Hardee’s threatens closures over franchisee hours dispute

The relationship between Hardee’s parent company, CKE Restaurants, and franchise operator Paradigm Investment Group is deteriorating over a disagreement about operating hours.

CKE has directed all franchisees to keep locations open until 10 p.m., citing evolving customer expectations and the need for consistent brand operations. Paradigm, which runs 76 Hardee’s restaurants across Alabama, Mississippi, Tennessee, and Florida, has refused to comply. These restaurants close around 2 p.m., which Paradigm argues better aligns with local consumer patterns and profitability models.

In response, CKE has begun the process of terminating franchise agreements. Paradigm has filed a lawsuit, alleging that the operating hour mandate is a pretext to seize profitable stores.

Legal showdown: franchisee accuses CKE of bad faith tactics

Paradigm’s lawsuit accuses CKE of acting in bad faith and attempting to reclaim profitable franchise locations through contractual overreach. The group contends that CKE is requiring conditions not included in the original franchise agreements, including longer operating hours and costly upgrades.

Paradigm states that it has invested more than $173 million into its Hardee’s operations and paid over $87 million in royalties. It argues that CKE is now trying to benefit from these investments without offering support or financial accommodation.

The suit also alleges that these standards are not consistently applied across the Hardee’s network. Paradigm claims that many corporate-run locations are not subject to the same requirements, raising concerns about equal treatment and contractual fairness.

Operational demands and digital upgrades cause financial strain

CKE is mandating more than just extended hours. According to Paradigm, the company also requires implementation of third-party delivery systems, loyalty programs, and digital kiosks.

The franchisee argues that these changes significantly raise costs and are not financially viable in its markets. Extending operating hours would increase labor, utility, and security expenses, but Paradigm states that customer demand declines sharply in the evening across many of its locations.

The lawsuit claims these new obligations would lead to operational losses and potentially force the company into bankruptcy. Paradigm is seeking court intervention to prevent the closures and maintain existing operations.

Broader implications for the fast-food franchise model

This dispute highlights larger tensions in the franchise model as fast-food brands adapt to digital platforms and shifting consumer habits. Hardee’s has faced long-term headwinds, with more than 200 locations closing in the past decade.

The conflict underscores the difficulties of balancing central brand strategy with local market realities. Paradigm argues that enforcing universal standards in disparate markets can create unsustainable conditions for franchisees, particularly in areas with limited consumer demand for late-night or digital services.

As the franchise model evolves, conflicts such as this could shape future agreements and the responsibilities shared between franchisors and operators.

The 76 Hardee’s locations under Paradigm’s ownership are concentrated in the southeastern United States, employing a significant regional workforce. If CKE prevails, many of these restaurants could close, potentially affecting jobs in both urban and rural communities.

Sources:
New York Post