As per the report by WRTV, the donut chain, based out of Indiana, has filed for Chapter 11 bankruptcy at the US Bankruptcy Court for the Southern District of Indiana.
This comes amid civil lawsuits and court rulings against Jack’s Donuts CEO Lee Marcum and his businesses.
Founded in 1961 in New Castle, India, the franchisor of the brand and its commissary on Wednesday said Jack’s Donuts of Indiana Commissary has more than 100 creditors and $14.2 million in liabilities, as per WRTV.
The filing further says that Jack’s Donuts of Indiana Commissary LLC has total property assets of over $1.4 million.
This difference makes the brand eligible for Chapter 11 Bankruptcy declaration.
The creditors cited in the bankruptcy filing include businesses that have existing judgments, including trucking company Carter Logistics, which have sued Jack’s Donuts alleging that they have not been paid for delivering donuts.
Chapter 11 is a type of bankruptcy that allows businesses to reorient its businesses under court supervision rather than liquidate all their assets.
Why did Jack’s Donuts file for bankruptcy?
According to a report by The Street, Jack’s Donuts opened a production and distribution centre back in October 2023, which marked the beginning of a spiral.
When the commissary opened, Jack’s Donuts CEO Lee Marcum asked several of its franchises to stop making donuts at their facilities and instead buy it from them. This prompted many of the stores to sell their baking equipment and lay off workers, essentially giving up their ability to make their own products.
However, this did not sit well with customers, who compared the new products to “gas station donuts”.
Since then, the situation has become worse coupled with the legal troubles, leading to the company finally file for bankruptcy.
What’s next for Jack’s Donuts?
Jack’s Donuts has issued a statement confirming the bankruptcy, but said that its stores will remain open.
“We have plans for continued and uninterrupted future operations that will be filed in the case. Our stores remain open, our teams are at work, and our commitment to quality, tradition, and community remains unchanged,” it said.
The brand further said that independently owned franchises are not subject to this action.
“The Jack’s franchisor and certain related entities are the subject of the bankruptcy proceedings, and no independently owned franchisee is subject to this action.”
“For more than 60 years, Jack’s Donuts has been about more than donuts — it’s been about people. As we move through this process, our focus is the same: to ensure that the Jack’s experience continues for generations to come,” the company said.
Key Takeaways
- Jack’s Donuts filed for Chapter 11 bankruptcy due to significant financial liabilities and ongoing legal issues.
- The company’s recent operational changes led to franchise discontent and affected product quality perception.
- Despite bankruptcy, Jack’s Donuts aims to maintain store operations and uphold its brand values.
