Weighing Jamba, Inc. (JMBA)’s Potential

Poor Man’s Growth

Cash-strapped, Jamba Juice is looking to grow without breaking the bank. Management has placed a renewed focus on the franchising model and plans to drastically increase the number of franchised locations. The company can’t sustain growth rates with only company-owned store growth, mainly because the company can’t afford the capital expenditures necessary. Dunkin Brands Group Inc (NASDAQ:DNKN), almost a 100% franchised company, has proven that the franchise model can be very profitable and cost efficient. Jamba, Inc. (NASDAQ:JMBA) is set to take in 5%-6% of franchisee revenues, which could added up quickly following an expansion. The company also plans to drastically expand the number of JambaGo locations.

This year alone, the company plans to add 1,000 of these new low-cost locations. Roughly 80% of the JambaGo locations are in schools throughout the country, which will provide Jamba, Inc. (NASDAQ:JMBA) a consistent flow of traffic to these locations. Similar to the razor/blade business model, JambaGo will provide the company with sustained, low cost revenues.

Risks

• Low amounts of cash on hand, which may hinder growth
• Cold climates may create difficult seasonality should the company expand to the east
• Future domestic and international markets may already be saturated with Starbucks and Dunkin’ Donuts
• Both Starbucks and Dunkin’ Donuts are entering Jamba’s core juice business
• Menu offerings may prove unsuccessful