Jamba Inc., the owner of the restaurant chain Jamba Juice, is planning on selling nearly 40% of its company owned stores to Vitaligent LLC, a franchisee group that already owns Jamba Juice stores in the St. Louis area. This entails the sale of 100 stores in California, and the value of this sale is estimated at $36 million. Jamba’s CEO, James White, has stated that the majority of the proceeds will go toward purchasing back a sizable amount of Jamba shares. The sale of these stores was advocated by two new board members, Engaged Capital LLC and JCP Investment Management LLC, who are in favor of cutting costs and disposing of underperforming stores in order to do so.
The strategy being undertaken is to go from 70% of Jamba Juice’s being operated by an outside franchisee to 90% by 2016. This strategy is not something that is unprecedented in the restaurant chain industry. Restaurant chain heavyweights McDonald’s, Burger King, and Wendy’s are all moving toward more franchising. The reasoning behind this approach is so these companies can rely more heavily on steady royalties and licensing to generate income rather than remain dependent on volatile revenues from owned and operated locations.