How Kirk Perron started Jamba Juice

How Kirk Perron started Jamba Juice

How Kirk Perron started Jamba Juice

How Kirk Perron started Jamba Juice

How Kirk Perron started Jamba Juice – As 1990 dawned, Kirk Perron was a health-conscious 26-year-old with an idea: he thought fruit-filled smoothie drinks could have popular appeal.

The scrappy California native, who’d only made it through a two-year junior college, had no idea just how popular his new company—first known as Juice Club and later as Jamba Juice—would become. Today it’s the largest smoothie chain in the US, with more than 700 stores and over $260 million in annual sales.

How did a young entrepreneur and three of his friends in the small Northern California town of San Luis Obispo come out on top in the smoothie wars, despite scant retail or restaurant experience? It took hard work, networking, a well-timed flat tire, and a fortuitous visit to put Jamba Juice on its way to success.

 Portrait of a young entrepreneur

In his 20s, Kirk had become a health and fitness buff, into gym workouts and long bike rides. After exercising, Kirk sometimes cooled off with a smoothie at one of the local stands. At the time, the few smoothie shops in the area were mostly shacks on the beach or hole-in-the-wall places.

Kevin recalls the shops of that era as “strictly geared for the granola people.” In other words, they appealed to only a small segment of the population.

Ever on the hunt for his next business idea, Kirk began to think about the potential for introducing smoothies to mainstream consumers. It was 1990, and the low-fat health craze was just taking hold. Smoothies were a low-fat product. Kirk reasoned that if smoothies were sold in a clean, well-designed, friendly, well-located store, they could attract a broader audience.

There was a growing smoothie chain in the south—Smoothie King had started in 1973—but no established chain on the West Coast. No one had created a systematized business around smoothies, with appealing stores and consistently tasty products.

Drinking a smoothie one day, “something inside me clicked,” Kirk recalls in his co-authored book Jamba Juice Power. “I realized then and there that freshly made smoothies and juices were the ticket. You can enjoy smoothies on the run, they taste fantastic, they don’t cost a lot, and their health benefits are undeniable.”

Opening the first store

After driving the California coast to check out existing smoothie stores for ideas, Kirk was ready to open his own store under the name Juice Club.

He bought a few industrial-grade blenders and started experimenting with smoothie recipes. For his founding employee in the smoothie business, Kirk looked no farther than his longtime romantic partner, Kevin, then 24, who was studying business at California Polytechnic State University at San Luis Obispo.

For the first location, the duo focused on the neighborhood around the Cal-Poly campus, figuring it would give the store good traffic from college students and faculty. There was only one snag: the pair had to find a landlord willing to rent them a retail storefront. Few shopping-center owners were enthusiastic about taking a chance on a couple of young kids with no retail experience.

After months of pitching their plan to landlords without success, Kirk caught a break. An old family friend knew the landlord of one small shopping center near campus, Ferrini Square.

The owner put them through their paces. How many customers did they anticipate? How much sales did they expect to do in the first year?

Kirk said his goal was to do $2,000 a day at the store. The landlord was convinced, and the pair signed a lease for a small store. After fitting in the refrigerators and freezers needed to store the smoothie ingredients, Kevin recalls there was less than 800 square feet of retail space left.

Next, Kirk cobbled together the money needed to build the first store, using his own cash flow from the triplex, as well as loans from friends and family. Construction was originally estimated at $170,000, but ran over and neared $200,000.

Now that the store was taking shape, Juice Club needed someone who knew the smoothie business. For an operations manager and second founding employee, Kirk picked another aspiring young entrepreneur he’d met in the checkout line at Safeway: Joe Vergara, who was managing a local smoothie shop for a small chain.

In creating the first store, Kirk and Kevin had a chance to indulge a personal passion for design and architecture. Every detail was belaboured —the curve of the counter, the shade of white for the walls, the way wheatgrass was displayed in the case, the stain color on the wood floors.

The effort paid off immediately, Kevin says. “People were invigorated as much by stepping into the space as by drinking the smoothies,” he says. “People started asking from the very beginning, ‘Wow—is this a chain?’”

Cruel summer

Juice Club opened on April 7, 1990. From the start, the store had a dozen employees, Kevin recalled, as the shop’s hours were long (7 a.m. to 11 p.m.). Kirk would often open the doors in the morning, while Joe would take the day shift and Kevin would arrive after classes at Cal-Poly to work and then close up. Business grew gradually but steadily, and within 60 days the employee count was closer to 30.

“Team members in the early days, their job description was very simple—do whatever it takes to make the customer’s experience the best.”

With essentially no initial marketing budget, Juice Club relied on word of mouth. Kevin noticed a trend: women would come in, have a smoothie, and then return with their boyfriends. From the beginning, Juice Club smoothies had sexy names such as Hawaiian Lust, Boysenberry Bliss and Pacific Passion, so there was a romantic angle to coming into Juice Club that worked to draw more customers.

This approach was paying off in a growing audience of enthusiastic, repeat customers. It seemed an auspicious time to open an eatery that sold cold drinks, as a hot California summer lay just ahead. Kirk was certain business would boom. But when June rolled around, the green Juice Club team got a nasty surprise.

Despite the financial stress, the team tried hard to maintain the upbeat, friendly atmosphere Kirk sensed was essential to setting Juice Club apart from other smoothie stores. The few customers that did come in were met by smiling, attentive staff and never guessed the company was experiencing a cliffhanger of a summer.

“We were both biting our nails a bit, Kirk especially,” says Kevin. “But I’ll never forget how keeping our game face on encouraged customers to keep coming back.”

The home office

In September, school resumed, the weather was still warm, and word spread quickly about Juice Club. “Sales just exploded,” Kevin recalls.

From their initial goal of doing $2,000 a day of business, Juice Club now often brought in five times that figure. At the end of the first year, sales were roughly $600,000, Kevin recalls, and the store turned a profit.

Within two years, the annual figure would hit $1 million at the original store.

It was decided the best way to grow Juice Club was through franchising. Kirk pinned up a large US map at home and put the first pin in San Luis Obispo. It took until 1992 to get all of the franchise paperwork squared away, and then the founders started visiting franchise trade shows to pitch their concept to prospective franchise buyers.

To help drive their franchising effort, the trio brought on a fourth founding employee—another local resident and Cal-Poly acquaintance of Kevin’s, Linda Ozawa-Olds, who had just completed an MBA at the school. The house’s kitchen became her office while Kevin, who’d enjoyed his business-writing classes at Cal-Poly, wrote the four-inch-thick franchise operations manual in a spare bedroom.

By 1994, meetings with prospective franchisees were increasing and Kirk wanted a more professional-looking office. Juice Club took over an empty storefront next door to the store, outfitting it with wood floors and crown moldings. As word spread that Juice Club was franchising, topcaliber prospects began to visit the new office—a carload of Pepsi executives at one point, and even a member of the royal family of Bahrain, Kevin recalls.

That same year, Scott and Celia Denig got a flat tire in San Luis Obispo, and wandered into Juice Club while they waited for a tire change at a nearby repair shop. The young couple ended up staying in town overnight to investigate the concept further, and opened the third store in Palo Alto, California, in 1994.

Venture capitalists come knocking

The accidental visitor to the Palo Alto Juice Club store would prove to have an even greater impact on Juice Club’s future. The wife of Technology Venture Investors general partner Bob Kagle came in for a smoothie and then, like so many women before her, came back with her husband. Kagle saw lines out the door and enthusiastic customers, and thought he had found the next Starbucks—an analogy that came readily to mind, as Kagle was also a Starbucks investor.

Franchisees continued to sign up, and Juice Club had commitments for a total of 20 stores when Kagle led a $3 million investment round in Juice Club in late 1994. Also participating: Starbucks founder Howard Schultz.

As they got to know the business, the new investors saw two troubling problems. One lay in the business model—because Juice Club was cash poor, it couldn’t provide franchisees with location build-outs or purchase the land under their stores, as many franchise chains do.

Schultz wanted Juice Club to follow the same model as his company and own its stores. The funding round was delivered on the promise that Juice Club would stop franchising and use the money to build its own stores.

 A new name

The other problem was the name. Schultz and other board members impressed upon the team that “Juice Club” was too generic and didn’t successfully convey all the qualities of the brand—health, fitness, fun, great service. Most importantly, it included no words that could be trademarked to help protect the brand’s identity from imitators. This was a problem the founders were well aware of, as they’d seen copycat smoothie bars popping up near their stores named Juice Bistro, Juice Bar, and more.

They brainstormed. They went to the Cal-Poly library and looked through books, including dictionaries in other languages. Finally, they went out for fish and chips together and came to the Swahili word “jama”, which means “to celebrate.” This evolved into “jamba.” To go with the new name, they chose the now-familiar swirl, which represents a smoothie being mixed in the blender. 

Later Years

Jamba grew quickly to over 730 units by 2008 and nearly $334 million in sales. But there was trouble brewing: Jamba racked up losses each year, hitting a high of nearly $150 million in 2008, just in time to confront a major economic recession.

The company’s policy of owning most of its stores had come back to bite it, causing revenue to plummet, along with the company’s stock price. A re franchising initiative found franchise buyers for more than 140 company stores, which generated franchise fees and cut the number of company-owned units. Revenue fell to $255 million in 2010, but losses also fell, shrinking to under $21 million.

Turnaround efforts have focused on repositioning Jamba as a health and fitness brand with food for all three meals of the day. Hot beverages were introduced in stores for the cold months to shore up winter revenue. White also cut deals to license the Jamba name to grocery-goods makers to bring Jamba products, including smoothie mixes and fruit chips, to grocery shelves.

By year-end 2010, comparable-store sales had stabilized. The company returned to profitability in mid-2011.

One bright spot in Jamba’s recent struggles is that one founding employee returned to the fold. In 2009, Linda returned and, with her husband, bought and still operates nine Jamba franchise stores in California, including the original store.

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