Paradigm Investment Group has initiated a legal battle against CKE Restaurants, the parent company of Hardee’s, in a significant escalation of tensions within the fast food industry.
The lawsuit claims that CKE’s demands for extended operating hours and the implementation of digital services could drive Paradigm’s 76 Hardee’s locations towards insolvency.
Go deeper with GlobalData
Paradigm Investment Group, which operates 76 Hardee’s locations across the US states of Alabama, Mississippi, Tennessee and Florida, has filed a lawsuit accusing CKE Restaurants of bad faith actions.
The franchise operator alleges that CKE is threatening to terminate its franchise agreement over Paradigm’s refusal to adopt digital services and extend store operating hours, which could lead to the restaurants’ closure.
The legal challenge by Paradigm Investment Group against CKE Restaurants centres on a dispute over operational demands. Paradigm claims it has invested more than $173m in its restaurants and contributed $87m in royalties.
The company is now facing potential termination for not keeping stores open until 10pm and failing to implement digital services such as third-party delivery and loyalty programmes.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataParadigm’s CEO, Don Wollan, has publicly criticised Hardee’s for what he describes as “heavy-handed” tactics that were not part of the original franchise agreement.
“Hardee’s was ramming things down our throat which weren’t in the franchise agreement,” Wollan was quoted by Franchise Times as saying, emphasising the risk of setting a precedent for further unilateral changes by the franchisor.
The lawsuit also highlights a controversial statement made by Hardee’s to Midcap Financial Trust in 2022, asserting that Paradigm was in “good standing”. Paradigm now questions the veracity of that statement, suggesting that Hardee’s either misled the bank or engaged in fraudulent behavior to secure a loan.
Paradigm’s contention is that the additional fees and operational demands imposed by Hardee’s, such as a technology fee and a third-party delivery initiative, are financially burdensome and not transparently disclosed, as required by law. These practices, Paradigm argues, could lead to financial ruin and are not enforced on Hardee’s corporate-run stores, indicating a double standard.
The lawsuit also sheds light on the impact of Roark Capital’s acquisition of CKE in 2013, with Paradigm’s CEO noting the negative consequences of constant leadership changes at Hardee’s.
“Every time a new CEO comes in and wants to take some goofy risk or try something different that we instinctually know isn’t to work, we’re left pulling shrapnel out of our body for several years,” Wollan told Franchise Times.
