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Jack in the Box franchisees file a complaint over restructuring

The operators are asking California regulators for protection over a coming restructuring of lease arrangements.
Photograph: Shutterstock

Jack in the Box franchisees on Monday said they have filed a complaint with California state regulators over a planned restructuring in the way the franchisor manages some of the leases that it controls.

The National Jack in the Box Franchisee Association, which represents 2,000 of the chain’s more than 2,200 restaurants, say it is trying to protect operators as the company forms a new subsidiary to manage its real estate.

Jack in the Box controls the leases for 1,800 franchisee-owned locations. The company leases those locations from landlords and then subleases them to franchisees—a relatively common phenomenon pioneered by systems such as McDonald’s Corp.

According to the operators, Jack is planning to organize its real estate under a separate subsidiary, Jack in the Box Properties LLC. Last month, the company sent a letter to landlords informing them of the restructuring and asking them to transfer leases into the subsidiary.

The association filed a complaint with the California Department of Business Oversight regarding the reorganization. “We are asking the state who licenses and regulates franchising and Jack in the Box Inc. to ensure the franchisees are protected from losing their livelihood as well as their employees,” Dan Watkins, attorney representing the association, said in a statement.

Jack in the Box has not yet commented on the operators' complaint.

The association’s action has come as operators have been increasingly vocal in pushing for changes at the company.

The association, which has argued that cuts in corporate overhead and marketing have hurt franchisees, has called upon the company to hire a new CEO. It has also asked for at least one spot on the board of directors.

The operators worry that they could be vulnerable to having their rights to operate a location terminated “with very little notice or opportunity to rectify the situation.”

They also worry that they could lose their locations if the landlord opts not to transfer the lease to the new organization.

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