Operators at Jack in the Box ‘Hit a Dead End’
Lenny Comma is CEO of Jack in the Box, which reported flat same-store sales at franchised stores for the 40 weeks ended July 8, down from a 1.5 percent increase the same period the prior year.
The heavyweights at Jack in the Box have “hit a dead end” with their franchisor, according to their attorney Robert Zarco of Zarco Law, and so issued a press release yesterday calling for CEO Lenny Comma “to step down and relinquish his position as CEO, and for the board of directors to replace” the current leadership team.
“This has been a bold step for us. It’s been a little bit difficult step for us, but it’s one we’ve felt compelled to do because we haven’t been getting response from Jack in the Box,” said Michael Norwich in a conference call. He is chairman of the National Franchisee Association for Jack in the Box and operates 14 restaurants.
“The guys on this call represent close to 900 restaurants out of the 2,200 in our system,” he said, referring to the half-dozen fellow operators who also serve on the franchisee association’s board.
“What happens is you run out of options,” he said. “You make requests like we have done, three separate times. We asked Lenny Comma a year ago if we could discuss with the board, we brought to him surveys of franchisees that there was discontent. We had a frank conversation. He seemed willing to give us access to the board, but it never materialized.”
In the annual franchisee conference in July, Norwich said, a majority of association members voted to express “no confidence” in the current leadership team.
Anil Yadav, who operates 223 restaurants, said on the call he believes the publicly held Jack in the Box’s focus on cutting general and administrative expenses and boosting the stock price in the short term is “really unhealthy.” “You can’t live quarter by quarter and keep the stock price up. It’s great for the shareholders, but we are also stakeholders,” he said. “A lot of franchisees are collapsing because the transactions have been eroding.”
Jack in the Box sent a statement, saying in part: “For the past several years, and during the past year in particular, we’ve worked closely with the leadership of the NFA on a variety of issues of importance to the company and our franchisees,” it said. “We have always been open to their constructive feedback and have worked to address any legitimate concerns. Importantly, we believe the viewpoints expressed today by the NFA leadership are not reflective of the entire franchise community.”
I requested an interview with a Jack in the Box executive, and a senior VP at outside PR firm FleishmanHillard said he would “check in with the Jack in the Box team to see if that’s possible.”
There’s more to come on this story in a future print edition, including the possible retribution that franchisees face when they go public with complaints.