Franchisee Paradigm Files Lawsuit Against Hardee's Over Termination Threats and Tech-Related Charges
Restaurant Franchisee Sues Hardee's Over Unilateral Demands
Paradigm Investment Group, a long-standing Hardee's franchisee operating more than six dozen restaurants across multiple states, has filed a lawsuit against Hardee's parent company, CKE Restaurants Holdings, over alleged unlawful demands.
At the epicenter of the dispute are several business practices and demands that Paradigm alleges were not part of their franchise agreement. The key areas of contention are the technology fee, operational hours, and the implementation of digital systems.
Hardee's, according to Paradigm, requires the franchisee to pay a monthly technology fee and adopt digital tools such as online ordering, third-party delivery, and a loyalty program. However, Paradigm claims these requirements were not stipulated in their original franchise agreements and were added through updates to Hardee's operations manual.
Furthermore, Paradigm has been closing some of its restaurants in the afternoon as opposed to keeping them open until 10 p.m., a practice Hardee's considers a violation of the franchise agreement. Paradigm contends that this decision does not cause any monetary harm to Hardee's but instead benefits the chain financially by improving sales, profitability, and employee retention.
The lawsuit also alleges that Hardee's threatened to terminate Paradigm's franchise agreements, potentially forcing Paradigm to pay up to $13 million in liquidated damages and sell its restaurants at a reduced value. Paradigm disputes these claims, arguing that it has been justified in its decision not to comply with Hardee's alleged unlawful demands.
Paradigm has invested over $173 million in its Hardee's restaurants and paid significant royalties, yet it feels unfairly pressured to adopt costly changes. The franchisee has requested a declaratory judgment in its favor and an injunction to prevent the termination of its franchise agreements, among other things.
CKE Restaurants, the parent company of Hardee's and Carl's Jr., has been unable to comment due to the active legal matter. Roark Capital Group, which acquired a majority stake in CKE in 2013, is the current owner of the fast-food brand.
This lawsuit is the latest development in the ongoing tense relationship between franchises and corporations, as economic uncertainty and changing consumer preferences impact the industry. As the court case unfolds, it remains to be seen how this dispute will be resolved and potentially set a precedent for the future negotiations between franchisors and franchisees.
- The capital that Paradigm Investment Group has invested in its Hardee's restaurants and the ongoing royalties they pay put them at an economic disadvantage when faced with unilateral investment demands, such as the adoption of digital systems and technology fees.
- The ongoing legal dispute between Paradigm and Hardee's parent company, CKE Restaurants Holdings, presents a question about the general-news issue of the power balance between franchisors and franchisees in the technology-driven restaurant industry, particularly concerning the implementation of digital tools and operational practices.
- The lifestyle of Paradigm's restaurant employees may undergo significant changes due to the implementation of digital systems and online ordering platforms, highlighting the potential impact of technological advancements on workforce adaptability in the foodservice sector.
