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Jack in the Box franchisees want new ownership

The franchisee association reiterated its call for a new CEO and said the company’s creation of a new advisory council was a “gut punch.”
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Jack in the Box franchisees renewed their call for a new CEO and new ownership Wednesday, arguing that they’ve been ignored in recent months despite the company’s comments otherwise.

The National Jack in the Box Franchisee Association, or NFA, also said that the company’s creation of a Franchisee Advisory Council represented a deterioration in the group’s relationship with executives.

“It was like a gut punch,” Michael Norwich, chairman of the NFA, said in an interview with Restaurant Business. “It wasn’t in the least bit conciliatory at all. To us, it feels very much like a way to diminish the NFA.”

In a statement sent late Wednesday afternoon, Jack in the Box said that the company has created “several inclusive channels through which to communicate with the entire franchise community, including regular town hall meetings and the peer-elected Franchise Advisory Council.”

The NFA has been at war with Jack in the Box for the past nine months since the association overwhelmingly passed a “vote of no confidence” in the burger chain’s management. The group later went public with its complaints, calling on the company to replace CEO Lenny Comma.

The association, which says it represents close to 89% of Jack’s 2,100 franchised restaurants, has since filed a lawsuit and asked to have a franchisee appointed to the company’s board.

The association’s primary complaints center on Jack in the Box’s cuts to general and administrative spending, which it says is hurting franchisee support—support operators believe many of their operators need.

“A lot of guys are really struggling financially,” Norwich said. “It’s just mind-boggling that nobody reaches out with an olive branch from the other side. There’s been ample opportunity for somebody to do that. We’ve indicated we would be willing to talk.”

The association’s latest complaint centers on the decision by Jack in the Box to form the Franchisee Advisory Council.

The NFA says that the council appears to be a replacement for a Strategic Leadership Council that was formed by the association and Comma. Such groups advise leadership on various company decisions.

The Strategic Leadership Council includes five members of the association and two “at-large” members that Jack in the Box appoints. Norwich said that the new Franchisee Advisory Council is made up mainly of non-NFA members.

“It’s not even about who sits on that, as much as it is that we were given the opportunity to have say-so, and that was taken away,” Norwich said.

But Jack in the Box, in its statement, said that members of the NFA were invited to participate in the Franchisee Advisory Council. “Any suggestion that the formation of the FAC was ‘intended to silence the NFA’ is simply not true.”

“To the contrary, NFA board members were elected by their peers or offered seats on the FAC by the company but refused to participate.” Jack in the Box said that “the door remains open” for those offered to participate.

Comma, in comments to analysts last month, said that executives have met with 80% of the chain’s operators during road shows.

He has argued in the past that improving same-store sales would ease franchise tensions. “Comps help to build a lot of great relationships in this business,” Comma said. “Our No. 1 priority is comp, and it’s driving profitability for our franchisees because more than anything that’s what we need right now.”

He said executives have been spending more time with operators to help them understand what the industry is going through, and how the chain has been responding.

“I’m hoping they will take those interactions and the facts we’re sharing to heart and use those things to make rational decisions going forward,” Comma said.

But Norwich said that operators have struggled to gain traction with executives. Despite the road shows, he said, “Nobody is making any effort to reach out and address our concerns with us.”

Jack in the Box has been exploring strategic alternatives, including a possible sale, though there have been reports of concerns among potential buyers about the chain’s franchise dispute and its lack of growth.

Norwich said the association would work with any existing buyer, but he reiterated that the company needs new management.

“I really think a sale is the way to go,” he said. “But I hope it’s not a sale that would involve current executives because that would probably put us in the same boat.”

UPDATE: This story was updated to include comments from Jack in the Box.

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