Unrest is stirring in the Jack in the Box franchise system. The National Jack in the Box Franchisee Association is calling for current CEO Lenny Comma to step down and for the board of directors to replace the brand’s current leadership team. This came after the association had a majority vote of “no confidence” at its annual meeting in July.
The National Jack in the Box Franchisee Association, founded in 1995, is vast, comprised of 95 franchisees representing the ownership of about 2,000 of the chain’s 2,240 units.
“The vote of ‘No Confidence’ is the culmination of years of long-ranging discussions and unanswered concerns brought directly to Jack in the Box CEO Lenny Comma,” said Michael Norwich, NFA Board Chairman, in a statement. “We have reached out in every possible manner to communicate our concerns to the leadership and the current board of directors by offering meetings, conducting our own surveys of the franchise system, and proposing various solutions to the issues facing our system.”
He added: “Following an extended period of time that was characterized by a lack of effective reaction by Jack in the Box leadership to remedy our expressed concerns which include among other things, a severe lack of corporate resources being devoted to providing service, support, assistance and marketing to the franchisee community and which have caused an unsustainable loss in sales and transactions, our membership has cast a vote of ‘No Confidence’ in the executive leadership at Jack in the Box and are asking for immediate response and action by the company’s Board of Directors.”
The association said Jack in the Box’s board of directors hired an independent outside counsel to investigate the “no confidence” issues. It also identified a number of key areas of concern, it said, that the board of directors “must focus on and set forth proposed solutions to each of these issues.”
“These action items and proposed solution were detailed in a letter sent to the Board of Directors. The NFA has received no response,” the association said in a release.
“We believe that the current investigation has no sense of urgency and is intended to further delay a response. As a body, we are disappointed that there have been no effective measures put into place as of yet toward resolving our concerns,” said Rabi Viswanath, NFA president, in a statement. “We are disheartened that our issues as franchisees have been put on the back burner by the leaders of Jack in the Box. Nonetheless, we feel it is time to advise Jack in the Box’s other stakeholders, its investors and employees, so they gain an understanding of the gravity of the situation currently existing in the Jack in the Box system and why sales and transactions are on the decline, and perhaps they can offer suggestions on how to help solve these problems.”
As for the list of concerns, NFA shared those on October 9. They are:
- The restructuring of upper management, including replacing Lenny Comma as CEO.
- The appointment of a qualified CEO with strong and effective experience and demonstrable success in developing an organization like Jack in the Box in terms of size and complexity.
- The appointment of a dedicated Chief Marketing Officer with a clear strategic vision and plan of execution for the company (CMO Iwona Alter stepped down more than a month ago and hasn’t been replaced yet).
- The cessation of questionable financial tactics like reducing support staff and infrastructure so as to avoid further reduction of already depleted G&A expenses and resources.
- The use and expenditures of the system’s Marketing Fund have not been fully or adequately shared with the association resulting in serious concerns about use, allocation and management of the fund.
- The enforcement of the association’s and franchisees’ rights arising out of a prior settlement agreement entered into in 1999.
“We are in need of leadership that is going to provide a robust strategy and vision to allow for the long-term, viable success of this major brand,” added David Beshay, NFA Board Member. “We can no longer sit idly by while the existing management team destroys the value of this brand for the franchisees, for employees and for shareholders. The right thing to do is to approach the Board of Directors directly as to our concerns and demand action, and that’s what we are doing.”
The NFA said it engaged franchisee attorney Robert Zarco, founding partner at Miami litigation firm of Zarco, Einhorn, Salkowski and Brito, to represent their interests in this dispute.
“Throughout my involvement, the Franchisee Association has acted diligently and in good faith, making every imaginable effort to reach out to respectfully express their concerns directly with the Jack in the Box leadership to no avail,” Zarco said in a statement. “These are small business owners who represent the very fabric of this nation. They should be able to protect their businesses in a true partnership with the leadership of the brand they love and bring daily to their customers. It’s unfortunate that the Jack in the Box leadership has allowed the tension to reach this point. I have a long history of helping franchisors understand the seriousness of their franchise owners’ grievances and expect to advance the concerns of the JIB-NFA in whatever forum necessary to obtain similarly positive results.”
Jack in the Box is coming off a third-quarter review where it posted modest same-store sales gains of 0.6 percent at company restaurants and 0.5 percent at franchised units, year-over-year. This was against a 1.6 percent decline and a 0.1 percent, gain, respectively, in the prior-year period. The company metrics were driven by average check growth of 2.6 percent, partially offset by a 2 percent decline in transactions. There were 2,095 franchise and 146 company stores at the end of the third quarter.
Jack in the Box also announced that it’s embarking on a drive-thru revitalization program starting in 2019 and rolling through the back half of the year and into 2020. Executives said the brand plans to invest $30–$45 million on company restaurant drive-thru enhancements and remodels.
