NEW CASTLE, Ind.— Some Jack’s Donuts franchise owners are concerned about the company’s financial future as legal troubles mount for Jack’s Donuts CEO, Lee Marcum.
WRTV Investigates found six lawsuits have been filed against Marcum and businesses connected to him, including Jack’s Donuts and Jacks Donuts of Indiana Commissary LLC.
So far this year, courts in Indiana and New York have handed down $503,766 in judgments against them, according to records obtained by WRTV Investigates Kara Kenney.
“It’s scary for us”: Some Jack’s Donuts franchise owners concerned
Jack’s Donuts started serving donuts in New Castle in 1961 and Marcum is the third-generation owner of the company, according to their website.
They currently have 24 locations and 14 franchisees.
Jack’s Donuts franchisees Nickole Patton and Angi O’Connell Bone say they both quit their jobs in corporate America to sell donuts.
“It was one of those YOLO, let’s do it,” said O’Connell Bone. “I love when kids walk in and they have that big smile on their faces.”
O’Connell Bone owns the Fishers and Gas City locations.
Nickole Patton owns Jack’s Donuts shops in Carmel, Westfield and Broad Ripple.
“I’m asking for grace, I’m asking for forgiveness, so we can stay open because that’s where we are,” said Patton. “I just want customers to give us a little bit of grace and come back and try us just one more time.”
They’re both concerned about the financial future of Jack’s Donuts.
“It’s scary, it’s scary for us,” said O’Connell Bone.
“I think for a while, we’ve known things weren’t right,” said Patton.
Lawsuits filed against Jack’s Donuts CEO and businesses
WRTV Investigates found the following legal filings:
- Old National Bank filed a lawsuit on February 12 in Henry County accusing Marcum and Jack’s Donuts of Indiana Commissary of defaulting on business loans. The bank is asking for $3.4 million and is threatening to foreclose on the New Castle store and Marcum’s home. The case is still pending.
- Specialty Fitters, an Ohio company that installs mechanical piping services, filed a lawsuit for breach of contract on October 22, 2024, against Jacks Donuts of Indiana Commissary. Specialty Fitters alleges they performed work at the New Castle production facility but were not fully paid. On January 14, a Henry County judge handed down a $104,995.80 judgment against Jack’s Donuts of Indiana Commissary.
- Investment funding firms Novus Capital, Amerifi Capital, Spartan Business Solutions and Avanza Capital Holdings filed lawsuits in New York between November 2024 and January 2025 saying they’re owed money. Avanza Capital Holdings won a $292,768 judgment on January 24. Amerifi won a $61,888 judgment on February 18. Spartan Business Solutions won a $44,113.97 judgment February 10. Novus Capital’s lawsuit is still pending.
Some franchise owners say decisions at the corporate level are impacting their bottom line.
In a January 21 letter to Marcum, owners representing 18 locations asked Marcum to resign as CEO.
“The ongoing mismanagement, coupled with troubling financial actions, has not only directly impacted our operations but has also led to a broader loss of confidence in the company’s future,” read the letter. “Over the past 18 months, we have seen a noticeable decline in sales, revenue, and customer loyalty. We strongly believe that these issues stem from your leadership decisions, which have included misappropriation of company funds, financial mismanagement, and the creation of multiple entities for personal financial gain.”
VIEW THE FULL LETTER BELOW:
In October 2023, Jack’s Donuts opened a production and distribution center in New Castle called the commissary.
Some franchise owners say Marcum urged them to stop making donuts in their stores and use the commissary instead.
“He said it's going to make your lives easier, and we were like thank you,” said O’Connell Bone.
O’Connell Bone and Patton started using the commissary to get their donuts.
Patton says she sold all her kitchen equipment and fired seven bakers.
But, both franchise owners say customers complained the donuts didn’t taste the same.
"The donuts weren't great,” said O’Connell Bone. “We lost customers when we changed over, and they compared us to a gas station donut. That was heartbreaking.”
Some franchisees say that in the fall of 2024, Marcum told them corporate was having financial difficulties and the commissary could no longer supply donuts to every location.
That means some owners are now using stores that have kitchens to make their donuts and then transporting them to other Jack’s Donuts locations.
O’Connell Bone says she makes donuts at her Fishers locations for both Fishers and Gas City.
“We have to make them here and drive them back and forth to Gas City every single day,” said O’Connell Bone. “It's a nightmare. We are barely getting by right now."
Nickole Patton makes donuts out of her Westfield location. She says it takes staff two hours to deliver them to Carmel and Broad Ripple locations.
Patton says she had to buy kitchen equipment and a delivery vehicle.
“We are upwards of $50,000 of what we’ve spent to reopen our kitchen,” said Patton. “It’s insane. Kind of makes me want to throw up a little bit."
Mike Doran, co-owner of Irvington’s Jack’s Donuts, said he bought the no-kitchen location last year because the distribution center was supposed to provide donuts.
“It was based on a commissary that was going to provide donuts,” said Doran. “We opened and in three weeks we got a phone call that we were losing our supply chain.”
Irvington now operates a deli and gets their donuts from another Jack’s Donuts franchisee.
Doran does not have any plans to sell the location.
“I don’t want to do to somebody else what was done to me," said Doran.
Jack’s Donuts CEO Responds
WRTV Investigates reached out to Jack’s Donuts CEO Lee Marcum for an on-camera interview, but he declined.
Through a spokesperson, he provided a statement and answered questions via email.
“The root cause of the financial difficulties stems from a combination of factors, including mismanagement on my part, for which I take full responsibility,” read the statement. “Other factors include inflation, the increased cost of shipping, ingredients and gas, and the pursuit of innovative business opportunities, specifically at the commissary. However, the situation has been made worse due to the failure of certain franchisees to pay their outstanding bills, which has significantly impacted our financial stability.”
WRTV Investigates asked for proof some franchise owners owe money, and Marcum sent us dozens of invoices for donuts for Carmel, Westfield, Broad Ripple, Fishers, Gas City, and Irvington as well as a franchise fee for Irvington.
WRTV asked if the franchisees who spoke on camera are the only ones who owe money.
“No, there are other franchisees who owe money as well. However, the key distinction between the three who appeared on camera and the others is that the latter are actively working to resolve their outstanding balances,” Marcum said in an emailed statement.
Marcum also emphasized that the commissary is still open.
“We opened the commissary in October 2023 and it has never closed,” said Marcum in an emailed statement. “The commissary remains fully operational, serving franchise owners seven days a week. The purpose of the commissary was and is to provide better service and less operational challenges. Our top priority is delivering delicious donuts to our customers while supporting our franchisees.”
WRTV Investigates asked about the future of the commissary and asked if Jack’s Donuts is restructuring.
“We have appointed additional supervisors to enhance oversight and performance. The supervisors oversee accounts payable, facility management and production,” read the statement. “We are discussing inventive business opportunities that would increase the efficiency at the commissary and improve the way we serve our franchisees and our customers.”
Marcum said via a spokesperson that Jack’s Donuts is proud to have served the community for more than 60 years.
“Despite our recent financial difficulty, we are committed to providing fresh, quality donuts and ingredients to both our customers and franchisees,” said Marcum in an emailed response.
“We don’t know how it’s going to end”: Franchise owners look at options
The franchisees we spoke with say they are not to blame for corporate-level financial problems.
Doran, Patton and O’Connell Bone also dispute the amounts Marcum says they owe and say Marcum violated their franchise agreements.
They’re asking for Marcum to step down.
“We believe that a change in leadership is essential to restoring financial stability, rebuilding the company’s reputation, and aligning corporate priorities with the interests of the franchise network,” read the letter requesting Marcum’s resignation as CEO.
Nickole Patton is asking customers to stop by her Broad Ripple, Westfield and Carmel locations.
“We are going to save Jack’s Donuts,” said Patton. “I just want customers to give us a little bit of grace and come back and try us just one more time."
Angi O’Connell Bone does not want to sell her Fishers and Gas City locations.
“Who is going to want to buy this now, making your own donuts?” asked O’Connell Bone. “Making donuts is very hard.”
She is considering changing her stores’ name, but in the meantime, she emphasizes she’s making the donuts customers love.
“We are here and making the original Jack’s donut,” said O’Connell Bone. “We don’t know how it’s going to end. Honestly, we don’t.”
Business law expert weighs in
WRTV Investigates spoke with Nicholas Georgakopoulos, a business law professor at IU McKinney Law School in Indianapolis.
He said it’s common for conflicts to arise between franchise owners and a parent company.
“Very often, conflicts arise,” said Georgakopoulos. “It’s very common that the franchisees or local owners are on one side of this conflict, and the mothership is on the other side of this conflict because sometimes their interests are in opposite directions."
WRTV Investigates also asked about lawsuits, like the one filed by Old National Bank.
“Business is a dangerous, very risky enterprise,” said Georgakopoulos. “The banks are experienced at trying to collect what they’re owed, and that seems to be what we have here. The bank lender to the mothership, the franchisor, is saying ‘look we are owed this money, so I’m going to proceed with the next step which is to foreclose on the collateral you pledged to secure the loan.’”
Jack’s Donuts and its commissary have not filed for bankruptcy.
“We are exploring all options to continue serving customers and franchisees,” read a statement from Marcum.
Georgakopoulos said some businesses in financial distress may choose to file for Chapter 11 bankruptcy.
“Typically, there will be an effort to make the business more effective, so there will also be a reorganization of the business,” said Georgakopoulos. “Reorganization should be thought of mostly as a reorganization of ownership and debt.”
Have a tip? You can contact WRTV Investigates Kara Kenney at kara.kenney@wrtv.com.
