Jamba Juice 2008 Annual Report Download - page 17

Table of Contents
along increased fruit and dairy costs, our margin will decrease and our profitability will suffer accordingly. In addition, higher diesel and gasoline prices may
affect our supply costs, near-term construction costs for our new stores and may affect our revenue going forward. For example, in some cases higher diesel
prices have resulted in the imposition of surcharges on the delivery of commodities to its distributors, which they have generally passed on to us to the extent
permitted under our arrangements with them. To help mitigate the risks of volatile commodity prices and to allow greater predictability in pricing, we typically
enter into fixed price or to-be-fixed priced purchase commitments for a portion of our fruit and dairy requirements. We cannot assure you that these activities
will be successful or that they will not result in our paying substantially more for our fruit supply than would have been required absent such activities. We
do have some multi-year pricing agreements with certain vendors. Many communities have also recently banned polystyrene take out food packaging. The
Company is actively working with its vendors to develop a less costly cup that satisfies energy, emissions and waste management concerns, but there is no
guarantee that the Company will be successful in its efforts.

We maintain food distribution contracts primarily with one supplier. This supplier, Southwest Traders, Inc., provided 81%, 82%, 85% and 87% of
cost of sales for our fiscal 2007 and 2006 and Jamba Juice Company’s fiscal 2006 and 2005, respectively, which potentially subjects us to a concentration of
business risk. If this supplier had operational problems, our operations could be adversely affected.


Food service businesses can be adversely affected by litigation and complaints from customers or government authorities resulting from food quality,
allergens, illness, injury or other health concerns or operating issues stemming from one retail location or a limited number of retail locations. Adverse
publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our products.
We could also incur significant liabilities, if a lawsuit or claim results in a decision against us, or litigation costs, regardless of the result.

Labor is a primary component in the cost of operating our business. We devote significant resources to recruiting and training our team members. A
considerable number of the team members employed by us and our franchisees are paid at rates related to the federal minimum wage. In 2007, the federal
minimum wage increased from $5.15 to $5.85 and it will increase again in 2008 to $6.55 and in 2009 to $7.25. Additionally, many of our team members
work in stores located in states where the minimum wage is greater than the federal minimum and receive compensation equal to the state’s minimum wage.
During 2007, we had state minimum wage increases in California, Oregon, New York, Arizona, Washington, Colorado, Illinois and Florida all above the
federal minimum wage. In addition, San Francisco itself has a minimum wage requirement greater than the State of California. These minimum wage
increases and any further increases in the federal minimum wage or the enactment of additional state or local minimum wage increases will increase labor
costs. If we are unable or unwilling to increase our menu prices or take other actions to offset increased operating costs, our operating results will suffer.
Additionally, competition and labor shortages in various markets could result in higher required wage rates.



We consider food safety a top priority and dedicate substantial resources towards ensuring that our customers enjoy high-quality, safe and wholesome
products. However, we cannot guarantee that our internal
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