Jamba Juice 2008 Annual Report Download - page 46

Table of Contents
Jambacards have been sold since November 2002, the cards have no expiration date and are reloadable. Jambacard breakage income is recognized when
the Company determines the likelihood of a jambacard being redeemed by a customer is remote based on an analysis of redemption data and redemption
patterns. The Company collected monthly redemption data, analyzed the redemption pattern since the introduction of the jambacard program in November of
2002 and determined that after three years of inactivity, the redemptions of jambacards are deemed to be remote. In determining the amount of the liability to
relieve, in addition to the redemption analysis, Jamba Juice Company performed an analysis of Jamba Juice Company’s requirement to remit unclaimed
property or escheat in the states where Jamba Juice Company does business. Based on a review of the application of various state unclaimed property laws and
jambacard sales by state, Jamba Juice Company estimated its escheat requirement and determined the appropriate liability for both estimated future
redemptions and escheat requirements. The balance of the jambacard liability as of November 28, 2006 was $17.7 million.
Interest expense for the 22 Week Period was $0.4 million. This was a function of interest rates and borrowings on the credit line during the period with
an average loan amount of $5.4 million.
Income tax expense for the 22 Week Period was $2.6 million. This was a function of income before income taxes of $4.8 million and an effective tax rate
of 53.6% during the 22 Week Period.
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For JJC fiscal 2006, revenue from Company Stores and fees from franchised locations represented 96.3% and 3.7% of total revenue, respectively.
Revenue is primarily from smoothie and juice sales and, for JJC fiscal 2006, increased $44.0 million or 21.0% to $253.0 million from $209.0 million in JJC
fiscal 2005. This increase was driven primarily by a $34.2 million increase from new Company Store revenue which resulted from net unit growth of 41
stores for JJC fiscal 2006. Also contributing to the increase in revenue was a $7.4 million, or 3.7%, increase in comparable store revenue for Company Stores
and a $2.3 million, or 33.8%, increase from franchise revenue and fees from JJC fiscal 2005.
Franchise and other revenue increased 33.8% to $9.3 million in JJC fiscal 2006 from $7.0 million in JJC fiscal 2005. This $2.3 million increase
resulted primarily from an increase in franchise support revenue of $2.1 million related to fees that Jamba Juice Company received for franchise employee
support provided in the period. This is a reimbursement for employment services that Jamba Juice Company provides for a Midwest franchisee and a joint
venture in Florida, known as JJC Florida LLC. This increase in fees is primarily attributable to entering into a management agreement with JJC Florida LLC
in June 2005. Also contributing to the increase were franchise royalties which increased by $0.6 million, or 11.7%, as a result of net unit growth of 15 stores
to end at 217 stores as of June 27, 2006, up from 202 stores as of June 28, 2005, and a 5.4% increase in comparable franchise store revenue for the period.
Under the terms of a management agreement with its Midwest franchisee, Jamba Juice Company employed and managed the eight stores in the
Minneapolis market and was reimbursed for its actual costs plus an administrative fee. In addition, on June 28, 2005, Jamba Juice Company entered into an
agreement with JJC Florida LLC to employ and manage the 13 stores in Florida. Jamba Juice Company entered into these arrangements in order to ensure that
customers were provided with a consistent brand and user experience across markets.
During JJC fiscal 2006, Jamba Juice Company recognized $0.3 million of other franchise revenue from Whole Foods Market. The development
agreement between Jamba Juice Company and Whole Foods Market expired by its own terms on January 1, 2005. As of January 1, 2005, there were twenty-
four Jamba Juice stores operated by Whole Foods Market within their grocery stores. Each such store was subject to its own license agreement that provided,
among other things, a 10-year term and permitted Whole Foods Market to terminate the license early if the store was not profitable. In addition, as of that date,
Jamba Juice Company itself operated four
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