Association Engages Representation from Franchisee Attorney Robert Zarco, Esq.
The National Jack in the Box Franchisee Association today announced it has called for the current Jack in the Box Inc. (NASDAQ: JACK) CEO, Leonard A. Comma (Lenny), to step down and relinquish his position as CEO, and for the board of directors to replace the current leadership team. This call is the aftermath of a majority vote of ‘No Confidence’ from the association’s members at its annual meeting held in July.
The membership of the National Jack in the Box Franchisee Association is comprised of 95 franchisees representing the ownership of approximately 2,000 restaurants out of a system-wide total of approximately 2,240 restaurants.
“The vote of ‘No Confidence’ is the culmination of years of long-ranging discussions and unanswered concerns brought directly to Jack in the Box CEO Lenny Comma,” said Michael Norwich, NFA Board Chairman. “We have reached out in every possible manner to communicate our concerns to the leadership and the current board of directors by offering meetings, conducting our own surveys of the franchise system, and proposing various solutions to the issues facing our system.”
Norwich continued, “Following an extended period of time that was characterized by a lack of effective reaction by Jack in the Box leadership to remedy our expressed concerns which include among other things, a severe lack of corporate resources being devoted to providing service, support, assistance and marketing to the franchisee community and which have caused an unsustainable loss in sales and transactions, our membership has cast a vote of ‘No Confidence’ in the executive leadership at Jack in the Box and are asking for immediate response and action by the company’s Board of Directors.”
The membership of the association tasked its leadership with communicating its ‘No Confidence’ vote to the Jack in the Box Board of Directors, after which Jack in the Box Board of Directors hired an independent outside counsel to investigate the ‘No Confidence’ issues. The association also identified a number of key areas of concern that the Board of Directors must focus on and set forth proposed solutions to each of these issues. These action items and proposed solution were detailed in a letter sent to the Board of Directors. The NFA has received no response.
“We believe that the current investigation has no sense of urgency and is intended to further delay a response. As a body, we are disappointed that there have been no effective measures put into place as of yet toward resolving our concerns,” said Rabi Viswanath, NFA President. “We are disheartened that our issues as franchisees have been put on the back burner by the leaders of Jack in the Box. Nonetheless, we feel it is time to advise Jack in the Box’s other stakeholders, its investors and employees, so they gain an understanding of the gravity of the situation currently existing in the Jack in the Box system and why sales and transactions are on the decline, and perhaps they can offer suggestions on how to help solve these problems.”
The association membership concerns expressed in the letter are laser-focused toward the implementation of strategic measures that will positively impact the business and drive transaction, traffic and check average.
The list of concerns and action items set forth in the letter include:
- The restructuring of upper management, including replacing Lenny Comma as CEO.
- The appointment of a qualified CEO with strong and effective experience and demonstrable success in developing an organization like Jack in the Box in terms of size and complexity.
- The appointment of a dedicated Chief Marketing Officer with a clear strategic vision and plan of execution for the company.
- The cessation of questionable financial tactics like reducing support staff and infrastructure so as to avoid further reduction of already depleted G&A expenses and resources.
- The use and expenditures of the system’s Marketing Fund have not been fully or adequately shared with the association resulting in serious concerns about use, allocation and management of the fund.
- The enforcement of the association’s and franchisees’ rights arising out of a prior settlement agreement entered into in 1999.
“We are in need of leadership that is going to provide a robust strategy and vision to allow for the long-term, viable success of this major brand,” said David Beshay, NFA Board Member “We can no longer sit idly by while the existing management team destroys the value of this brand for the franchisees, for employees and for shareholders. The right thing to do is to approach the Board of Directors directly as to our concerns and demand action, and that’s what we are doing.”
The National Jack in the Box Franchisee Association has engaged internationally recognized franchisee attorney Robert Zarco, founding partner at the Miami litigation firm of Zarco, Einhorn, Salkowski and Brito, to represent their interests in this dispute.
“Throughout my involvement, the Franchisee Association has acted diligently and in good faith, making every imaginable effort to reach out to respectfully express their concerns directly with the Jack in the Box leadership to no avail,” said Zarco. “These are small business owners who represent the very fabric of this nation. They should be able to protect their businesses in a true partnership with the leadership of the brand they love and bring daily to their customers. It’s unfortunate that the Jack in the Box leadership has allowed the tension to reach this point. I have a long history of helping franchisors understand the seriousness of their franchise owners’ grievances and expect to advance the concerns of the JIB-NFA in whatever forum necessary to obtain similarly positive results.”