Jamba Juice 2013 Annual Report Download - page 20

TABLE OF CONTENTS
competitors change with each of the four day-parts, ranging from coffee bars and bakery cafés to casual dining chains. Many of our
competitors or potential competitors have substantially greater financial and other resources than we do, which may allow them to react to
changes in the market quicker than we can. In addition, aggressive pricing by our competitors or the entrance of new competitors into our
markets, could reduce our revenue and operating margins.
We are subject to risks associated with climate change and climate change regulation.
Laws and regulations regarding climate change, energy usage and emissions controls may impact the Company directly through higher
cost of goods. The potential impacts of climate change and climate change regulations are highly uncertain at this time, and the Company
cannot anticipate or predict the material adverse effect on our financial condition, results of operations or cash flows as a result of climate
change and climate change regulations.
Our revenue is subject to volatility based on weather and varies by season.
Seasonal factors cause our revenue to fluctuate from quarter to quarter. Because the majority of our revenue results from the sale of
smoothies, our revenue is typically lower during the winter months and the holiday season and during periods of inclement weather (because
fewer people choose cold beverages) and higher during the spring, summer and fall months (for the opposite reason).
Fluctuations in various food and supply costs, particularly fruit and dairy, could adversely affect our operating results.
Supplies and prices of the various products that we use to prepare our offerings can be affected by a variety of factors, such as weather,
seasonal fluctuations, demand, politics and economics in the producing countries. These factors subject us to shortages or interruptions in
product supplies, which could adversely affect our revenue and profits. In addition, the prices of fruit and dairy, which are the main
products in our offerings, can be highly volatile. The quality of fruit we seek tends to trade on a negotiated basis, depending on supply and
demand at the time of the purchase. An increase in pricing of any fruit that we use in our products could have a significant adverse effect on
our profitability. In addition, higher diesel and gasoline prices may affect our supply or transportation costs and may affect our profitability.
Although we attempt to mitigate the risks of volatile commodity prices and allow greater predictability in pricing by entering 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. Declines in sales may also adversely affect our business to the extent we have long-term purchase commitments in excess of our
needs.
We are dependent upon a limited number of distributors for a significant amount of our food distribution for our Stores.
For Company Stores, we maintain food distribution contracts primarily with one distributor, Systems Services of America (“SSA”),
and a majority of Franchise Stores are serviced by The SYGMA Network, Inc. (“SYGMA”). Although we believe our relationships with
these distributors will result in increased operation efficiencies and cost savings, we cannot assure you that we will be successful or that we
will not have to pay substantially more for distributor services in the event SSA or SYGMA have operational problems. Should either
distributor have operational problems, our operations could be adversely affected.
We may face difficulties entering into new or modified arrangements with existing or new suppliers or new service providers.
If we expand our operations into new geographic areas through new Company Stores, Franchise Stores and/or the JambaGO platform, or
introduce new products with special manufacture, storage or distribution requirements, we may have to seek new suppliers and service
providers or enter into new arrangements with existing ones. We may also encounter difficulties or be unable to negotiate pricing or other
terms as favorable as those we currently enjoy, which could harm our business and operating results. For example, the potential growth in
smaller format stores may cause the frequency of shipments to increase and the average number of cases per shipment to decrease, thereby
increasing the Company’s per case shipment costs.
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