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RESTAURANTS—Closed Franchises in Mexico

At the request of Jack In The Box, Inc., Mexican authorities closed down five Jack In The Box franchises in Tijuana and Mexicali that were being run under another company.

A spokesman for the Kearny Mesa-based Jack In The Box described the closings, the last of which took place Aug. 6, as the “culmination” of a series of legal battles with the Mexican franchisee, Foodmex.

However, a lawyer representing Foodmex said the franchises have been shut down and reopened before. Officials from Foodmex, which has main operations in Mexico and an office in Coronado, did not return several calls for comment. The company is in Chapter 7 bankruptcy proceedings in Nevada, said Omar Arcia, Foodmex’s counsel from the Miami-based franchise litigation firm Zarco & Pardo, P.A. The issue lies not with compliance from his client, but with Foodmex’s two sublicensees, Arcia said. The licensees are awaiting a decision from Mexico’s courts, Arcia said. The fast-food shops have been reopened in the past, after the companies appealed previous rulings, he said. In 1990, Foodmex had signed a 20-year master licensee agreement with Jack In The Box. The deal allowed Foodmex to produce Jack’s trademark hamburgers and fast-food items.

Ten franchises were opened, and Foodmex operated half of them, Arcia said. The remaining shops were run by companies Foodmex created with other partners, he said.

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After a ruling from the U.S. District Court of Southern California in 1997, Foodmex closed its five franchises, Arcia said. The other franchises, which were run by other companies, remained open, he said. The Jack In The Box/Foodmex deal soured soon after the franchises opened in 1991, said Brian Luscomb, director of corporate ommunications for Jack In The Box. The restaurants didn’t meet operational standards, pay bills or use company-approved suppliers, Luscomb said.

The actions put Jack In The Box’s product credibility at risk, he said. The companies handled most of their conflict through the Institute of Industrial Property, a Mexican entity created under NAFTA to protect trademarks and other related issues. The institute’s decisions resulted in the franchises being shut down, Luscomb said. In December 1996, Jack In The Box terminated Foodmex’s master license, he said. Last June, a U.S. District Court instructed Foodmex to stop using Jack In The Box’s proprietary marks, such as signs, logos and recipes, Luscomb said. The franchises continued to use the logos and signs, he said. Last December, authorities confiscated and removed the shops’ Jack In The Box logos, covering the main signs with black hood-like bags, he said

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