Jack in the Box is not the only restaurant chain dealing with franchisee unrest. But it does appear that its relationship with operators will not be salvaged at this point. A sale of the company is what both the company and franchisees really want.
— Danni Santana
The public battle between Jack in the Box and its store operators rages on, as the chain’s National Franchisee Association (NFA) called for the replacement of CEO Lenny Comma again, Wednesday.
In a statement, the NFA said the recent formation of the Franchisee Advisory Council (FAC), which includes non-NFA members and Jack in the Box representatives, was created to silence the group’s efforts of inducing change at the C-suite level beginning last fall. The new committee has also seemingly replaced the prior Strategic Leadership Council established by the NFA and Jack in the Box, the organization said.
“NFA members did not participate in the formation of the FAC, and as a result, it is comprised primarily of non-NFA members,” said Michael Norwich, chairman of the board of the NFA.
Non-NFA members make up less than 12 percent of the Jack in the Box franchisee system. Changes made to the aforementioned Strategic Leadership Council also have to be approved by the NFA, but no permission was ever sought, it said. Jack in the Box did not immediately return request for comment.
Jack in the Box is not alone in dealing with franchisee unrest. El Pollo Loco, McDonald’s, and Papa John’s are just some of the other chains on bad terms with operators, as franchisees continue to assert their power over chains, as predicted in our 2019 Restaurant Megatrends.
The San Diego-based chain has struggled to generate positive sales in recent quarters, resulting in relatively flat same-store performance in the last fiscal year. Meanwhile, competitors Burger King and Taco Bell each grew comparable-store sales by 2 percent and 6 percent, respectively, in 2018.
Jack in the Box has publicly been exploring a sale of its company for an estimated $2.1 billion, according to Bloomberg. As franchisees await the announcement of a deal, many have begun raising menu prices to offset minimum wage increases in the state of California, where a majority of Jack in the Box locations reside. Some menus now list two for $1.29 tacos compared to two for 99 cents prices offered last spring.
“At this point, we are hoping for a credible buyer that brings with them changes in management that will cultivate the business and foster robust franchisee relationships,” said Norwich. “If that happens, the brand will thrive, and all stakeholders win. We who have seen Jack in its greatest days know that restoring the brand’s prominence is well within reach if we can make some positive changes.”