Popular US donut chain files for Chapter 11 bankruptcy: What next for Indiana-based Jack’s Donuts?

Popular bakery chain Jack’s Donuts has filed for bankruptcy under Chapter 11 of US law, a report citing court documents said.

According to a report by WRTV, the Indiana-based donut chain has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Indiana.

This comes amid civil lawsuits and court rulings filed against Jack’s Donuts CEO Lee Marcum and his businesses.

Jack’s Donuts of Indiana Commissary has more than 100 creditors and $14.2 million in debt, a franchisee and representative for the brand, which was founded in New Castle, India, in 1961, told WRTV on Wednesday.

The filing also states that Jack’s Donuts of Indiana Commissary LLC has total property assets of over $1.4 million.

This difference makes the brand eligible to file for Chapter 11 Bankruptcy.

Creditors named in the bankruptcy filing include businesses with existing provisions, including trucking company Carter Logistics, which sued Jack’s Donuts for allegedly not being paid for donut deliveries.

Chapter 11 is a type of bankruptcy that allows businesses to redirect their business under court supervision rather than liquidating all their assets.

Why did Jack’s Donuts file for bankruptcy?

According to The Street, Jack’s Donuts opened a production and distribution center in October 2023, and this was the beginning of a spiral.

When the commission opened, Jack’s Donuts CEO Lee Marcum asked many of his franchisees to stop making donuts at their facilities and buy them from them. This caused many stores to sell cooking equipment and lay off workers, essentially giving up their ability to make their own products.

But that didn’t sit well with customers, who compared the new products to “gas station doughnuts.”

Since then, the situation has worsened with legal problems leading to the company eventually filing for bankruptcy.

What’s next for Jack’s Donuts?

Jack’s Donuts released a statement confirming the bankruptcy but said its stores would remain open.

“We have plans to ensure that our future operations, which are the subject of the lawsuit, will continue and be uninterrupted. Our stores will remain open, our teams are at work, and our commitment to quality, tradition and community will not change,” he said in the statement.

The brand also said independently owned franchises are not subject to this action.

“Jack’s franchisor and certain related entities are subject to bankruptcy proceedings, and no independently owned franchisees are subject to such litigation.”

“For more than 60 years, Jack’s Donuts has been about more than donuts; it’s been about people. As we move forward in this process, our focus remains the same: ensuring the Jack’s experience continues for generations to come,” the company said.