News Summary
Paradigm Investment Group, operating 76 Hardee’s locations, is suing parent company CKE Restaurants over alleged bad faith actions including attempted termination of franchise agreements. The lawsuit, filed in Tennessee, highlights claims of excessive demands and fees, amid Hardee’s declining performance. Paradigm seeks to retain ownership of its Alabama locations as tensions rise over corporate decisions that franchisees argue threaten their financial health.
Birmingham’s Hardee’s Franchisee Files Lawsuit Against Parent Company CKE Restaurants
Big news is brewing in Birmingham as Paradigm Investment Group, a large franchisee operating 76 Hardee’s restaurants, is taking on its parent company, CKE Restaurants, in an explosive lawsuit. Filed on April 14 in the Middle District of Tennessee, the stakes are high with Paradigm aiming to keep control of its eateries, including a hefty 62 locations right here in Alabama.
The Heart of the Matter
Paradigm is no ordinary franchisee; it has earned the prestigious title of “Franchisee of the Year” in the past, and now it finds itself fighting for its rights against what it describes as Hardee’s bad faith actions. The crux of the lawsuit stems from CKE’s efforts to terminate franchise agreements, insisting that Paradigm has not complied with several demands, including:
- Implementation of online ordering
- Using third-party delivery services
- Joining a loyalty program
- Payment of technology fees totaling a staggering $234,346
CKE claims Paradigm’s locations frequently shut down after lunch hours, saying they are not following the standard hours of operation. They even issued a default notice, threatening to invoke a purchase option that would allow them to acquire the restaurants at a fraction of their value while claiming over $13 million in liquidated damages and lost royalties. Talk about tension!
Executive Turnover and Changing Strategies
Paradigm’s CEO, Don Wollan, believes the roots of this lawsuit point to a rocky chain of events at the executive level of Hardee’s. Frequent turnover in leadership appears to be leading to hasty and questionable decisions, with strategies that seem to harm franchisees rather than support them. For instance, during the COVID-19 pandemic, Hardee’s permitted adjusted hours but later enforced a return to normal business times—a move that Paradigm argues isn’t practical in today’s labor market.
Interestingly, Paradigm has found that closing earlier at their Hartselle location resulted in a bump in daily revenue. It looks like adapting to the current environment is key, and sometimes less is indeed more.
Franchise Agreements Under Fire
The lawsuit dives deeper, asserting that Hardee’s has imposed additional technology fees and requirements that weren’t properly disclosed in their franchise agreements. Wollan has raised concerns about the implications of allowing these unilateral changes to go unchallenged. For franchisees, accepting these demands could pave the way for even more unsolicited fees and operational mandates, which could be disastrous for their financial health. Let’s be real—nobody wants to go bankrupt over a corporate mandate that doesn’t make sense.
Paradigm argues that adhering to Hardee’s new demands is not sustainable, especially given the backdrop of Hardee’s own dismal performance. The company has seen 200 closures in the past decade, with nearly 150 of those in just the last three years—a decline that hasn’t gone unnoticed, resulting in a 12% drop in domestic system sales since 2014.
A Familiar Struggle
Since Roark Capital acquired CKE in 2013, the firm has faced scrutiny over Hardee’s declining performance and the high turnover rate among executives. The shady business practices are casting a long shadow over what was once a reputable brand.
With Paradigm having poured over $173 million into these restaurants throughout the years and having paid more than $87 million in royalties, both parties are at an impasse. As new leadership continues to impose aggressive tactics, franchisees are left to fend for themselves, fighting for what they built amidst the struggle for survival.
The courtroom saga continues, and the outcome could redefine the landscape of Hardee’s franchises in Alabama and beyond. The business world will be watching closely as this legal drama unfolds.
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Additional Resources
- AL.com
- Restaurant Business Online
- Franchise Times
- Wikipedia: Hardee’s
- Google Search: Hardee’s franchise lawsuit
