Jamba Inc (JMBA), which currently operates more than 752 stores, recently announced the opening of its first franchised store in Massachusetts with a new franchisee Corey Peterson, who boasts an experience of 17 years in the restaurant business. To further boost its presence in the state, the company plans to open an additional 3 stores with Peterson.
The Emeryville, California-based company stated that the new store has been opened on the second floor of the Northshore Mall in Peabody. The Northshore Mall is one of the largest shopping malls in New England and offers a full range of retail, restaurant and entertainment for its shoppers. This new store is expected to benefit immensely from its strategic positioning. The shopping center attracts visitors from all the nearby locations.
The menu offers a variety of baked goods and snacks, apart from its specialty better-for-you beverage and food offerings. Jamba’s peers like Starbucks Corporation (SBUX) and McDonald’s Corporation (MCD) also have a presence in the mall.
On the same day, Jamba also announced the opening of its first franchise outlet in West Valley City, Utah, which marks the eleventh Jamba store in the state. The new store has come up with Blended Star, LLC, the largest Jamba Juice franchise operator in Utah. The opening of the new store is a part of the agreement of refranchising 10 Jamba Juice stores by Blended Star, LLC. The franchisor inked the deal with the company in 2010.
We believe that the new store openings are in line with the company’s expansion strategy through franchising. We believe Jamba’s transition to a more franchise-centric model will require less capital and stabilize cash flow generation. Jamba Juice expects to add up to 50 to 70 new domestic traditional and non-traditional franchise locations in 2011.
We are impressed with Jamba’s slow-but-steady turnaround. Apart from the domestic market, Jamba is also in an expansion mode overseas. Jamba currently has a presence in Korea, Philippines and Canada. Among these, the Jamba brand has been well received in Korea, thus encouraging Jamba’s Korean partner to open more stores. Jamba anticipates retail distribution to grow from 25,000 to more than 30,000 by the end of this year.
For fiscal 2011, management expects comparable store sales in the range of 2% to 4% and operating margin between 18% and 20%. Jamba currently retains a Zacks #3 Rank (short-term 'Hold' rating). We are also maintaining our long-term Neutral recommendation on the stock.
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