The National Jack in the Box Franchisee Association (NFA) last week issued a statement expressing disappointment that very little attention was paid on the part of Jack in the Box (JIB) during its Q2 earnings call to address the broken relationship with its franchise community, which accounts for approximately 95% of the overall JIB system. While NFA members are optimistic about the positive short-term impact the current program is having, franchisees still express concerns regarding the high dependence on discounting and that their issues are not being addressed, along with the JIB board’s decision to stand by CEO and Chairman Lenny Comma.
The statement from the NFA board of directors reads:
“The JIB board has shown zero interest in franchisee concerns by ignoring every attempt we have made to share our grievances. Disputes are inevitable when one of the parties is unwilling to communicate. Our issues will continue to fester and worsen with the board’s commitment to keeping the status quo. They are leveraging up the balance sheet with debt at the same time our transactions continue to drop, as seen in the 2.2% decrease in transactions in the second quarter. We are worried about where that leaves franchisees when the debt needs to be repaid and the current management team has moved on.”
Tensions between the NFA, who represent approximately 1,900 of the JIB’s 2,100 franchised restaurants, and JIB have been steadily escalating since the NFA’s vote of “no confidence” in CEO Lenny Comma at their annual meetings in July of 2018. Among the NFA’s top concerns is JIB’s shift to an asset-light model and continued cuts to G&A spending in areas that the NFA deems vital to their continued growth and success, namely marketing, operations, training and development.
“We absolutely understand the movement to get to an asset-light model. That said, it is important to effectively reallocate the reduced G&A in a way that benefits the operators by supporting the levers of the company that will produce the results we all want to see,” said Steve Flohr, NFA board member. “We are receptive to great leadership. Having someone who will be a steward of the brand and seek to align with what is in the best interest of franchisees and shareholders shouldn’t be hard to accomplish. We are a system of seasoned franchise owners that have witnessed tremendous success when there is outstanding franchisor leadership, and that’s all we seek to have.”
Despite the tepid response to JIB stock on Wall Street following reported earnings, the NFA contends that the new plan to pursue securitization coupled with its short-sighted discount laden marketing strategy is a severe hindrance to system growth and not one that franchisees are eager to get behind.
“No company that is as heavily franchised as Jack in the Box can successfully move forward and implement a long-term strategy without alignment with its franchise community,” said Robert Zarco, franchise counsel for the National Jack in the Box Franchisee Association. “World class brands utilize a shared vision between franchisor and franchisee, with an alignment between the two being the most critical.”
“Management cannot expect to effect and maintain successful growth while there are so many unresolved franchise issues,” said Dino Savant, NFA member. “You would think that while they were taking their victory lap during today’s call, they would lament the fact that the relationship with their largest stakeholder is in such a state of disarray.”
More information about the National JIB Franchisee Association can be viewed by clicking here.
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