SAN DIEGO – The Jack in the Box National Franchisee Association (NFA) filed a lawsuit against franchisor Jack in the Box for breach of contract and violation of the good faith and fair dealings provisions of the company’s franchise agreements.
In a statement, NFA said its members are seeking to legally enforce their “…right to an audit of the marketing fund under the 1999 agreement and provide a full accounting of the activity of the marketing fund from 2016 forward to continue annually,” along with reimbursement for roofing and other capital expenses. The NFA also accused Jack in the Box of requiring franchisees to implement “…unnecessary remodels in order to subsidize the franchisor for its acknowledged financial responsibility.”
“The franchisee is the lifeblood of this brand and the key to its future success,” said Michael Norwich, chairman of the Jack in the Box NFA board of directors. “Many of us have invested a great deal in its future. Healthy franchisees are the key to brand success and we have been an undervalued stakeholder in the eyes of this management.
“We have been diminished as a result of the heavy G&A cuts whereas we believe prudent investment in the brand would have yielded better returns for all stakeholders,” Norwich added. “We can no longer sit back and allow decisions that greatly impact our businesses to be made without our interest in mind.”
The lawsuit follows a complaint filed by the NFA with the California Dept. of Business Oversight relating to a new financial restructuring strategy that has landlords transferring their lease agreements from Jack in the Box Inc. to a subsidiary, Jack in the Box Properties LLC. NFA said its members are concerned by a lack of transparency because franchisees are not in direct contact with landlords and have no information related to how rent payments are divided between Jack in the Box and the landlords.
NFA’s membership includes 85 percent of franchisees representing the ownership of approximately 2,000 restaurants out of a system-wide total of approximately 2,240 restaurants.