Jamba to Expedite Refranchising

The listing of Jamba (JMBA - Snapshot Report) in the Franchise Registry of U.S. Small Business Administration (SBA) on Thursday, June 25 provides a boost to the company's refranchise plans. The registration under the SBA will allow a faster approval of loans for the franchisees.

The Franchise Registry list names of systems whose franchisees enjoy the benefits of a streamlined review process for SBA financing. Loan applications on the Franchise Registry can be examined and processed more diligently and promptly by the SBA and lenders since the respective franchise agreements do not need to be evaluated in each individual case.

On May 28, 2009, the company announced the plans to refranchise up to 150 company-owned stores, primarily outside of California. During 1Q09, Jamba sold its 10 company stores in Arizona to an existing franchisee.

The additional cash generated from the sale of company-owned stores to franchisees will be utilized to pay down existing debt and to fund future viable growth opportunities.

The company also has plans to add up to 50 new franchise locations by the end of 2009, primarily in non-traditional venues such as airports and schools.  Management believes that there is still enough potential in U.S. markets to support another 2,700 stores.

Jamba is transitioning to a more franchise-centric model. Currently 68% of Jamba's units are company-owned. Jamba is no longer opening any new company stores.

No new company-owned stores were opened in 1Q09 compared to 17 new company-owned stores in 1Q08. New unit expansion consists primarily of franchising, which should reduce Jamba's capital employed and stabilize cashflow generation. We maintain our Hold rating on the stock.