Source: Jamba.

Jamba (NASDAQ: JMBA) is playing nice with activists, and Wall Street's liking it for now. Shares of the 862-store smoothie chain moved sharply higher on Tuesday after naming a pair of activist investors to its board and concluding a well-received conference presentation. 

Appointing JCP Investment Management's James Pappas and Engaged Capital's Glenn Welling will silence the potential proxy battle that loomed at Jamba. Pappas -- despite owning just a 2.3% stake in the chain -- was proposing six new board members to shake up the meandering chain last month. The move followed Engaged Capital taking an 8.2% position earlier in the year, also vowing to push for changes. 

You can't blame the activists. Jamba is the killer brand in its niche, but that hasn't translated into blowout financial performance. The stock may have moved nicely higher for three consecutive years, but it only seems to be scratching the surface.

Jamba posted several years of annual deficits before squeezing out a small profit in 2013. It's hoping that handing over company-owned locations to franchisees and cutting costs will help improve profitability in the future.

Presenting at the ICR XChange Conference on Tuesday morning, Jamba fleshed out its refranchising initiatives. It plans to go from a store base that is presently 70% franchisee operated to 80% by the end of this year, ultimately achieving a run rate of better than 90% by the end of next year.

Jamba's targets for 2015 are encouraging.

  • It sees its remaining company-owned stores growing comps this year at a 3%-5% clip, up from an earlier forecast of just 2%-4% in comps growth.
  • Jamba hopes to generate an operating profit of 4%-6%, up from an early goal of 2%-3%.
  • The plan for 2015 is to refranchise as many as 114 stores and open 100-125 new global locations.

The refranchising effort has been rolling out for a couple of years now. Investors can't value Jamba based on revenue growth because its top line is shrinking as it shifts to an asset-light and franchisee-heavy model. Analysts see revenue sliding another 16% this year as it goes from ringing up sales to collecting royalties. Activists, Jamba, and Wall Street agree that the best course for Jamba continues to be to grow its fleet of franchisee-run smoothie shops. We're living in changing times where smoothies are available from burger joints and coffee shops -- usually for less and often with drive-thru convenience -- but Jamba's still the brand that matters.

Pappas and Welling on the nine-member board will make things interesting. Pappas in particular doesn't like to wait around. He took a chairman position on the board of a publicly traded KFC franchisee in 2013 and in a year it was sold off to a private equity firm. Does he see Jamba as a property that can continue to deliver market-beating returns for years with a few operational changes, or is he hoping to smoke out a buyer hungry for Jamba's growing presence in wellness beverages and food products?

The blenders are turning faster at Jamba. A proxy battle may have been averted, but the real creamy goodness may be waiting at the bottom of the blender.