Franchisees and franchisors suing one another is nothing new, but it’s important to remember that the scope of the lawsuits run the gamut between chains with thousands of stores and those with fewer than 10.
Jack in the Box has more than 2,000 stores nationwide. Bud’s Broiler has six locations in the New Orleans area. Both are battling lawsuits.
Problems at Jack in the Box
The Jack in the Box National Franchisee Association filed lawsuits recently alleging breach of contract against the franchisor. The association represents 95 franchise owners who operate about 2,000 of the restaurant’s 2,240 restaurants.
The lawsuit alleges Jack in the Box is not living up to a 1999 agreement with franchisees to provide an audit of marketing funds. The violation stems from remodeling and other structural repairs for which Jack in the Box took full responsibility yet allegedly shifted some roofing repair costs to franchisees. The lawsuit reportedly comes after two years of negotiation over solutions on declining transactions seen across the franchise.
This is the third time in several months the association has brought grievances against the franchisor forward. It recently filed a complaint with the California Department of Business Oversight over its financial restructuring strategy. In July, the association saw a majority “no confidence” vote against CEO Lenny Comma and in October called for him to step down and for a new leadership team.
Problems at Bud’s Broiler
A franchise agreement between the six Bud’s Broiler locations in the New Orleans area and the parent company, Bud’s Broiler Holdings, requires the restaurants to buy nearly all supplies from the parent company.
On Nov. 21, a lawsuit filed by the parent company alleges the owner of the franchise on City Park Avenue bought hamburger meat from an unapproved source and attempted to duplicate the hickory smoke sauce. The company sought a temporary restraining order against the franchisee from using the “Bud’s” name and trade secrets and from operating any business at the location that would compete with the burger chain.
On Nov. 28, the business doors were open and hamburgers were being served at the 24-hour restaurant, but the name “Bud’s” had been painted over on signs outside the business.
In October, the franchisee, Shannon Prince – who owns the building at 500 City Park Ave. and has been running the Bud’s Broiler at the location since 2009 – sued Bud’s Broiler and the owners, alleging the main company conducted a concession stand at LSU Stadium in Baton Rouge and at New Orleans’ Voodoo Fest.
The problems faced by both Jack in the Box and Bud’s Broiler are no less serious because of the relative size of the companies involved. Any company that faces complex business litigation needs quality legal representation.