Jamba Juice 2007 Annual Report Download - page 92

Table of Contents
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on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the
requisite service periods in Jamba Juice Company’s consolidated statements of income. For further discussion, see Note 11.
Segment Reporting—SFAS No. 131  requires financial information for
each segment that is individually managed with separate operating results that are reviewed regularly by the chief operating decision makers. Jamba Juice
Company has one reportable retail segment.
Reclassifications—Certain prior-year amounts were reclassified to conform to current-year presentation. Items previously classified as cost of sales and
related occupancy, store operating and other operating expenses were reclassified to separately present cost of sales, labor, occupancy, and store operating as
their own independent line items. Jamba Juice Company also aggregated on the statements of income franchise support expenses, losses on disposals, asset
impairment and store closures, jambacard and gift certificate breakage income, litigation settlement expense, and sales tax audit expense into a single line item,
other operating expense.
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Jamba Juice Company, has entered into multi-unit license agreements with area developers to develop stores in certain geographic regions. Under typical
multi-unit license agreements, the area developer generally pays 1/2 of the initial non-refundable fee multiplied by each store to be developed as a non-refundable
development fee upon execution of the multi-unit license agreement. Each time a store is opened under the multi-unit license agreement, the franchisee is
required to pay the remaining 1/2 of the initial fee. As of November 28, 2006, there are 121 stores operating under the four current and three expired or
terminated multi-unit license agreements. In addition, as of November 28, 2006, there are 11 stores operating with Whole Foods Market in which employees of
Whole Foods Market are operating the stores. As of November 28, 2006, three of the four current multi-area developers have contractual commitments to open,
cumulatively, 24 new franchise stores.
Jamba Juice Company generally executes franchise agreements for each store which set out the terms of its arrangement with the franchisee. The
franchise agreements typically require the franchisee to pay an initial, non-refundable fee and continuing fees based upon a percentage of sales. Subject to
Jamba Juice Company’s approval and their payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration.
Deferred franchise revenue as of November 28, 2006, June 30, 2006 and 2005, includes $441,000, $432,250, and $478,500, respectively, relating to
non-refundable development fees paid by two current and one former area developer, as well as initial fees paid by franchisees whose stores have not yet
opened.
Franchise revenue consists of fees from our franchisees. Jamba Juice Company recognizes initial fees received from a franchisee as revenue when it has
performed substantially all initial services required by the franchise agreement, which is generally upon the opening of a store. Jamba Juice Company
recognizes continuing fees based upon a percentage of franchisee revenues as earned. Jamba Juice Company recognizes renewal fees when a renewal agreement
with a franchisee becomes effective. Jamba Juice Company is not required to contribute capital as part of multi-unit license agreements or franchise agreements.
Jamba Juice Company incurs expenses that benefit both its franchisees and our Jamba Juice Company-owned stores. These expenses, along with other
costs of servicing of franchise agreements, are charged to general
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