News Summary
Paradigm Investment Group has filed a lawsuit against Hardee’s parent company, seeking to retain control over 76 fast-food locations amid claims of bad faith practices. The lawsuit highlights disagreements over franchise agreements, operational hours, and undisclosed fees. Paradigm asserts that it has invested over $173 million in the restaurants, while also raising concerns over Hardee’s management turnover. The franchisee is seeking at least $35 million in damages as tensions rise between the two parties.
Tennessee — Paradigm Investment Group, a franchisee based in Nevada, has filed a lawsuit against Hardee’s parent company to retain control of 76 fast-food restaurants located across Alabama, Mississippi, Tennessee, and Florida. The lawsuit, submitted to the Middle District of Tennessee on April 14, claims that Hardee’s is acting in bad faith by attempting to terminate various franchise agreements.
The legal action follows a notice of default and termination issued by Hardee’s on January 15, which Paradigm asserts was delivered due to their refusal to comply with demands for online ordering systems, third-party delivery services, a loyalty program, and the payment of a technology fee totaling $234,346. Hardee’s contends that Paradigm’s locations frequently fail to meet standard business hours, often closing after lunch, which contributed to the motives for the termination notice.
In the lawsuit, Paradigm accuses Hardee’s of employing “heavy-handed” practices to unjustly gain control of profitable restaurant locations, thereby jeopardizing their long-standing investment. Since the year 2000, Paradigm has reportedly invested over $173 million in these restaurants and has paid more than $87 million in royalties.
Concerns have also emerged regarding excessive turnover within Hardee’s management, which Paradigm cites as a cause for inconsistent strategies that destabilize franchisee operations. Despite the ongoing issues, Paradigm argues that it has successfully maintained profitability, showcasing improved sales in some locations by closing earlier, a tactic which has reportedly increased daily revenue.
The franchisee’s lawsuit challenges the legitimacy of Hardee’s demands for specific operating hours and the associated payment obligations, stating these conditions were not stipulated in the original franchise agreements. Paradigm also contends that Hardee’s enforces compliance selectively, asserting that corporate-owned stores frequently do not follow the same operating hours or service standards required of franchise locations.
Furthermore, Paradigm accuses Hardee’s of deceptive practices, including the implementation of undisclosed fees via amendments to operational manuals, which may violate franchise disclosure laws. Since 2016, Hardee’s has seen substantial sales declines, with an estimated $200 million drop in system-wide sales and the closing of hundreds of restaurants beginning in 2019.
The franchisee is seeking at least $35 million in compensatory damages due to the actions of Hardee’s. The lawsuit also suggests that Hardee’s may have misrepresented the status of Paradigm’s franchise operations to financial institutions, a situation that could align with fraudulent conduct.
Hardee’s has faced significant management instability, experiencing a turnover of four CEOs in five years, which has contributed to persistent changes in executive leadership. The pressure from Hardee’s to extend operating hours, which Paradigm claims are not justified by customer demand, presents additional financial burdens that could lead to potential insolvency for the franchisee.
Despite the disputes and challenges, Paradigm reports that its average restaurant volume has outperformed Hardee’s corporate units in profitability, suggesting a strong business performance in comparison to the broader brand amidst ongoing turmoil. This ongoing legal battle underscores significant tensions between the franchisee and the corporate parent, as both parties navigate the complexities of franchise operations in today’s fast-food industry.
Deeper Dive: News & Info About This Topic
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