Frustrated Jack in the Box franchisees said they’ve reached a stalemate with corporate leaders who have formed a new franchisee council aimed at silencing disgruntled operators, according to a statement released Wednesday by The National Jack in the Box Franchisee Association.
At issue is the San Diego-based chain’s recent formation of the Franchise Advisory Council (FAC). Representatives for the National Jack in the Box Franchisee Association (NFA), which called for the ouster of CEO Lenny Comma late last year, said the new group usurps the role of the Strategic Leadership Council. That seven-member panel formed in late 2017, in cooperation with corporate, to discuss high level issues important to franchisees. The council consists of five NFA members.
On Wednesday, the NFA, which currently represents 89% of franchisee operators who own about 1,900 restaurants, said the formation of the FAC was done without consulting the association.
“We see the formation of the FAC as an act of retaliation intended to silence the NFA membership,” chairman Michael Norwich said in statement.
Jack in the Box, which is exploring a sale, said the company has “created several inclusive channels through which to communicate with the entire franchise community" including regular town hall meetings and the new Franchise Advisory Council. The formation of the Franchise Advisory Council was first announced in December during "road shows" with franchisees, the company said.
Jack in the Box said NFA members “were invited to participate in creating the FAC” which consists of six peer-elected franchisees, and one company appointed franchisee.
“Any suggestion that the formation of the FAC was intended to silence the NFA is simply not true,” the company said in a statement. “NFA Board members were elected by their peers or offered seats on the FAC by the company, but refused to participate. For those who have been given the opportunity to participate on the FAC, the door remains open.”
NFA members said they declined to participate because the company has ignored its complaints for several months, and by forming this new franchise group, they are essentially dismissing the NFA.
“We’re struggling with not being heard and not being listened to,” said Norwich, who owns 14 restaurants in Texas.
Southern California-based franchisee David Beshay, who owns 185 restaurants in California, Idaho, Washington and Texas, said Jack in the Box used to lead the industry with innovation — from employee training to food quality.
“Today, our competition is passing us by,” Beshay said in a phone interview Wednesday.
He started his career as an employee at a Fullerton, Calif., Jack in the Box in 1992. He bought his first restaurant in 2006.
“We want Jack in the Box greatness to come back,” he said.
Tension between franchisees and Jack in the Box began last fall, when the franchise association announced a vote of no confidence in Jack in the Box leaders. Their claim: Jack in the Box has taken no action to correct declining sales.
In an earnings call in February, Jack in the Box said it plans to downsize redundant items and invest in drive-thru enhancements to improve operations. Changes include adding digital menu boards, placing canopies over menu and order windows, enlarging the order window for better customer interaction, and improved landscaping.
Beshay said “enhancing the drive-thru experience” for guests is a good idea. But, it’s not enough.
“I think it needs to be part of a larger strategy on how we improve food quality and guest experience,” he said. “Great brands create holistic strategy.”
In its latest quarter, ended Jan. 20, systemwide same-stores sales at Jack in the Box fell 0.1%, compared to a 0.2% drop for the same period last year. Franchised stores, which represent 94% of units, saw comparable-restaurant sales decline 0.1%, compared to a 0.3% decline in the same quarter last year.
Norwich said the association is hopeful that “a credible buyer” will purchase the company and install new leadership: “If that happens, the brand will thrive, and all stakeholders win.”
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