A major fast food chain’s efforts to streamline its operations have taken a new turn. This time, to the courtroom.
As the company works on a broader plan to close underperforming locations, a dispute with one of its largest franchise operators is escalating, raising questions about who ultimately controls whether restaurants stay open or close.
At the center of the conflict is Jack in the Box, which is now trying to stop a wave of closures that it claims a franchisee has no right to make.
Jack in the Box (JACK) has filed for a restraining order in Washington state court to prevent franchisee AJP Enterprises from closing 38 restaurants in the greater Seattle area.
The legal action follows the company’s termination of AJP Enterprises in March over more than $1.4 million in unpaid marketing fees.
According to court documents, the franchisee was given 30 days to fix the breach, but failed to do so. Despite that notice, AJP Enterprises informed the fast-food chain of its intention to begin closing its remaining locations, with closures expected on April 22 unless the default notice is lifted, according to Restaurant Business Online.
Jack in the Box argues that the franchisee has “no contractual right” to close the restaurants and is seeking immediate court intervention. The company maintains that unauthorized closures could damage brand value, disrupt local markets and create broader operational risks.
According to franchise law experts at Franzy, these agreements often limit the franchisee’s ability to unilaterally close locations, especially when financial obligations remain unresolved.
Jack in the Box files an order to block the closure of 38 franchised restaurant stores.Justin Sullivan/Getty Images
The current legal action is the latest development in a years-long dispute between the company and franchise operator Steve Wazny, owner of AJP Enterprises and NHG Enterprises.
In 2024, the entities filed a lawsuit seeking to block the closure of 39 Seattle-area restaurants. Wazny alleged that Jack in the Box attempted to use the closure of eight underperforming locations as justification for closing the remaining stores and forcing a sale.
While the fast food chain initially argued that those closures were carried out without its approval, both sides ultimately reached a temporary agreement under which Jack in the Box would not close the remaining locations and the franchisee would continue to operate in compliance with its franchise obligations.
However, that deal began to unravel when AJP Enterprises stopped paying required marketing fees for the remaining units, triggering the current legal and non-compliance escalation.
Wazny’s relationship with Jack in the Box dates back to 2012, when he acquired most of the locations for $27 million, according to Franchise Times. At its peak in 2024, that portfolio grew to 47 restaurants, including newly developed units.
Court documents indicate that financial challenges began to arise as early as 2017, largely due to poor store performance. Wazny has argued that the company failed to provide adequate operational support, while Jack in the Box disputed that claim.
The conflict reflects broader structural pressures within the franchise business model.
Franchises allow independent operators to leverage established brands, benefiting from standardized systems, marketing support and customer recognition. For franchisors, it enables rapid expansion while reducing capital investment and operational risk.
However, the model also introduces complexity. As networks scale, maintaining consistent execution across independently operated locations becomes increasingly difficult, particularly in the restaurant industry, where margins are tight and performance can vary widely by market.
According to data from the U.S. Bureau of Labor Statistics, about 17% of new restaurants close within the first year. Restaurants’ long-term survival rates are even more challenging: About half close within five years and only 34.6% last more than a decade, according to Oysterlink.
More coverage on restaurant closures:
FMS Franchise consultants point out that consistency is one of the most difficult aspects of expanding a franchise system.
“The essence of franchising lies in offering a consistent brand experience across locations, a challenge that becomes more complex as the number of franchise units grows,” the firm states. “This consistency is vital to maintaining brand integrity and requires a well-orchestrated franchise development plan.”
The legal dispute comes as Jack in the Box executes its broader recovery plan, known as “Jack on Track,” unveiled in April 2025.
The strategy includes closing approximately 150 to 200 underperforming restaurants, streamlining operations and improving cash flows to strengthen the company’s balance sheet.
Jack in the Box CEO Lance Tucker said the plan focuses on three priorities: reducing debt, investing in growth initiatives such as technology and restaurant renovations, and optimizing the company’s restaurant base for long-term profitability.
Recent financial results highlight the urgency behind these efforts.
In the first quarter of fiscal year 2026:
Same-store sales declined 6.7% year over year.
Comparable franchise sales fell 7%.
The company’s comparable sales fell 4.7%.
Franchise-level margin decreased to $84.1 million (38.6%), down from $97.1 million (40.9%) a year ago, driven primarily by lower sales and a smaller number of stores.
Total revenue fell 5.8% to $349.5 million, reflecting weaker performance and fewer operating locations. During the quarter alone, the company closed 14 restaurants, 12 of which were franchised units.
Even as it seeks to stop AJP Enterprises from closing its remaining 38 restaurants, Jack in the Box has confirmed that additional closures are planned as part of its restructuring strategy.
For the fiscal year ending September 27, 2026, the company expects to close between 50 and 100 restaurants, most of them franchised.
The fast-food chain also anticipates continued pressure on same-store sales, forecasting results will range between a 1% decline and a 1% increase compared to fiscal 2025.
The dispute between Jack in the Box and AJP Enterprises highlights the delicate balance in franchising between corporate control and operator independence.
When financial performance declines and contractual obligations are not met, that balance can quickly break down, leading to legal battles over who ultimately controls whether locations remain open.
As more restaurant brands look to streamline operations and improve profitability, disputes like this could become more frequent and ultimately reshape the way franchisors impose control on their systems.
Related: Dunkin’ could exit an entire market in 2026 after 14 years
This story was originally published by TheStreet on April 16, 2026, where it first appeared in the Restaurants section. Add TheStreet as a preferred source by clicking here.
