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The Every Franchise Directory ranks very highly in Google for words relating to smoothie franchises and we get a lot of inquiries everyday. It has a lot of appeal as a business to get into too.
The smoothie business is hot. It’s grown to a $2 billion business, and it’s only going to get bigger, as consumers continue to eat healthier.
The perfect way to play this is not McDonald’s (NYSE: MCD), but rather a smaller, more nimble competitor, Jamba Juice (NASDAQ: JMBA).
Jamba was in a world of hurt when James White took over as CEO back in 2008. All of the stores were owned by the company, it was only in a few markets, and all it did was sell smoothies, not much else.
Since becoming CEO, White has launched an initiative to make the majority of the stores franchises instead of company owned, launched breakfast food (oatmeal, coffee), put its products in stores and schools across the country.
Just this morning, the company announced that 13 stores in Florida would become franchises, as it seeks to have 80% of its stores as franchises. Last month the company announced 4 stores in New Jersey (desperately needed in my opinion), to capture more of the market share for the consumer dollar.
Growth is accelerating at Jamba, as the company agreed to develop up to 200 stores in South Korea. The first store in Korea is set to open later this year. The company also expects to close another international deal before the year is over.
The company has been performing significantly better financially lately, as it continues to move towards the franchise model.
In the second quarter the company earned 2 cents a share, below Wall Street estimates and the stock was hit after the company reported. That’s because Wall Street doesn’t understand this story. You need to look at the franchise results and not the results as a whole, as it transforms its business.
During the quarter, franchise & other revenues jumped 20.3% to $1.8 million, aided by the increase in royalties related to the increase in the number of franchise stores. California, which is where a majority of the stores are located in the U.S., experienced its coldest summer in some time, and this is not expected to continue in future years. Once California begins its normal summers, consumers will want to buy more smoothies to combat the heat.
The balance sheet of the company is rock solid, with $34.3 million in cash, and no debt as of the end of the second quarter.
Investors would certainly be wise to take a look at Jamba to juice up their portfolios.