A Hardee’s franchisee in Alabama and other states in the Southeast is alone in the system in its decision to close most of its restaurants at 2 p.m., the franchisor argued in a court filing late last week.
Paradigm Investment Group is also alone—outside of an operator that runs the fast-food chain’s restaurants in travel plazas—in its insistence on refusing to accept online and mobile orders, Hardee’s said in a counterclaim to the operator’s lawsuit against the brand.
Hardee’s wants a federal court to validate its decision to terminate Paradigm’s franchise agreements, which would likely result in a sale of the operator’s 76 restaurants, but which could also lead to a number of closures.
The counterclaim came in response to Paradigm’s lawsuit filed earlier this spring seeking to prevent the termination. Hardee’s sent a notice in January that the franchisee was not in compliance with its franchise agreement.
In the process, the franchisee took Hardee’s to task over the performance of the system, which has struggled for years. Paradigm operates restaurants in Alabama, Mississippi, Tennessee and the Florida panhandle. But most of its restaurants are in Alabama, and 41 of the restaurants close at 2 p.m. None of the 76 accept mobile orders, delivery or participate in the loyalty program.
Paradigm argues that its restaurants don’t generate enough business after 2 p.m. in some markets to warrant remaining open. It also argued that it would likely end up in bankruptcy if it followed Hardee’s requirements.
But the franchisor painted Paradigm as a lone wolf, both in its decision to close at 2 p.m. and its refusal to accept digital orders.
Hardee’s said it started working on a “digital transformation initiative” in 2019. The company started using Olo to process digital orders in 2021. That’s also when Hardee’s started requiring franchisees to use third-party delivery providers DoorDash and Uber Eats. The chain also started a loyalty program using the software provider Punchh.
Those rules became mandatory in 2022, according to Hardee’s. All but two operators have installed the software, and digital orders now make up 7% of Hardee’s franchisees’ revenues, and 8.2% of sales at the chain’s corporate stores, according to the lawsuit.
Hardee’s first sent a notice to Paradigm that it was out of compliance on technology, and its refusal to pay technology fees, in 2022. Paradigm owes more than $200,000 in unpaid tech fees, the franchisor says.
Hardee’s also argues that Paradigm is alone in its refusal to keep all its restaurants open at least 16 hours a day, though a few restaurants have special permission to keep reduced hours. The franchisor says in its counterclaim that nearly 30% of its sales over the past two years came from 2 p.m. to 10 p.m.
Hardee’s “believes that staying open for dinner positions the Hardee’s brand as a breakfast, lunch and dinner business and drives additional restaurant sales,” the company argues.
The franchisor first sent a notice to Paradigm in 2024 and then sent a termination notice in January.
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