Financing

As it is sold, Clean Juice struggles with supply issues

Operators have closed or rebranded nearly half of the chain’s locations over the past year and a half. And then as the chain was sold last week, franchisees were told the company lost its distribution contract.
Clean Juice
Clean Juice operators worry they may not have access to branded juice. | Photo by Jonathan Maze.

Operators of the Clean Juice franchise heard last week that the company was being sold to Friendly’s owner Brix Holdings, but they were more concerned with another piece of news: They would soon have trouble getting juice.

The company lost its contract with Sysco, according to franchisees and copies of communications shared with Restaurant Business. The contract covers about 80% of the food and paper supplies operators use for their business, including bottled juices, operators say.

“Our name says juice,” one operator said on the condition of anonymity. “We can’t get juices, what do we do?”

The company has since reached a deal with Sysco on a non-wholesale contract to provide franchisees with supplies for the next few weeks, but it’s uncertain how long they’ll have access to the proprietary branded juice for which the chain is known. And it raises the prices for franchisees already struggling with high costs and low sales.

“Our stores will be serviced by Sysco with no material interruption to their business through our closing with Brix Holdings,” Landon Eckles, Clean Juice’s cofounder, said in a statement to Restaurant Business. “I cannot speak for them regarding their plans for Clean Juice’s supply chain in the future, but as an experienced and sophisticated franchisor of many other brands who need similar services, I trust they will make the right decisions moving forward.”

A representative for Brix would not comment on the end of the contract, referring questions on the topic to Clean Juice.

The end of the Sysco contract exacerbates problems at Clean Juice leading up to the sale. The brand was founded in 2016 and grew rapidly with a business model in which operators cold-pressed juices on site.

It sold a lot of franchises, even through the pandemic, and had deals with former NFL players Tim Tebow and David Tyree.

Yet operators couldn’t generate a profit. Then, in late 2022, the brand switched to pre-bottled juices. The juices were sold at lower prices, at a lower profit, and the move eliminated one of the franchise’s key business models and a reason a lot of franchisees bought into the system.

The move exacerbated operators' financial losses. Clean Juice operated 135 locations at the end of 2022, according to the company's franchise disclosure documents (FDD). It was down to 113 locations in October of last year, according to the most recent FDD. The brand's sale announcement said the chain had 75 locations. 

More than 50 operators have taken the company to arbitration to get out of their franchise agreements.

A representative for Brix suggested it doesn’t expect any other operators to leave the system.

“We believe that a majority of the franchisees who wished to exit the system have already done so and we are engaged with the remaining franchise community to better understand and support their business moving forward,” Sherif Mityas, CEO of Brix, said in an emailed statement. “We fundamentally believe in the Clean Juice model and look forward to accelerating their growth in the years ahead.”  

Clean Juice’s remaining franchisees were told in early April that the contract with Sysco expired on March 31.

In that email, seen by Restaurant Business, the distributor imposed a 5% increase in the margin it gets on deliveries of supplies to Clean Juice operators. Clean Juice said the increase “caught us by surprise.”

The increase was due in part to the drops in cases delivered to Clean Juice operators. Sysco also had a “significant amount of dead inventory” due to “poor compliance” or because some products were expired.

The deal with Brix was announced last week. Yet, at the same time, operators were told by Sysco that their locations were no longer covered under the Clean Juice deal. Operators could get supplies, but only through a “street account,” and it raised questions about proprietary products that still remain.

For operators already struggling to make money, that cost was tough to swallow.

Clean Juice’s VP of supply chain, Scott Brainard, then told operators that the company was aware of the situation and that the brand was “working on multiple solutions.”

“In the very short term,” he wrote, “we encourage you to order as much cold press juice/shots/milks products, frozen fruit and branded cups and lids as you can store and sell through the next four to six weeks.”

Many franchisees, however, don’t have the storage capacity for that much product.

A subsequent email to franchisees indicated “nothing will change until May 10th at the earliest,” but that pricing will change. Meaning that the non-wholesale contract between Clean Juice and Sysco would cost more.

The email also indicated that the company was “working on a plan to get every store what they need in cold press to last the next few weeks.”

Yet it was uncertain how long Sysco would have the company’s branded juices available. Sysco will continue to sell them until inventory is gone. “We are working on a plan to get you these products,” Brainard said. “It will either still be through Sysco, or we may change broadline partners.”

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