and may lead to acceleration of the principal amount and accrued but unpaid interest on the Toggle Notes. We were in compliance with the covenants included in the indenture governing the Toggle Notes as of January 31, 2012.

We may redeem the Toggle Notes prior to the maturity date based upon the following conditions: (1) prior to March 14, 2013, we may redeem up to 35% of the original aggregate principal amount of the Toggle Notes with the proceeds of certain equity offerings, including this offering, at a redemption price of 110.500% of the aggregate principal amount of the Toggle Notes being redeemed plus accrued and unpaid interest, (2) on or after March 14, 2013, we may redeem all or a portion of the Toggle Notes during the 12-month periods commencing March 14, 2013, March 14, 2014 and March 14, 2015 and thereafter at redemption prices of 105.250%, 102.625%, and 100%, respectively, of the aggregate principal amount of the Toggle Notes being redeemed plus accrued and unpaid interest, and (3) prior to March 14, 2013, we may redeem all or a portion of the Toggle Notes at a price equal to 100% of the aggregate principal amount of the Toggle Notes being redeemed plus a make-

whole premium and accrued and unpaid interest. Upon a change of control, the holders of the Toggle Notes have the right to require us to redeem their Toggle Notes at a redemption price of 101% of the aggregate principal amount of the Toggle Notes being purchased plus accrued and unpaid interest.

Sale-Leaseback Transactions

During fiscal 2012, we entered into agreements with independent third parties under which we sold and leased back 47 restaurant properties. The initial minimum lease terms are 20 years, and the leases include renewal options and right of first offer provisions that, for accounting purposes, constitute continuing involvement with the associated restaurant properties. Due to this continuing involvement, these sale-leaseback transactions are accounted for under the financing method, rather than as completed sales. Under the financing method, we include the sales proceeds received in other long-term liabilities until our continuing involvement with the properties is terminated, report the associated property as owned assets, continue to depreciate the assets over their remaining useful lives, and record the rental payments as interest expense. Closing costs and other fees related to these sale-leaseback transactions are recorded as deferred financing costs and amortized to interest expense over the initial minimum lease term. When and if our continuing involvement with a property terminates and the sale of that property is recognized for accounting purposes, we expect to record a gain equal to the excess of the proceeds received over the remaining net book value of the associated restaurant property and any unamortized deferred financing costs.

During fiscal 2012, we received proceeds of $67,454 in connection with these transactions, which are included in other long-term liabilities in our Consolidated Balance Sheet as of January 31, 2012. In connection with these transactions, we capitalized deferred financing costs of $3,872 during fiscal 2012. The net book value of the associated assets, which is included in property and equipment, net of accumulated depreciation and amortization in our Consolidated Balance Sheet, was $48,722 as of January 31, 2012.

We expect that we will sell and leaseback additional restaurant properties in the future; however, there can be no assurance as to the number of transactions we will be able to complete, the amount of proceeds we will generate or whether we will be able to complete additional sale-leaseback transactions at all. See Note 11 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further discussion.

Cash Flows

During fiscal 2012, cash provided by operating activities was $95,341. The net loss of $19,279 for fiscal 2012 includes certain expenses which are added back in deriving cash flows from operations, including depreciation and amortization expense of $82,044, interest expense converted to long-term debt of $11,313, share-based compensation expense of $4,593, a loss of $2,976 recorded for the early extinguishment of notes and amortization of deferred financing costs and discount on notes of $4,821. Additionally, changes in our operating assets and liabilities resulted in an increase to cash flows from operations of $14,494. The amounts of our operating assets and liabilities can vary significantly from year to year, depending upon the timing of large customer receipts and payments to vendors, but they are not anticipated to be a significant source or use of cash over the long term.

Cash used in investing activities during fiscal 2012 totaled $49,505, which principally consisted of purchases of property and equipment of $52,423, partially offset by $1,985 of proceeds from the sale of property and equipment and $749 of collections of non-trade notes receivable.

Capital expenditures for fiscal 2012 and 2011 were as follows:


	Successor		Successor/ Predecessor
	2012		2011
Remodels:
Carl’s Jr.	$	3,231	$	2,617
Hardee’s		10,477		15,537
Capital maintenance:
Carl’s Jr.		12,573		11,051
Hardee’s		11,512		14,806
New restaurants and rebuilds:
Carl’s Jr.		7,036		10,889
Hardee’s		2,142		3,602
Dual-branding:
Carl’s Jr.		457		858
Hardee’s		2,069		2,346
Real estate		1,086		20
Corporate and other		1,840		1,372

Total	$	52,423	$	63,098

Capital expenditures for fiscal 2012 decreased $10,675, or 16.9%, from the prior year mainly due to decreases of $5,313 in new restaurants and rebuilds, $4,446 in restaurant remodels and $1,772 in capital maintenance, which were partially offset by a $1,066 increase in real estate and franchise acquisitions. Based on our current capital spending projections, we expect capital expenditures to be between $60,000 and $70,000 for fiscal 2013. During the last seven years we have remodeled or developed 384 of our 423 company-operated Carl’s Jr. restaurants, and 424 of our 469 company-operated Hardee’s restaurants. We expect to remodel between 40 and 50 company-operated restaurants during the fiscal year ending January 31, 2013.

Cash used in financing activities during fiscal 2012 was $23,837, which principally consisted of dividends of $190,188 paid on common stock, the payment of $78,047 for the early extinguishment of notes, $8,011 of repayments of capital lease obligations and $9,930 for payment of deferred financing costs. These cash uses were largely offset by proceeds of $196,230 from the issuance of our Toggle Notes and $67,454 from financing method sale-leaseback transactions.

Long-Term Obligations

Contractual Cash Obligations

The following table presents our long-term contractual cash obligations as of January 31, 2012:


	Payments Due by Periods
	Total		Less Than One Year		1-3 Years		3-5 Years		After 5 Years
Long-term debt⁽¹⁾	$	862,032	$	3	$	8	$	329,530	$	532,491
Interest and commitment fees on long-term debt⁽²⁾		400,181		62,467		124,933		121,951		90,830
Capital lease obligations⁽³⁾⁽⁴⁾		59,814		12,007		18,649		15,033		14,125
Operating lease obligations⁽³⁾		709,109		89,779		163,240		129,565		326,525
Financing method sale-leaseback obligations⁽⁵⁾		109,506		4,794		9,588		9,761		85,363
Unconditional purchase obligations⁽⁶⁾		87,168		75,063		7,430		2,384		2,291
Other commitments⁽⁷⁾		4,213		2,183		1,921		109		—

Total contractual cash obligations	$	2,232,023	$	246,296	$	325,769	$	608,333	$	1,051,625

(1)	For the purposes of this table, we have assumed that all future interest payments on our Toggle Notes will be paid entirely in PIK Interest, resulting in all interest being added to the principal amount of the Toggle Notes and due at maturity on March 14, 2016.

(2)

Represents our cash interest obligations on our long-term debt, commitment fees related to the unused portion of our Credit Facility and fees related to our outstanding letters of credit. The amounts included above assume no changes to the borrowings on our Credit Facility through maturity or early redemption of our Senior Secured Notes.

(3)

The amounts reported above as operating lease and capital lease obligations include leases contained in the estimated liability for closed restaurants and leases for which we sublease the related properties to others. Additional information regarding operating lease and capital lease obligations can be found in Note 10 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

(4)	Capital lease obligations consist of the undiscounted value of the future principal and interest payments.

(5)	Additional information regarding our sale-leaseback financing obligations can be found in Note 11 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

(6)	Unconditional purchase obligations include contracts for goods and services, primarily related to system restaurant operations and contractual commitments for marketing and sponsorship arrangements.

(7)

Other commitments shown in the table above are comprised of executive retention bonuses and obligations which represent uncertain tax positions. The years for which the uncertain tax positions will be effectively settled or paid have been estimated in scheduling the obligations within the table. In addition to the obligations in the table above, approximately $3,870 of unrecognized tax benefits have been recorded as an offset to deferred income tax assets, of which $1,342 is anticipated to be effectively settled or paid within one year. Additionally, we have $9,867 of unrecognized tax positions which are fully offset by a valuation allowance of which we are uncertain as to if or when such amounts may be settled.

Other Commercial Commitments

The following table presents our other commercial commitments as of January 31, 2012. See Note 15 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for additional discussion.


	Amount of Commitment Expirations Per Period
	Total Amounts Committed		Less Than One Year		1-3 Years		3-5 Years		After 5 Years
Outstanding letters of credit	$	30,913	$	30,913	$	—	$	—	$	—
Other⁽¹⁾		1,016		675		302		19		20

Total other commercial commitments	$	31,929	$	31,588	$	302	$	19	$	20

(1)

Other includes commitments retained in connection with the sale of La Salsa in fiscal 2008 and consists of contingent liabilities related to guarantees and assignments of La Salsa leases and self-insured workers’ compensation, general and auto liability claims that arose prior to the completion of the sale of La Salsa.

Critical Accounting Policies and Estimates

Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our consolidated financial position and results of operations. Information regarding our significant accounting policies and estimates can be found in Note 1 of Notes to Consolidated Financial Statements included elsewhere in this prospectus. Our most critical accounting policies and estimations are described in the following paragraphs.

Business Combinations

We allocate the purchase price of business combinations to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess, if any, of the purchase price over these fair values is recorded as goodwill. Management is required to make certain estimates and assumptions in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. The significant purchased intangible assets recorded by us in connection with the Merger include trademarks/tradenames, franchise agreements, and favorable lease agreements. The fair values assigned to these identified intangible assets are discussed in detail in Note 2 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Critical estimates in valuing certain tangible and intangible assets for business combinations include:

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future expected brand-level cash flows related to our trademarks/tradenames and franchise agreements;

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market value of lease arrangements and the expected term, including available option periods, of such leasing arrangements;

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assumptions likely to be used by market participants in valuing in-service restaurant-level assets;

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determination of the estimated useful lives of the assets acquired; and

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discount rates used in valuing such assets.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Refer to additional discussion in Note 2 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Impairment of Restaurant-Level Long-Lived Assets

During the second and fourth quarter of each fiscal year, and whenever events or circumstances indicate that the carrying value of assets may be impaired, we evaluate our restaurant-level long-lived assets for impairment. For purposes of impairment testing, assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, which is generally the individual restaurant level for property and equipment and favorable leases. For each asset group, we evaluate whether there are indicators of impairment such as sequential annual cash flow losses or adverse changes in the physical condition or expected use of the asset group. When indicators of impairment exist, we evaluate whether the assets are recoverable by comparing the undiscounted future cash flows that we expect to generate from their use and disposal to their carrying value. Restaurant-level assets that are not deemed to be recoverable are written down to their estimated fair value, which is determined by assessing the highest and best use of the assets and the amounts that would be received for such assets in an orderly transaction between market participants.

In connection with analyzing restaurant-level long-lived assets to determine if they have been impaired, we make certain estimates and assumptions, including estimates of future cash flows, assumptions of future same-store sales and projected operating expenses for each of our restaurants over their estimated useful life in order to evaluate recoverability and estimate fair value. Future cash flows are estimated based upon experience gained, current intentions about refranchising restaurants and closures, recent and expected sales trends, internal plans, the period of time since the restaurant was opened or remodeled, the maturity of the related market and other relevant information. If our future cash flows or same-store sales do not meet or exceed our forecasted levels, or if restaurant operating cost increases exceed our forecast and we are unable to recover such costs through price increases, the carrying value of certain of our restaurants may prove to be unrecoverable, and we may incur additional impairment charges in the future.

As of the date of our fourth quarter fiscal 2012 impairment evaluation, we had a total of 35 restaurants within our two major restaurant concepts that generated negative cash flows on a trailing-13 period basis. The asset groups, which include property and equipment and favorable lease assets, had combined net book values of $13,321. If these negative cash flow restaurants do not begin generating positive cash flows within a reasonable period of time, the carrying value of the assets associated with these restaurants may prove to not be fully recoverable, and we may recognize additional impairment charges in the future. During fiscal 2012, we recorded impairment charges of $766 related to restaurant-level long-lived assets.

Impairment of Goodwill and Intangible Assets

We test goodwill for impairment on an annual basis, or more frequently if events and/or circumstances indicate that goodwill might be impaired. The impairment test is performed at the reporting unit level, and an impairment loss is recognized to the extent that the carrying amount of goodwill exceeds the fair value. We consider the reporting unit level to be the brand level as the components (e.g., restaurants) within each brand have similar economic characteristics, including products and services, production processes, types or classes of customers and distribution methods. In accordance with the authoritative accounting guidance, we use a two-step test to identify the potential impairment and to measure the amount of goodwill impairment, if any. We first identify any potential impairment by comparing the estimated fair value of the reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying amount, there is no impairment and the second step is not required. If step two is required, we measure impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of goodwill.

As of January 31, 2012, our goodwill consisted of $199,166 for our Carl’s Jr. reporting unit and $9,719 for our Hardee’s reporting unit. The goodwill for both reporting units resulted primarily from the Merger on July 12, 2010. During the fourth quarter of fiscal 2012, we performed our goodwill impairment test for our Carl’s Jr. and Hardee’s reporting units. As of the date of the annual impairment test, the fair values of both the Carl’s Jr. and Hardee’s reporting units exceeded their respective carrying values by more than 20%. The excess of the fair value as compared to the carrying value is attributed primarily to the general improvement in financial markets

between the date of the acquisition and the date of the impairment test, and improvements in operating results and cash flows. However, future declines in market conditions and the actual future performance of our reporting units could negatively impact the results of future impairment tests.

As of January 31, 2012, our indefinite-lived intangible assets consisted of Carl’s Jr. trademarks/tradenames of $144,000 and Hardee’s trademarks / tradenames of $134,000. We test our indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. During the fourth quarter of fiscal 2012, we performed our impairment test for trademarks/tradenames at both Carl’s Jr. and Hardee’s and concluded that no impairment charge was required. However, any future declines in our system-wide restaurant portfolio at either concept, declines in company-operated or franchised revenues or increases to the discount rate used in our impairment test could negatively impact the results of future impairment tests.

Our definite-lived intangible assets are amortized utilizing a straight-line basis over their estimated useful lives and are tested for impairment when events or circumstances indicate the carrying value may be impaired. Refer to discussion of long-lived assets for a discussion of impairment of restaurant-level long-lived assets.

Estimated Liability for Closed Restaurants

We use certain assumptions to determine the amount of the estimated liability for closed restaurants. The most significant assumptions relate to the determination of the estimated liability for future lease payments and other contractual obligations on vacant restaurants, and the extent to which these costs may be reasonably expected to be recovered by future sublease income. We estimate the cost to maintain leased vacant properties until the lease can be abated. If the costs to maintain properties increase, or it takes longer than anticipated to sublease such properties, we may need to record additional estimated liabilities. If the vacant restaurants are not subleased on the terms that we used to estimate the liabilities, we may be required to record losses in future periods. Conversely, if the leases on the vacant restaurants are terminated or subleased on more favorable terms than we used to estimate the liabilities, we reverse previously established estimated liabilities, resulting in an increase in operating income. Our estimated liability for closed restaurants was $3,912 as of January 31, 2012.

Estimated Liability for Self-Insurance

We are self-insured for a portion of our current and prior years’ losses related to workers’ compensation, general and auto liability insurance programs. We generally have stop loss insurance for individual workers’ compensation and general liability claims over $500 and auto liability claims over $250; however, our retained risk is substantially higher for a small number of older claims. We estimate our self-insurance exposure based on the average historical losses on claims we have incurred and on actuarial observations of historical claim loss development and our actuary’s estimate of unpaid losses for each loss category. We record our accrued liabilities for self-insurance at present value, based on an estimated risk-free interest rate at the balance sheet date. Our actual future claim loss development may be better or worse than the development we estimated in conjunction with our actuary, in which case our reserves would require adjustment. If we experience a higher than expected number of claims or the costs of claims rise more than expected, then we would be required to adjust the expected losses upward and increase our future self-insurance expense. Our estimated liability for self-insurance was $41,466 as of January 31, 2012.

Loss Contingencies

The assessment of contingencies is highly subjective and requires judgments about future events. We review loss contingencies at least quarterly to develop estimates of the likelihood and range of possible settlement. Those contingencies that are deemed to be probable, and for which the expected loss is reasonably estimable, are accrued in our Consolidated Financial Statements. If only a range of loss can be determined, with no amount in the range representing a better estimate than any other amount within the range, we record an accrued liability

equal to the low end of the range. The ultimate resolution of such loss contingencies may differ materially from amounts we have accrued in our Consolidated Financial Statements. As of January 31, 2012, we have recorded an accrued liability for contingencies related to litigation in the amount of $2,409, with an expected range of losses from $2,409 to $5,753.

In addition, as of January 31, 2012, we estimated the contingent liability of losses related to litigation claims that are not accrued, but that we believe are reasonably possible to result in an adverse outcome and for which a range of loss can be reasonably estimated, to be in the range of $2,135 to $10,425. We are also involved in legal matters where the likelihood of loss has been judged to be reasonably possible, but for which a range of the potential loss cannot be reasonably estimated. We expense our legal defense costs as incurred.

See Note 15 of Notes to Consolidated Financial Statements included elsewhere in this prospectus for further information.

Accounting for Lease Obligations

We lease a substantial number of our restaurant properties. At the inception of the lease, each property is evaluated to determine whether the lease is an operating or capital lease. The lease accounting evaluation may require significant judgment in estimating the fair value and useful life of the leased property and to establish the appropriate lease term. The lease term used for this evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured because failure to exercise such option would result in an economic penalty. Such economic penalty would typically result from our having to abandon buildings and other non-detachable improvements with remaining economic value upon vacating the property.

The lease term may also include a “rent holiday”, which begins on the date we are given control of the leased premises and typically ends upon restaurant opening. Factors that may affect the length of the rent holiday period include construction-related delays. Extension of the rent holiday period due to such delays would result in greater rent expense recognized during the rent holiday period.

Franchise Operations

We sublease a number of restaurant properties to our franchisees. As such, we remain principally liable for these leases. If sales trends or economic conditions worsen for our franchisees, their financial health may worsen, our collection rates may decline and we may be required to assume the responsibility for additional lease payments on franchised restaurants.

Our franchising income is dependent on both the number of restaurants operated by our franchisees and their operational and financial success, such that they can make their royalty and rent payments to us. When appropriate, we establish notes receivable pursuant to completing workout agreements with financially troubled franchisees. We cease accruing royalties and rental revenue from franchisees during the fiscal quarter in which we determine that collectability of such revenue is not reasonably assured.

Our consolidated allowances for doubtful accounts on accounts receivable and notes receivable are 0.2% and 1.3% of the gross accounts and notes receivable balances, respectively, as of January 31, 2012. Although we regularly review the allowances for doubtful accounts, there can be no assurance that the number of franchisees or franchised restaurants experiencing financial difficulties will not increase from our current assessments, nor can there be any assurance that we will be successful in resolving financial issues relating to any specific franchisee.

In addition to the sublease arrangements with franchisees described above, we also lease land and buildings to franchisees. As of January 31, 2012, the net book value of property under lease to Hardee’s and Carl’s Jr. franchisees was $41,027 and $12,682, respectively. Financially troubled franchisees include those with whom we

have entered into workout agreements and who may have liquidity problems in the future. In the event that a financially troubled franchisee closes a restaurant for which we own the property, our options are to operate the restaurant as a company-operated restaurant, transfer the restaurant to another franchisee, lease the property to another tenant or sell the property. These circumstances would cause us to consider whether the carrying value of the land and building was impaired. If we determined the property’s carrying value was impaired, we would record a charge to operations for the amount the carrying value of the property that exceeds its fair value. As of January 31, 2012, the net book value of properties under lease to Hardee’s and Carl’s Jr. franchisees that were considered to be financially troubled franchisees was approximately $3,467 and $718, respectively, which are also included in the amounts above.

Income Taxes

Significant judgments and estimates are required in determining our consolidated income tax expense. These estimates include, among other items, depreciation and amortization expense allowable for tax purposes, allowable tax credits, effective rates for state and local income taxes and the deductibility of other items. Our income tax (benefit) expense, deferred income tax assets and liabilities, valuation allowance against deferred income tax assets, and reserves for uncertain tax positions reflect management’s best assessment of estimated current and future taxes attributable to our operations.

We record deferred income taxes for the estimated income tax effect of temporary differences between the financial and tax bases of assets and liabilities using the asset and liability method. Deferred income tax assets are also recorded for NOL and income tax credit carryforwards. A valuation allowance to reduce the carrying amount of deferred income tax assets is established when it is more likely than not that we will not realize some portion or all of the tax benefit of our deferred income tax assets. We evaluate, on a quarterly basis, whether it is more likely than not that our deferred income tax assets are realizable. In performing this analysis, we consider all available evidence, both positive and negative, including historical operating results, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies that may be employed to prevent operating loss or tax credit carryforwards from expiring unused.

As of January 31, 2012, our valuation allowance of $10,975 against deferred income tax assets relates to certain state NOL carryforwards and a portion of our state income tax credits. Realization of the tax benefit of such deferred income tax assets may remain uncertain for the foreseeable future, even if we generate consolidated taxable income, since certain deferred income tax assets are subject to various limitations and may only be used to offset income of certain entities and in certain jurisdictions.

From time to time, we may take positions for filing our tax returns which may differ from the treatment of the same item for financial reporting purposes. The ultimate outcome of these items will not be known until the Internal Revenue Service, or similar state taxing authority, has completed its examination or until the statute of limitations has expired.

We maintain a liability for underpayment of income taxes and related interest and penalties, if any, for uncertain income tax positions. In considering the need for and magnitude of a liability for uncertain income tax positions, we must make certain estimates and assumptions regarding the amount of income tax benefit that will ultimately be realized. The ultimate resolution of an uncertain tax position may not be known for a number of years, during which time we may be required to adjust these reserves in light of changing facts and circumstances.

New Accounting Pronouncements

See Note 3 of Notes to Consolidated Financial Statements included elsewhere in this prospectus.

Presentation of Non-GAAP Measures

We have included in this MD&A certain measures of financial performance that are not defined by U.S. GAAP. Company-operated restaurant-level adjusted EBITDA, company-operated restaurant-level adjusted EBITDA margin and franchise restaurant adjusted EBITDA are non-GAAP measures utilized by management internally to evaluate and compare our operating performance for company-operated restaurants and franchised restaurants between periods. Each of these non-GAAP financial measures is derived from amounts reported within our Consolidated Financial Statements, and the computations of each of these measures have been included within our “Operating Review” section of this MD&A.

These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable U.S. GAAP measures. These non-GAAP measures have certain limitations including the following:

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Because not all companies calculate these measures identically, our presentation of such measures may not be comparable to similarly titled measures of other companies;

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These measures exclude certain general and administrative and other operating costs, which should also be considered when assessing our operating performance; and

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These measures exclude depreciation and amortization, and although they are non-cash charges, the assets being depreciated or amortized will often have to be replaced and new investments made to support the operations of our restaurant portfolio.

Company-Operated Restaurant-Level Non-GAAP Measures

We define company-operated restaurant-level adjusted EBITDA, which is expressed in dollars, as company-operated restaurants revenue less restaurant operating costs excluding depreciation and amortization expense and including advertising expense. Restaurant operating costs are the expenses incurred directly by our company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. We define company-operated restaurant-level adjusted EBITDA margin, which is expressed as a percentage, as company-operated restaurant-level adjusted EBITDA divided by company-operated restaurants revenue.

Franchise Restaurant Adjusted EBITDA

We define franchise restaurant adjusted EBITDA, which is expressed in dollars, as franchised restaurants and other revenue less franchised restaurants and other expense excluding depreciation and amortization expense.

Impact of Inflation

Inflation has an impact on food and packaging, construction, occupancy, labor and benefits, and general and administrative costs, all of which can significantly affect our operating results. In particular, the cost of food commodities has increased markedly over the last two years, resulting in upward pricing pressure on many of our raw ingredients, and thereby increasing our food costs. We expect that there may be additional pricing pressure on some of our key ingredients, most notably beef, during fiscal 2013. Historically, consistent with others in the QSR industry, we have generally been able to pass along to our customers, through price increases, higher costs arising from these inflationary factors. In addition, we routinely enter into purchasing contracts or pricing arrangements for certain commodities that set in advance the price of a given commodity for a fixed period of time, which are designed to mitigate the effects of cost volatility. Significant and/or prolonged increases in the prices of the ingredients most critical to our menu, particularly beef, could significantly affect our operating results or cause us to consider changes to our product delivery strategy and adjustments to our menu pricing.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the impact of interest rate changes, foreign currency fluctuations and changes in commodity prices. In the normal course of business, we may employ policies and procedures to manage our exposure to these changes.

Interest Rate Risk

Our principal exposures to financial market risks relate to the impact that interest rate changes could have on our Credit Facility, which bears interest at a floating interest rate and, therefore, our results of operations and cash flows will be exposed to changes in interest rates. As of January 31, 2012, our Credit Facility remained undrawn. Accordingly, a hypothetical increase of 100 basis points in short-term interest rates in our floating rate would not have an impact on our interest expense. This sensitivity analysis assumes all other variables will remain constant in future periods.

Foreign Currency Risk

Our business at company-operated restaurants is transacted in U.S. dollars. Exposure outside of the U.S. relates primarily to the effect of foreign currency rate fluctuations on royalties paid to us by our international franchisees. Our objective in managing our exposure to foreign currency fluctuations is to limit the impact of such fluctuations on earnings and cash flows. As of January 31, 2012, our most significant exposure related to the Mexican Peso. Foreign exchange rate fluctuations have not historically had a significant impact on our results of operations. During the fiscal 2012, if all foreign currencies had uniformly weakened 10% relative to the U.S. dollar, our franchised restaurants and other revenue would have decreased $1,675.

Commodity Price Risk

We, along with our franchisees, purchase large quantities of food, packaging and supplies. The predominant food commodities purchased by our restaurants include beef, chicken, potatoes, pork, dairy, cheese, produce, wheat flour and soybean oil. The cost of food commodities has increased markedly over the last two years, resulting in upward pricing pressure on many of our raw ingredients, and thereby increasing our food costs. Furthermore, we expect that there may be additional pricing pressure on some of our key ingredients, most notably beef, during fiscal 2013.

Like all restaurant companies, we are susceptible to commodity price risks as a result of factors beyond our control, such as general economic conditions, significant variations in supply and demand, seasonal fluctuations, weather conditions, food safety concerns, food-borne diseases, fluctuations in the value of the U.S. dollar, commodity market speculation and government regulations. To mitigate these risks, we routinely enter into purchasing contracts or pricing arrangements for certain commodities that contain commodity risk management techniques designed to minimize price volatility. The purchasing contracts and pricing arrangements we use for certain commodities set in advance the price of a given commodity for a fixed period of time, which helps to mitigate the effects of commodities price volatility. These purchasing contracts and pricing arrangements may result in unconditional purchase obligations, which are not reflected in our Consolidated Balance Sheets. Typically, we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address material commodity cost increases by adjusting our menu pricing, or changing our product delivery strategy. However, increases in commodity prices, without adjustments to our menu prices, could increase restaurant operating costs as a percentage of company-operated restaurants revenue, which could negatively impact our operating results.

BUSINESS

Home of the Big, Juicy Burger

We are one of the world’s largest operators and franchisors of quick service restaurants (“QSR”) with 3,243 owned or franchised locations operating in 42 states and 25 foreign countries primarily under our Carl’s Jr. and Hardee’s brands. We offer innovative, premium products that we develop to appeal to “young, hungry guys” but that also appeal to a broad demographic base of individuals who aspire to be youthful. We believe that our target demographic of 18 to 34 year old males who enjoy premium food at a reasonable price makes up a large portion of the global QSR market, which is currently estimated to generate $225 billion in sales annually ($141 billion in the United States). Specifically, younger males account for almost one quarter of all QSR visits and have the highest frequency of any demographic group at almost 17 visits per month. Our focus on this customer type is anchored by our menu of high quality, premium products, and is enhanced through our edgy, breakthrough advertising. We are the fifth largest Hamburger QSR operator globally with a large and rapidly growing international presence that is focused on fast growing emerging markets.

At the end of fiscal 2012, our system-wide restaurant portfolio consisted of:


	Carl’s Jr.		Hardee’s		Other		Total
Company-operated		423		469		—		892
Domestic franchised		693		1,226		9		1,928
International franchised		197		226		—		423

Total		1,313		1,921		9		3,243

Our business objective is to continue growing our average unit volumes (“AUV”) and expanding both Carl’s Jr. and Hardee’s in new and existing markets throughout the world by leveraging our unique brand positioning, high-quality product offering, compelling restaurant economics and established global footprint. Our business strategy focuses on the growth of our franchise restaurant base, which provides a more stable, capital efficient income stream. From the end of fiscal 2007 through the end of fiscal 2012, we have grown our franchise restaurants from 1,904 units (64% of total) to 2,351 units (72% of total), and we have grown our international restaurants by a 12% compound annual growth rate from 238 units (8% of total) to 423 units (13% of total) over the same period. For fiscal 2012, we generated total revenue of $1.3 billion, Adjusted EBITDA of $165.9 million and a net loss of $19.3 million. See Note 5 under “Summary—Summary Historical and Pro Forma Financial and Other Data” for an explanation of Adjusted EBITDA and a reconciliation to net (loss) income.

What We Have Accomplished

Guided by our revitalization plan and strong executive team leadership, our recent accomplishments include:

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Remodeled or developed over 90% of our company-operated restaurants over the past seven years;

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Achieved a seven percentage point improvement in customer satisfaction scores across our concepts from fiscal 2007 to fiscal 2012;

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Opened over 560 new restaurants system wide since the end of fiscal 2007;

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Signed a robust pipeline of over 800 franchise development commitments with over 500 signed in the last three years;

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Since the end of fiscal 2007, franchised units have increased from 64% to 72% of total units;

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Increased our international restaurant base by 78% from 238 units in 13 foreign countries at the end of fiscal 2007 to 423 units in 25 foreign countries at the end of fiscal 2012;

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LOGO

One Powerful Concept, Two Global Brands


		Carl’s Jr. has a total of 1,313 company-operated and franchised restaurants located in 14 states and 14 foreign countries. Domestic Carl’s Jr. restaurants are predominantly located in the Western United States, with a growing presence in Texas. International Carl’s Jr. restaurants are located primarily in Mexico, with a growing

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