Valley Juice - Case Summary

Business Description

The Debtor owns and operates 12 Jamba Juice franchise locations throughout the San Francisco Bay Area, selling fruit and vegetable-based smoothies and other food products.

• The active restaurant locations include:
  • 152 Kearny Street, San Francisco, CA
  • 2306 South Shore Center Drive, Alameda, CA
  • 1555 East 14th Street, Suite 189, San Leandro, CA
  • 19651 Hesperian Blvd., Hayward, CA
  • 30-C San Pablo Towne Center, San Pablo, CA
  • 1982 Pleasant Valley Avenue, Oakland, CA
  • 500 Parnassus Room 116, San Francisco, CA
  • 170 O’Farrell Street, San Francisco, CA
  • 2300 16th Street, San Francisco, CA
  • 5030 El Cerrito Plaza, El Cerrito, CA
  • 2794 Pinole Valley Road, Pinole, CA
  • 8460 Edgewater Drive, #1, Oakland, CA

The Debtor is part of a larger group of Jamba Juice franchisees, which includes affiliates Sonneshine LLC, Valley Juice Oakland, LLC, and Valley Juice Alameda, LLC. All entities are owned by a common holding company, Ledgewood Holdings LLC.

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Corporate History

The Debtor’s operations are governed by a Limited License Agreement executed with its franchisor on July 17, 2024. This agreement, which also involves guarantors, replaced previous franchise agreements and granted the Debtor a limited license to continue operating its stores under strict terms.

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Operations Overview

The Debtor generates revenue from in-store customer payments and sales through third-party food delivery services. While cash and card payments are deposited daily, revenue from delivery companies is received several days after the transaction.

Banking and Payment Processing

• The Debtor maintains bank accounts with Chase and Bank of America. Each of the 12 locations has a dedicated bank account where daily receipts are deposited before being transferred to a main operating account for expense payments.
• Credit and debit card transactions are processed through merchant accounts held by the Debtor’s parent company, Ledgewood Holdings, LLC. After transaction fees are deducted, the net payments are transferred to the Debtor’s operating account.

Key Agreements

• The Debtor operates under a License Agreement with Jamba Juice, which it considers critical to its business and intends to assume as part of its restructuring.
• The company is also party to various contracts with delivery services and gift card merchants, which it plans to continue operating under.

Assets and Workforce

• As of the petition date, the Debtor reports approximately $67,252 in cash and estimates the value of its other assets as follows:
  • Inventory and Supplies: $145,843
  • Accounts Receivable: $143,210
  • Equipment: $119,831
  • Furniture: $22,158
• The Debtor’s 232 employees are paid bi-weekly via payroll processor Isolved. A principal of the company receives an annual salary of $75,000.
• Food and supply purchases are made daily under net-14 day payment terms.

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Prepetition Obligations

As of the petition date, the Debtor reports approximately $14.5 million in total unsecured priority and non-priority claims. The company’s capital structure includes the following obligations:

Unsecured Claims

• The Debtor’s unsecured debt is composed primarily of:
  • Priority Tax Claims: Approximately $4.1 million.
  • Intercompany Loans: Approximately $9.7 million. The Debtor notes that the collectability of these intercompany receivables is uncertain, as the affiliate entities are also expected to file for Chapter 11 protection.

Franchisor Debt

• The Debtor has several obligations to its franchisor, Jamba Juice, and its affiliates, including:
  • A $400,141 Balloon Promissory Note dated Oct. 15, 2024, which requires a balloon payment of approximately $355,412 on Dec. 1, 2025.
  • A separate $115,000 Payment Obligation, payable in 12 monthly installments.
  • An obligation to repay Jamba Juice for past-due rent that the franchisor paid on the Debtor’s behalf at locations where Jamba Juice served as the sublandlord.

Employee and Trade Claims

• The Debtor owes approximately $269,000 in unpaid prepetition wages, associated taxes, and benefits to its 232 employees. No single employee is owed more than the statutory priority cap of $15,750.
• In the 20 days prior to the bankruptcy filing, the Debtor received approximately $132,630 in food and beverage deliveries, which may give rise to administrative priority claims under section 503(b)(9) of the Bankruptcy Code.

Other Obligations

• The Debtor is subject to various secured loans, tax liens, and judgment liens. Many of these secured debt obligations are personally guaranteed by a principal of the company and his wife.
• The Debtor acknowledges that its prepetition accounts receivable constitute cash collateral.

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Events Leading to Bankruptcy

The Debtor’s financial distress stems from the operational and financial impact of the COVID-19 pandemic, which led to a significant reduction in foot traffic at its restaurant locations. As a result, the Debtor fell behind on rent payments and was forced to close multiple stores. Certain former landlords subsequently obtained judgments and took possession of the premises.

• To fund ongoing operations amid these challenges, the Debtor obtained high-interest loans, the repayment of which created significant disruptions to its cash flow.
• A principal of the company also provided a $900,000 loan to the Debtor, funded by a personal loan secured by his real estate. The Debtor made payments directly to the principal's lenders, but these payments have ceased.
• The Debtor’s financial situation became untenable after it informed the franchisor that it would be unable to make the balloon payment due under its promissory note in December 2025.

Facing mounting creditor pressure, the Debtor filed for Chapter 11 protection to effectuate an orderly sale of its business and assets. The company intends to retain an experienced broker to market its 12 active Jamba Juice locations and pursue a sale that includes the assumption and assignment of the related leases.