This Popular Donut Franchise Just Filed For Bankruptcy And The Reason Couldn't Be Clearer

It turns out the holes at the center of its pastries aren't the only missing pieces in one donut franchise's business model. Jack's Donuts started in New Castle, Indiana, and has delighted customers since it first opened in 1961. As of October 30, 2025, the Midwest chain has filed for Chapter 11 bankruptcy protection for the brand's franchisor commissary store. The chain is 24 strong, with 14 stores owned by franchisees.

Restaurant chains battle bankruptcy for a variety of reasons, usually due to shifting consumer tastes and rising operational costs. But legal problems over unpaid bills have plagued CEO Jack "Lee" Marcum. Two affiliated companies, Marcum Industries and KCL Group, have also filed for bankruptcy at the same time. The Jack's Donuts of Indiana Commissary bankruptcy filing listed more than 100 creditors it owes $14.2 million in liabilities, against $1.4 million in assets.

A desire for growth may have been the company's downfall. Lee, the grandson to Jack's Donuts founder Jack Marcum Sr., has spent years expanding the company. Lee purchased the chain from his father, Jack Marcum Jr., in 2009, and moved the company away from years of store-baked donuts by opening the commissary distribution center in 2023. Per a statement made on the company's Facebook page, all of the chain's stores are still open and operating. However, the chain's website is no longer functional, and one franchisee-owned store has already changed its name. In short, Lee's direction may not have been what the chain needed to thrive.

11 lawsuits against the Jack's Donuts of Indiana Commissary are listed in the bankruptcy filing, with more than $1 million in judgements against the business. According to WRTV, $769,625 in unpaid invoices are owed to a trucking company, Carter Logistics, that Jack's used to deliver donuts throughout Indiana. A judgment for unpaid invoices for Specialty Fitters, a mechanical piping company that did work on the commissary, is $104,995.80. Multiple investment firms have also filed suit against the company for money owed. Around six liens are on Jack's Donuts of Indiana Commissary's assets, per Restaurant Business.

Jack "Lee" Marcum is also under a cease and desist order from the Indiana Secretary of State's Securities Commissioner for violating the Indiana Uniform Securities Act (IUSA) with three of his businesses. Reportedly, Marcum illegally sold unregistered securities to multiple investors in 2024. In February 2025, Old National Bank filed a lawsuit against Marcum for defaulted business loans. According to WRTV, the bank wants $3.4 million and possible foreclosures on the original New Castle Jack's Donuts location and Marcum's home. The case is pending.

While some companies come bouncing back from bankruptcy, it is uncertain if the future of Jack's Donuts will be as sweet as its distant past. Some franchisee stores are still operating today, but we wouldn't be surprised if more tried to rebrand to avoid being linked to the seemingly sinking parent company.

It can be hard to assess the root cause of a company's bankruptcy until long after the fact. For example, much is now known about what happened to Toys 'R' Us after it filed for bankruptcy, but back when bankruptcy first gripped the chain, customers were just confused. When it comes to smaller chains like Jack's Donuts, financially devastating changes can be the result of one wrong move, a domino effect of bad decisions, or blatant financial mismanagement.

Opening the large production center seems to be the financial wrench in the works, per some of Jack "Lee" Marcum's associates. As Jack's Donuts franchisee Ralph Allen told the Indianapolis Business Journal, it was initially opened to help maintain staff and provide frozen donuts to local grocery stores. However, after franchisees complained about the quality, several stores switched back to baking in-store doughnuts.

WRTV Indianapolis has been tracking the decline of the 64-year-old donut business under Marcum. The negative impact of the commissary hit franchisee sales hard, and many struggled to rebuild, especially locations without a kitchen. Marcum told WRTV he was owed money by franchisees, and blamed inflation, shipping, gas costs, and commissary "innovations" for his troubles. However, in a January 2025 letter signed by 18 owners and addressed to Marcum, he was asked to resign as CEO, and called out for "misappropriation of company funds, financial mismanagement, and the creation of multiple entities for personal financial gain."