Jack in the Box Inc. has already dropped its famous two-for-99-cents taco deal in some markets. Now, franchisees are hoping it dumps Chief Executive Lenny Comma as well.
Citing weak sales, franchisees of the fast-food chain are urging the company to replace its CEO and remake the upper management team, including hiring a head of marketing. The group that represents about 89% of Jack in the Box’s 2,200 locations says its resources have been cut in recent years, hurting training and remodeling efforts and leading to a loss of confidence in company leadership.
“We really need change,” said Michael Norwich, chairman of the National Jack in the Box Franchisee Assn. “Nobody is taking ownership and it’s resulting in the condition we’re in now.”
In response, the San Diego company said it has been open to “constructive feedback” from franchisees and will work with them “to develop and refine our strategy for success, and ensure our ultimate goals are fully aligned.”
“Importantly, we believe the viewpoints expressed today by the NFA leadership are not reflective of the entire franchise community,” Jack in the Box said in an emailed statement.
Activist investor Jana Partners — the third-largest holder in Jack in the Box, with a 7.5% stake as of June 30 — also took aim at the chain’s operations.
“We share the franchisees’ concerns about Jack in the Box’s performance and the lack of urgency in addressing it,” a spokesman for the New York hedge fund said in an email. “We appreciate their input and will incorporate it into our ongoing dialogue with the company.”
Comparable-store sales at Jack in the Box rose just 0.5% last year, trailing its burger peer group average of 1.5%, according to Bloomberg Intelligence data. Still, that marks a turnaround after several quarters of slipping sales — and Comma, 49, said in August that the positive momentum is continuing into the current quarter.
Lately, the chain, known for its late-night fare, said it has been losing some budget-conscious customers to rivals including Taco Bell and Carl’s Jr. that are offering steep discounts. In August, Comma said the company was trying to do more deals under $5.
Now, Jack in the Box restaurants are advertising rib-eye burgers, but some recent campaigns have been flops, said Norwich, who owns 14 restaurants. Franchisees said they were stuck with barbecue sauce after the chain’s Smoky Jack burger didn’t sell like the company expected. Jack’s Food Truck Series of sandwiches was also a disappointment, he said.
The company’s “primary impetus has been going asset-lite,” Norwich said, citing corporate layoffs. “We want to see focus on the top line sales number.”
Comma, who also serves as chairman, has been CEO of Jack in the Box since January 2014 and was chief operating officer before that. Recently, chief marketing officer Iwona Alter left the company.
The association recently hired franchise attorney Robert Zarco to represent its interests. It said the majority of franchisee members gave the company’s executive team a “no confidence” vote at the group’s annual meeting in July.