Following the footsteps of most of the industry behemoths,
) recently unveiled a brand-new store format and design
initiative. The latest arrangement will be implemented across the
board to transform store layout and blueprint.
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The new format will include limited menu Smoothie Stations,
drive-thru's and juice bar concepts at Jamba stores. Along with
the new concept stores and formats, Jamba's older outlets will
also be remodeled over the next four years. The leading juice
brand seeks to refresh 75 to 100 stores in 2013.
Jamba had introduced limited menu, smaller format Smoothie
Stations, and the expanded juice bar concept in California in
2012. Jamba has always remained focused on expansion and expects
accelerated growth in both existing core markets as well as new
For 2013, Jamba plans to open 60-80 new stores globally as well
as open up to 1,000 JambaGO locations and 100 limited menu
Smoothie Stations. Among them, significant expansion
projects are in the offing in California and New York.
Of late, restaurant companies are responding in a variety of ways
to address the issue of heightened competition in a somewhat
over-supplied domestic market. They began remodeling restaurants
to lift guest satisfaction as well as rolling out new and smaller
prototypes to reduce construction and occupancy costs and enhance
return on capital.
The Wendy's Company
Darden Restaurants Inc.
) are continuously benefiting from the unit-refurbishment
strategy. Wendy's benefited substantially from the re-imaging
program undertaken in 2011 with an average sales increase of 25%.
McDonald's had expected a comp lift of 5-6% in 2012 from a
re-imaging program that cost roughly $600,000.
Remodeling has also gained momentum for Darden in the last couple
of quarters across three of its concepts Red Lobster, LongHorn
and Olive Garden. Among them, Red Lobster remodeled 148 units in
fiscal 2012. After renovation, newer Red Lobster units kept
generating same-restaurant sales growth of 5-6% and yielding
higher return than cost of capital. LongHorn already completed
its remodeling in the Ranch House image during the second quarter
of fiscal 2012. Olive Garden is also undergoing extensive
After the overhaul, both new as well as refreshed stores of Jamba
will sport a contemporary look featuring an open layout from
restaurant through the kitchen, brighter lighting and colors,
updated graphics and options for a variety of lounge areas. The
new units will also use more environmentally friendly building
Renovation work, however, hurts revenue in the near term when
construction is on. We believe Jamba's free cash flow and
earnings before interest, taxes, depreciation and amortization
generation will likely be lower in the coming four years owing to
the adoption of the massive remodeling program. But after the
overhaul work, existing properties pay off more.
Jamba currently carries a Zacks Rank #5 (Strong Sell). Our
long-term recommendation for the stock remains Underperform.