A pair of big Washington state franchise companies have sued Jack in the Box, saying the company improperly terminated 39 locations in the state, even though they did not violate any rules, over the closure of eight other underperforming restaurants.
The two franchisees, AJP Enterprises and NHG Enterprises, are both owned by the same operator, Steve Wazny.
In the lawsuit, filed in a Washington state court, Wazny accuses Jack in the Box (JIB) of terminating the restaurants to force a sale. The lawsuit is asking a court to stop the termination. “JIB’s attempted termination has nothing to do with brand protection and everything to do with financial leverage,” the lawsuit said. “JIB’s strategy is clear: weaponize the cross-default provision to force plaintiffs into an involuntary sale at a distressed valuation.”
The stakes of the issue are potentially steep. Jack in the Box could force the closure of a large number of restaurants in Washington by terminating the restaurants.
Jack in the Box had not responded to a request for comment on Thursday.
This is the second major franchise dispute to hit Jack in the Box corporate. Sister chain Del Taco closed all but one of its locations in Colorado after that company terminated the restaurants and the lender later pulled its support for the operation. In that case, the franchisee that acquired the right to the state in 2023 had major financial question marks almost from the start.
It also comes during a period of upheaval for Jack in the Box. CEO Darin Harris left the company in February. The company named CFO Lance Tucker, who had only been back with the company a few weeks, as interim principal executive officer before naming him permanent CEO just last week.
In the Washington state case, the franchisees, AJP and NHG, had been in operation since 2012. Wazny acquired the locations that year directly from Jack in the Box for $27 million.
But the operator started having financial problems with some of its locations in 2017, according to court documents, and began talking with the company about dealing with underperforming restaurants. In 2024, Wazny flew to San Diego to meet with then-CEO Darin Harris, according to the lawsuit.
Wazny asked about a strategy for the underperforming restaurants and, according to the complaint, Harris told him the company would use its resources to address the locations’ problems. But Jack in the Box never took action, according to the lawsuit.
By September, the franchisee opted to close the eight restaurants because of the financial strain they were putting on the entire operation.
That month, Jack in the Box issued a notice of default to AJP, saying it had abandoned those eight locations. That default also featured a cross-default provision, which allows the franchisor to terminate all of a franchisee’s locations when some of them break the franchise agreement. That meant JIB wanted to terminate the other 39 restaurants operated by Wazny’s companies, even though they weren’t having problems.
Jack in the Box in September last year took possession of the eight closed restaurants. “Since taking possession, JIB has done nothing to reopen these locations, confirming that JIB itself recognizes these closures were financially sound decisions,” the lawsuit said.
The franchisees maintain control of the other 39 restaurants and the lawsuit said that those restaurants are “fully compliant with all franchise obligations” and the stores continue to pay into royalties. Jack in the Box also does not have a plan to deal with the restaurants once their franchise agreements are terminated.
“The threatened termination of 39 locations would be catastrophic, not only for plaintiffs, but also for their hundreds of employees, many of whom have been with the company for years and would face severe financial hardship,” the lawsuit said. “Importantly, JIB has no credible plan to take over these locations. If JIB proceeds with termination, the result will not be a smooth operational transition. It will be mass closures.”
“In reality, JIB’s conduct threatens to devalue its own system, damage its brand and drive away future franchise investors who will see how JIB treats even its most experienced operators,” the complaint added.
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