Jack in the Box franchisees on Monday filed a complaint with California regulators alleging they are potentially in danger of losing their leases because of a new way the San Diego-based burger chain has restructured its real-estate portfolio.
The National Jack in the Box Franchisee Association, which called for the removal of CEO Leonard Comma in early October after a vote of no confidence, filed the complaint with the California Department of Business Oversight. The state agency governs the offer and sale of franchises in California.
In the complaint, the association, which represents 95 franchise owners who operate about 2,000 of Jack in the Box’s more than 2,200 restaurants, said the chain is altering how the company handles 1,800 master-lease agreements with landlords. Jack in the Box sub-leases those properties to franchise owners.
But on Oct. 8, Jack in the Box asked the property owners to transfer their lease agreements from Jack in the Box Inc. into a newly formed subsidiary, Jack in the Box Properties LLC, according to a letter obtained by the franchisee group.
In their complaint, the franchisee group said Jack in the Box gave landlords the option to re-assign their leases to the new subsidiary. However, if the property owners opt-out, they were warned “that there may be no assets or revenues to pay their rents,” the association said, citing the Oct. 8 letter.