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Jamba (NASDAQ:JMBA)

Q2 2011 Earnings Call

August 16, 2011 5:00 pm ET

Executives

Karen Luey - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

James White - Chairman of the Board, Chief Executive Officer and President

Analysts

Scott Van Winkle - Canaccord Genuity

Gregory McKinley - Dougherty & Company LLC

Kurt Frederick - Wedbush Securities Inc.

Conrad Lyon - B. Riley & Co., LLC

Chris Krueger - Northland Securities Inc.

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Jamba Inc. Second Quarter 2011 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, August 17 -- I'm sorry, 16, 2011. I would now like to turn the conference over to Karen Luey, Executive Vice President and Chief Financial Officer. Please go ahead.

Karen Luey

Thank you, operator. Good afternoon. With me on today's call is James D. White, our Chairman, President and CEO. During today's call, I will review our second quarter financial results. James will follow with an update on our 2011 progress against plan and a review of our 2011 guidance. We will then open up the call for questions.

I would like to remind all listeners that this call is being broadcast and recorded live over the Internet at jambajuice.com. The webcast is available on our website, and the replay will be available via telephone until September 6, 2011. This conference call will include forward-looking statements within the meanings of the Securities Law. These forward-looking statements will include statements about the company's strategic priorities and certain statements of our expectations and plans. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements that are contained in the company's filings with the SEC, including the Risk Factors section in our Form 10-K. The company does not assume any obligation to publicly release any revisions to the forward-looking statements discussed during the call.

With that said, I would like to turn it over to James.

James White

Thank you, Karen. Welcome to our second quarter call. The solid start that Jamba experienced in Q1 continued in Q2, which leads us well-positioned to deliver on our expectation of accelerated growth for the year. Q2 had several accomplishments that I'll highlight briefly and cover later in more detail. Importantly, comparable store sales for our company-owned stores increased for the third consecutive quarter by 4.3%, giving us sequential sales gains in 8 of the last 9 quarters. Comparable store sales were also positive for our franchise stores for the fourth consecutive quarter. System-wide, we posted positive comparable store sales of 2.9%.

Our financials are also strengthening. Net income was $3.9 million or $0.05 earnings per share, and our cash balance remained strong for the second quarter at $23.4 million. And we have 0 debt on the books. We delivered positive comps in all four-day parts for the quarter, driven by product innovation in the 2 key day parts, breakfast and evening, expanding Whirl'ns Frozen Yogurt into 100 additional stores in Southern California and our Hot Breakfast Wraps into 270 stores, 270 company stores.

With the refranchising of 174 company stores completed, we are now squarely focused on franchise development. We accelerated our global franchise growth with the recent opening of our sixth Jamba location in South Korea and have plans to expand into the Philippines and Canada later this year.

Domestically, we opened 8 locations, including our first joint venture store with tennis superstar and entrepreneur, Venus Williams. The store is in Maryland, which represents our 25th state.

We also launched Team Up for a Healthy America, a significant social responsibility program focused on the fight against childhood obesity, which reinforces our positioning as the leading healthy lifestyle brand. Venus will also play a role in this effort as a spokesperson.

The strength of our balance sheet has enabled us to continue acceleration of 3 critical initiatives: product and menu innovation; CPG licensing; and our international expansion. I will return to provide additional perspectives on these accomplishments and share more about the key initiatives that will drive our results for the balance of the year. But now I'll ask Karen to take us through the financials.

Karen Luey

Thank you, James. On a GAAP basis, our results for the second quarter of 2011 reflected net income of $3.9 million or $0.05 diluted earnings per share, an increase of 148% compared to $1.6 million or $0.02 diluted earnings per share for the second quarter of 2010. The improvement is primarily related to our third sequential quarter of positive company comparable store sales of 4.3%, an increase in franchise and other revenue, continued efficiencies in cost of sales and a decrease in general and administrative expenses.

As a result of strengthening our business, we also saw a decrease in noncash impairment charges. System-wide comparable store sales were 2.9%, and our franchisee comparable store sales were 1.4%. We remain on track to meet our fiscal 2011 guidance.

We have been very focused on driving more profitable and efficient transactions to our stores. The results of our company comparable store sales for the quarter includes a 600-basis point increase due to average check, related to the price increase taken at the beginning of the quarter, increased attachments and less promotional discounting. Company comps also included an overall 170-basis point decrease in traffic. But excluding the deep discounted traffic driving initiative in the prior year, our traffic would have increased 160 basis points for the second quarter of 2011.

The primary drivers of company comparable store sales improvement included the continued stream of product innovation that started in the first quarter and continued into the second quarter with the introduction of our Fruit & Veggie Smoothies, Coconut Water Refreshers, Hot Breakfast Wraps and Frozen Yogurts. We saw increases in all four-day parts for the first time in over 4 years, including the dinner day four-part, where we are seeing the biggest impact from our Frozen Yogurt platform.

Our attachment rate for a beverage with another item was 22% for the second quarter of 2011, an improvement of 230 basis points from the prior year second quarter. We continue to make significant progress toward our goal of a 30% attachment rate.

Our franchise and other revenue increased by 58.3% to $2.9 million compared to $1.8 million from the same prior year quarter. The increase was attributable to royalties related to the increase in the number of franchised stores, an increase in franchise comparable store sales and also to revenue recognized from our consumer packaged goods licensing agreement.

Our CPG licensing revenue grew to $425,000 from $78,000 a year ago, more than a 5-fold increase. The number of retail doors in which Jamba-branded consumer products are sold increased to approximately 25,000 at the end of the quarter from 10,000 at the end of fiscal 2010.

We continue to see cost and supply pressures on the agriculture side, but have been able to mitigate these by leveraging strong supplier relationships and implementation of cost-saving initiatives.

Overall, total company store incentives, which includes cost of sales, labor, occupancy and store operating, decreased by 180 basis points over the prior year same period. Contributing to the improvement is our decrease in cost of sales and leveraging our fixed occupancy cost.

General and administrative expenses decreased 14.1% to $8 million, and as a percent of revenue, increased to 13.7% compared to 12.6% in the same period of the prior year. The decrease is attributable to the litigation expenses recorded in the prior year that did not recur this year. The rate increase was due to the reduction in company-owned stores as a result of our refranchise initiative.

Our cumulative federal net operating loss at the end of the quarter was $98 million, and we do not expect to be a federal taxpayer this year. Our balance sheet remains strong with $23.4 million in cash, cash equivalents and restricted cash and no debt at the end of the quarter. Our capital expenditures for the quarter were $3 million, related to new company-owned store capital, maintenance capital, revenue-driving initiatives and investments in our information technology platform.

Unlike the prior year, we shifted the capital spend for company-owned stores to the first half of the year in order to ensure that we capture the summer season. We opened 5 company-owned locations in California during the quarter, bringing our year-to-date total to 7. At the end of the quarter, we had 173,389 convertible shares outstanding.

With that said, I'd like to turn the call back to James.

James White

Thanks, Karen. As a reminder, our strategic priorities remain focused on reducing costs and expenses, ensuring a customer first service culture, improving our menu offering across all day parts, accelerating the development of our franchise system and building a robust portfolio of consumer products through our licensing platform.

The headwinds we faced in Q1 from rising commodity prices and other pressures continued in Q2, making ongoing -- making our ongoing focus on managing costs, reducing expenses and improving productivity all the more important. We took a modest retail price increase in Q2 to help offset some of the cost pressures, and we continue our efforts in a broad range of areas to reduce and eliminate all unnecessary costs and expenses that stand in the way of profitable growth.

We continue to leverage our flexible recipe formulas, global sourcing of key commodities and new distribution partnerships to drive supply-chain savings and increase our focus on labor efficiencies and driving productivity gains by leveraging technology. The breadth and intensity of these efforts makes us confident about delivering our profit margin objective.

Our strategic focus on customer first service is making excellent progress. One example is the new customer engagement system that we've added. It provides daily customer feedback that enables us to make immediate improvement that responds to issues and recommendations. This input also provides an early indicator of the acceptance of new menu items and customer satisfaction. Our menu expansion and innovation is focused on breakfast and the evening day parts. Our Breakfast Wraps, which we tested successfully in San Diego, was expended in 270 company stores in late May. Consumer feedback is very positive, and we will continue to expand this product platform.

Our Whirl'ns Frozen Yogurt, which we started testing in the fourth quarter in Sacramento, was rolled out to 100 company stores in Southern California in late May. We supported the yogurt expansion with a humorous marketing campaign called the Great Fro-Yo Sneakout, that is proving very successful. We are pleased with the performance of this platform and have plans to expand into additional stores in California this month.

Our new Fruit & Veggie Smoothies, as well as our Coconut Water Fruit-based Refreshers, are also outperforming expectations. Both are great menu additions that provide consumers with more reason to come to Jamba more often.

Let's move now to store expansion via our franchise system, which allows us to accelerate our growth, increase our brand presence, improve our overall margin and reduce capital requirements. Our ambition for international is significant, but very actionable and on track. We're focused on 10 priority markets where we can open 50 to 100 units in each market. We'll sign a master franchise agreement with a strong local partner who has a successful track record as a premier operator and brand developer.

During Q2, we announced the opening of our fifth Jamba location in South Korea. Our partner in South Korea, SBC, opened their sixth store just shortly after the Q2 closed and has plans to open 4 additional locations before the close of 2011. That represents almost 1 store a month for the balance of the year. The speed of this opening speaks to the growing popularity of Jamba with fans in Korea.

We also expect to open our first stores in the Philippines and Canada by late 2011. The total of these agreements represent 320 stores in the pipeline that will open over the next 10 years. The power of our brand, the quality of our products, the strength of our team and the selection of outstanding partners who know how to deliver superior service experience and drive execution are key factors in the success of our international expansion.

We also continue to expand domestically, with the opening of 3 franchise locations and 5 company-owned stores in our new geographies, with new outlets open in Connecticut and Maryland. Our non-traditional franchise outlets now include over 15 airport locations and transportation hubs, as well as more than 45 campus locations, and we will continue to push into more airports and universities where consumers are looking for convenient, portable, better-for-you options to enjoy on the go.

As I said, we entered our 25th state, Maryland, with the opening of our first joint venture store with tennis superstar and entrepreneur, Venus Williams. We plan to open an additional store with her this year in the Washington D.C., Maryland market, and a total of 5 stores over 2 years.

In addition to being a franchise partner, Venus is also a spokesperson for the Jamba brand. Venus is one of the world's most recognized athletes and an advocate for healthy living. Our relationship brings together what are 2 highly regarded healthy lifestyle brands in a collaborative mission to inspire and provide healthy living to combat childhood obesity and to provide additional job opportunities in the D.C. market area.

Another significant area for Jamba's transformation is our brand expansion through licensed consumer products, which broadens our opportunity to engage consumers beyond the in-store experience. Our efforts and those of our licensees have been nothing short of outstanding. The revenue being currently generated by licensed products is still small but is growing every quarter and over time will become a significant contributor to our earnings.

During the second quarter, Jamba-branded consumer product secured approximately 25,000 points of distribution in a broad range of grocery, natural foods, club, mass and other retail channels across all 50 states. We expect to expand the availability of our existing products into more than 30,000 points of retail distribution by year end.

During the first half, our licensees launched 5 lines of Jamba branded products. They are Zola Superfruit Shots, Johnvince trail mix, Nestlé Energy Drinks, Sundia Fruit Cups, Jamba-branded O.N.E. Coconut Water, our partner for the At-Home Smoothie Kits. Inventure also launched an additional flavor and received excellent visibility for the line with a segment profile on the July 2 Food Network Program, Unwrapped.

The Jamba-branded line with the greatest potential is our Nestlé Energy Drinks, which is performing very well in the $8.5 billion energy drink sector. Nestlé is investing heavily in this product line, which is currently available in the Northeast. And our progress doesn't stop there. We're pursuing agreements with potential new licensees in additional categories and expect more announcements in the coming months. The Jamba brand is strong and strengthening on all fronts.

And finally, I'd like to highlight our most recent marketing and social responsibility initiative, Team Up for Healthy America. This program brings together the WNBA and other partners to support healthy, active living in the fight against childhood obesity. It's a grassroot social media campaign that will engage our nation's youth and provide fun and simple ways to stay active and healthy. We expect over 15 celebrity endorsement, including those who have already signed on like Venus Williams and 10 highly-recognized players from the WNBA for this campaign, such as stars Alana Beard and Tangela Smith. More than 500 schools have committed to join the effort. Our goal is to enroll more than 250,000 people in the program to drive for more active lifestyles and healthier eating habits.

In addition to Venus and the WNBA, key partners include the National Parent Teacher's Association, the National Gardening Association and the California Association for Health, Physical Education, Recreation and Dance, CAHPERD. We believe this campaign will demonstrate the direct connection that consumers and our partners have with Jamba as a healthy lifestyle company. It will also help drive traffic to our stores through promotions and special engagements, and generate even more awareness of the brand as a leading health and wellness brand.

As I said at the outset, we are on track to deliver against our promises for 2011. These include achieving positive comparable store sales of 2% to 4%, operating profit margins of 18% to 20%, opening 50 to 70 locations and maintaining G&A expenses in dollars that are consistent with 2010 levels, excluding litigation charges and onetime expenses.

We are pleased with the first half of 2011, highlighted by our positive comparable store sales, system-wide. Our actions and achievements are facilitating the transformation of Jamba into a leading health and wellness brand. We believe we have established a winning business model and a roadmap that will continue to drive accelerated growth.

Before I conclude, I'd like to welcome our new franchise partners in the U.S. and around the world to the Jamba system. I would also like to thank the Jamba team members and franchise operators across the system for their continuing efforts and commitment to transforming our brand and driving outstanding service to our customers. I will now turn the call back to the operator so we can open up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Scott Van Winkle with Canaccord Genuity.

Scott Van Winkle - Canaccord Genuity

My first question -- there were some comments about traffic being down but up if you adjusted for last year. And I'm just looking at the numbers, traffic was down last year in the second quarter. Can you help me put that out?

James White

Again, the big headline, Scott, is we are far less promotional in this quarter, and I have Karen to walk through the way we think about traffic.

Karen Luey

Yes, Scott, last year, same quarter, second quarter of 2010, we actually ran 3 very deep discounted traffic driving initiative from a couple of logos and a $1 Superfruit Smoothie to put -- to promote our Superfruit initiative. This year, in the second quarter of '11, we actually didn't run any of those during the quarter. We may have run just one buy 2 for $5 promotion. And as a result, once you factor out the deep discounted promotions from last year and look at it on an apples-to-apples basis, our traffic actually improved on an organic basis by about 160 basis points.

Scott Van Winkle - Canaccord Genuity

Perfect. So you've got a measurement for what those incentives did last year to traffic?

Karen Luey

Absolutely.

Scott Van Winkle - Canaccord Genuity

And as we're in July, you're running up against the similar things you did last year with some competitive promotion. Has there been any change in kind of what happened last year, are the trends with competitive promotions out there in advertising?

James White

With about 5 weeks into this quarter, we are actually very confident with what we see, and it will be very consistent with what we're doing for the current quarter just completed.

Scott Van Winkle - Canaccord Genuity

Excellent. And the commentary about aggressively focusing on cost, does that -- does the commodity environment distract you at all from kind of the bigger initiatives you have going on? Or how do you put that into the mix?

James White

So I think the good news for this management team, we started on this journey in the recession, and we haven't come out of that mode. So we think we're well-positioned. It's just a daily part of what we do, and we're working hard to really -- now that we've restored top line momentum, we're trying to drive that down to the bottom line to work. We're focused on it. It's a part of what we do. It has been a part of the BLEND Plan since the first day we initiated it. So no distraction at all. We're very focused on driving profitable growth.

Scott Van Winkle - Canaccord Genuity

And lastly, James, you talked about the energy drink as being probably the biggest opportunity. Is there any additional commentary you can give on that new England test or I should say Northeast test thus far?

James White

It's early days. We're about 90 days into the launch from Nestlé. We talked about it as the biggest opportunity because this is the biggest year category for us, so very promising. We expect over the course of the next few months to be able to come back and discuss what the go-forward plans will be with Nestlé. But we've been very encouraged with the consumer response and the retailer selling today.

Scott Van Winkle - Canaccord Genuity

And if I could just add one more on that. With the spending that, that partner has thrown with that launch in the Northeast, have you seen any impact on your stores? Or is there anything we should think about as that launch moves across the country in the future and affects more of your store base?

James White

I think what we would say, if you look at our consumer goods licensing platform in general there, it is certainly the revenue stream that will come off those businesses. But the marketing spend that all of those partners have put in place, will only benefit the brand. The example would be the Inventure smoothie kit. They were on the Food Network's Unwrapped program. That's just tremendous additional exposure for the brand and really more of that to come as we further penetrate retail outlets outside of Jamba with our CPG platform in total.

Operator

The next question is from the line of Conrad Lyon with B. Riley & Co.

Conrad Lyon - B. Riley & Co., LLC

Question regarding the average weekly sales trend that we've seen over the first 2 quarters here. I noticed that you've got a nice increase, a 13%, 14% range. Can we expect that same type of growth you think in the back half of the year?

James White

I think what we'd say, I mean, we'll hold firm with our outlook for the full year. And we're 5 weeks into this quarter, and we like the trends that we see.

Conrad Lyon - B. Riley & Co., LLC

Okay. Fair enough. Let me talk about average checked in. In the quarter, nice boost, 6%. Any sense how much of that was lifted from not having the same promotional calendar this quarter?

Karen Luey

Yes, Conrad. So the total between attachment and more efficient promotion and discounting was about 340 basis points of the 600.

Conrad Lyon - B. Riley & Co., LLC

Got you. Okay. A different question. Nice trend here. I noticed the closures are slowing down here. Is that also indicative of what we may see going forward? Is that looking pretty good out there in terms of what's happening?

James White

We think so.

Conrad Lyon - B. Riley & Co., LLC

Okay. Macro question. James, you said something about the strong brand and how the brand is strengthening. Have you done studies recently that can quantify that and just show how it is in fact your brand is translating with the consumer?

James White

We have an ongoing set of metrics that we look at in terms of overall brand held. We saw that a 300-basis point improvement in terms of awareness of the brand. The last time we ran that report would have been at the end of Q1, but we're definitely strengthening the end total from a brand perspective across about a dozen different dimensions. But we look at it ongoing.

Operator

The next question is from the line of Chris Krueger with Northland Capital Markets.

Chris Krueger - Northland Securities Inc.

Most of my questions have been answered, but I believe you stated that you're focused on 10 international markets that can each have 50 to 100 units. Is there visibility there? And how confident are you that you may actually announce a couple of those markets this year? Or how far along are you on that do you think?

James White

We hope to -- and you know how these things work. We hope to be able to announce an additional market this year, and we've got plans to close agreements for 2 to 4 units in 2012. But we're very bullish on what we see internationally. I mentioned in the comments, we now have a pipeline of 320 units, and we expect to have 10 of those units open in 2011. And we would expect to double our international units for the foreseeable future. So we're very bullish, we've got a clear pipeline, we've got a team dedicated to opening up those new markets.

Chris Krueger - Northland Securities Inc.

Okay. And then domestically for franchises, has there been any issues with your partners coming up with financing in this environment? The new count is a little bit lower than what I have been modeling in, but I just wonder if you have any thoughts there.

James White

Really no issues that we've seen at this point. But certainly, with some of the things that are happening in the macro environment, there could be a tightening as we saw in the first early part of the recession. So more to come there, but we've seen no signs of a slowdown in the short run.

Chris Krueger - Northland Securities Inc.

Okay. And last, I think I missed it. Did you state what your attachment rate is for food to beverage in the quarter?

Karen Luey

Yes, we did, Chris. The attachment rate was 22%, up about 230 basis points over last year, same quarter.

Operator

The next question is from the line of Kurt Frederick with Wedbush Securities.

Kurt Frederick - Wedbush Securities Inc.

I've got a question on -- I mean, you talked a little bit about the benefit towards -- across the day parts, I think, or sales growth. I'm just wondering if that has kind of made the areas throughout the day a little bit more consistent as far as sales? And then maybe what impact that has as far as staffing levels at the stores?

James White

For us, I'd make a couple of points. Again, we had positive comparable store sales every single day part for the quarter. Just operationally, as we've started to really improve our overall operations, we've done a much better job on how we deploy labor, certainly having more balanced sales mix that are a lot easier. But as a concept, one of the strengths and one of the things that franchise partners are most excited about as they look at Jamba, we've always had pretty equal day parts. You've heard us talk about that evening kind of treat day part being challenging over the course of the last 4 or 5 years. The addition of our Frozen Yogurt offering has allowed us to bolster that day part, and that was the expressed purpose of that launch with the company. So we moved ourselves, we think, into a more virtual cycle with the additions across day parts, and we've also made some significant improvements from an operations and execution perspective.

Kurt Frederick - Wedbush Securities Inc.

Okay, great. And then just on the, I guess, the raw material cost. Cost of sales is a little better than I had expected, and I'm just wondering what you're seeing there in terms of commodity cost in general.

James White

As we talked about earlier, we've done a number of things over time, but I'll start with we've got a dynamite sourcing and supply chain team. If we go back in history, we've taken 400 basis points over the last 4 years out of our COGS line for the company. With us as a management team really starting in this recession mode, we've worked to build flexible formulations and renegotiate contracts and relationships. And that's just a part of what we do, and that's one of the reasons that even as we talked on prior calls, we didn't have a lot of concern on the COGS line for this year.

Karen Luey

And Kurt, what we've said in the past, is that our -- we think that our cost of goods sold will remain pretty much consistent at that 24%, 25% of company-owned revenue.

Operator

[Operator Instructions] Our next question is from the line of Greg McKinley with Dougherty & Company.

Gregory McKinley - Dougherty & Company LLC

I'm wondering if you could start off -- you've had a lot of product introductions at new stores, and I wonder if you could just recap for us what's new and how many locations. I think you said Breakfast Wrap was launched in 270 locations in late May. Frozen Yogurt was launched in 100 California stores in late May. What other product introductions have been made, maybe so I can understand a comparable store basis? What's out there, what hasn't anniversaried, if you will, and what's sort of creating some of those growth opportunities until it anniversaries?

James White

So the big opportunities that we've rolled more broadly into the system this year would include the Frozen Yogurt launch, which we moved from the Sacramento test into 100 Southern California stores. We'll add another 15 or 20 units in Northern California over the balance of this year. So that's yet to come at this point. We also took our Breakfast Wraps out of the San Diego test and rolled that into about 270 company-owned stores. You'll see that expand this fall. So those are probably the 2 most significant tests that we'll roll into the system this current year. We had a number of platforms that we launched though that were more system-wide. So we launched our Fruit & Vegetable Smoothies across the system. You might describe it as an LTO, but that went into the system. That was a significant platform for us. The Coconut Water Refreshers would've been another platform that went into the system. The big point I'd leave you with is our acceleration of our core smoothie innovation, in addition to the expansion of the menu, is probably kind of a one-two punch driving the overall momentum.

Kurt Frederick - Wedbush Securities Inc.

Okay. And then, is the franchise pipeline, that 320 stores, is that sort of your global franchise pipeline? Or is that just the international pacts you've signed?

James White

That's international only.

Gregory McKinley - Dougherty & Company LLC

So could you give us a sense -- maybe just remind me quickly. I know Korea is one market. What are the other major international markets that consist -- constitute that 320?

James White

Yes, so the 3 markets include South Korea. We've got a 10-year agreement with SBC as our partner there for 200 units. Again, we've got 6 units in place today. It will likely move to about 10 units before this year is up. We signed an agreement earlier this year with Max's Group in the Philippines. That agreement is for 40 units, and we expect our first unit to open up late this year, early next year. We also signed an agreement to take the brand to Canada with 80 units, and we would expect to open a unit this year, late next year. And again, for a total of 320 units in the pipeline, and we, again, expect to double our units that are in place really for the foreseeable future.

Gregory McKinley - Dougherty & Company LLC

And the -- Korea was 10-year duration. How long are the contracts with the Philippines and Canadian franchisees?

James White

They are all 10.

Gregory McKinley - Dougherty & Company LLC

Okay. And what's your franchise pipeline look domestically here now that the refranchising transactions are complete?

James White

For us, our market plan, as we look into the immediate future, so call that this current year and through '13, we would expect in the 50- to 70-unit range for that set of 3 years, it will be largely...

Gregory McKinley - Dougherty & Company LLC

Per year, 50 to 70?

James White

Per year. It will be largely franchise. We'll end up opening 8 or 9 company units this year. That will probably be cut in half as we look to the following 2 years, and we'll focus more on development with our current franchise partners as we fill in. We will continue to grow in our nontraditional venues, airports, college campuses and those kinds of venues moving forward.

Gregory McKinley - Dougherty & Company LLC

Okay. And then you talked about your portfolio of licensed products, and I think you did almost $0.5 million of license revenue this quarter. Where do you see that license revenue building? And then I guess it sounds like Nestlé's going to be the biggest level there for you. If you could talk about license revenue view for the remainder of the year and then maybe what your current portfolio of licenses could allow should those plans unfold successfully with Nestlé next year?

James White

Well what we expect to see is for 2011 in $1 million to $1.2 million range. What we said coming into this year is we would show a tripling of our licensing revenue. So we finished 2010 with about 400,000 in our license revenue. We expect to triple that again in 2012 based on what we can see at this point. So we're very pleased with the progress that's driven at this point, largely by us building distribution on the non-existing license relationships. You'll see some of those partners add additional items. You will also see us announce additional partnerships going forward if we compete the portfolio of categories that we think are leverageable for the brand.

Gregory McKinley - Dougherty & Company LLC

And then maybe just one final question. As the company builds out larger franchise network, more license revenue streams, how do you think about sort of the corporate cost structure as you migrate away from -- I mean, you'll still be somewhat a store operator model, but you migrate away from that to a degree and have an emphasis on those other models. Does it create an opportunity for a reduction in corporate costs? Or is it -- will be more in maintenance mode of expense run rate?

James White

Really, what we've said all along is we think we've got the right structure to grow into the growth company that we've been building over the course of last 2.5 years. So I think you'll see us be more a steady state from a G&A perspective. We will always continue to look for opportunities to take out costs, but we think we've got the right structure for the asset-like model that we're building. You'll see the top line start to grow profitably as we accelerate a combination of international CPG and our overall unit growth.

Operator

I would now like to turn the conference back over to Mr. White for any closing remarks.

James White

We look forward to talking to everyone on the next call, and I'd make really 2 final comments. We're very confident with our plans for the balance of the year, and we couldn't be more excited about our future. Thanks again, and we look forward to seeing you in the next call.

Operator

Ladies and gentlemen, this does conclude the conference call. You may now disconnect, and thank you for your participation.

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