Jamba Store Comps Down; States Halt Franchise Sales
As store comps continued their southerly trend, Jamba Inc. (NASDAQ:JMBA) filed its 10-Q reports for the first three quarters of 2017 late — on Thursday, March 15, 2018. Having likewise failed to file its franchise disclosure documents before the deadline, the company has lost its ability to sell franchises in Minnesota and Wisconsin.
Jamba no longer permitted to sell franchises in Minnesota and Wisconsin
Jamba Inc. (NASDAQ:JMBA) failed to register its annual franchise disclosure document in Minnesota to meet state law, so the commissioner of the state’s Department of Commerce informed the company on June 30, 2017, that it can no longer sell franchises in the state. Jamba’s franchising registration there has been canceled.
In January 2017, California exempted Jamba Juice Inc. from registration of its franchising disclosures. There is no exemption from disclosure filed yet for 2018.
However, in Wisconsin Jamba's registration also has expired.
Is a franchisor losing its state license to sell franchises important information for would-be franchise buyers, no matter what state they are in?
“Losing registration in multiple states is a giant red flag that no franchise buyer can ignore,” warns veteran attorney Carmen Caruso to franchise buyers who may have been thinking of buying a Jamba Juice shop. It is a sign that something fundamental is wrong. Caruso has a Chicago-based law firm that deals with franchise and dealership litigations throughout the country.
Revenue down for asset-light franchisor, but EBITDA up
As Jamba Inc. (NASDAQ:JMBA) exits the business of running juice stores to an asset-light model where it manages other people’s franchised stores, it has been losing revenue. Its total revenue declined $6.1 million to $56.3 million in the three quarters of 2017 that ended October 3, according to unaudited reports that it released yesterday, March 15.
Jamba’s executive vice president and chief financial officer Marie Perry stated, “We expect 2017 to be a year of strong profit growth. The transition to an asset-light model, along with a strategic refocusing on the core retail business, will cause revenue to decline in a predictable fashion. On this reduced revenue base, however, we expect significant improvements in profitability. Specifically, we anticipate an improvement of approximately $3.5 million in adjusted EBITDA in fiscal 2017 as compared to fiscal 2016.”
Jamba had a net loss of only $1.8 million for the first three quarters of 2017 compared to a $7.3 million loss for the same period the year before.
The president and chief executive officer of Jamba, Dave Pace, noted that the company is catching up on its quarterly reports to “a standard reporting cadence.”
Jamba anticipated that same-restaurant sales would fall slightly for the entire year by 0.4 percent. That figure is slightly below the flat to slightly positive comparable sales that the company had projected earlier. Same-restaurant sales for the three quarters fell 1.9 percent versus the same period in 2016.
The company’s CEO emphasized that it had hired experienced additions to the leadership team, exited underperforming business units to improve profitability, and launched innovative new products. “Jamba is an iconic brand,” said Pace. “We have positioned it for sustainable growth and significant value creation for our shareholders and are optimistic about our performance in 2018.”
Jamba stated it had 743 domestic franchised stores and 52 company-owned locations in the United States as of October 3, 2017.