Jack in the Box Parent Settles With Franchisees

Foodmaker Inc. said Tuesday it has reached settlements with franchisees representing about 90% of Jack in the Box restaurants over a lawsuit filed by the chain’s national franchise association last month.

In July, a number of franchisees sued Foodmaker over a bacterial food illness in the Pacific Northwest in January. Some 500 people were reported stricken by the illness, and three children died--two as the result of eating tainted meat.

Foodmaker, also owner and franchiser of Chi-Chi’s restaurants, took a $40.4-million charge for the settlements. That included a reserve for anticipated settlements for the remaining 10% of the franchised restaurants, it said.

“With this settlement behind us, we do not anticipate any significant charges to future earnings related to the January incident in the Pacific Northwest,” said President Jack Goodall.

The chain’s franchise association has agreed to withdraw a suit filed last month with the California Department of Corporations.

As a result of the charge, the company reported a net loss for the third quarter ended July 4 of $45.5 million, or $1.16 a share, compared to a profit of $4.7 million, or 11 cents a share, a year ago. Revenue was $280.2 million, down from $283 million in the year-ago period.

Restaurant sales at Jack in the Box stores open last year fell 9.2%.