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Foodmaker International Franchising, Inc., and Foodmex, Inc., its master licensee in Mexico, are in a messy food fight that has splattered into courts on both sides of the border.
Foodmaker International, the wholly owned subsidiary of the San Diego-based Foodmaker, Inc., has been trying to terminate its 7-year agreement with Foodmex since late last year.
That's the day Foodmaker gave Foodmex a formal "cure or termination" notice, outlining what it calls performance deficiencies.
Under its master license agreement (MLA), Foodmex was granted the right to license, develop and operate Jack In The Box restaurants in Mexico and to use the official logo.
In return, Foodmex agreed to pay licensing and royalty fees to Foodmaker International, according to company documents.
Foodmex also was obligated to develop a certain quota of eateries a year; to monitor license compliance with established quality control and operational systems and standards; and "to maintain sufficient solvency and capitalization to insure that Foodmex and its licensees remained economically viable."
According to Foodmaker, an audit 30 days after the notice was issued showed that the problems had not been resolved.
"Foodmex," it said, "was in no better financial condition. Termination of the MLA was warranted and appropriate."
"The bottom line is that in international franchising, picking the right partner is the key to success," Tim Pickwell, corporate counsel for Foodmaker, Inc., and director of Foodmaker International, said in a phone interview.
"In Foodmex, we have the wrong partner. They are undercapitalized and insolvent and they are failing to comply with our operational standards."
But Foodmex decided to fight the termination order, continuing to operate all of its 10 Jack In The Box eateries in Mexico. according to court papers filed in U.S. District Court's Southern District.
A flurry of suits and countersuits between the two parties followed. In March, federal Judge Napoleon A. Jones Jr. ruled in Foodmaker's favor.
In his decision, Jones concluded that Foodmaker had "demonstrated an immediate harm to their goodwill and reputation in light of Foodmex's continued use of the Jack In The Box proprietary marks."
The court denied Foodmex's request for a preliminary injunction against Foodmaker; and ordered Foodmex to comply with the termination order.
But Foodmex has refused to stop its Jack In The Box operations,...