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Why Jamba Juice is moving to Texas

Jamba Juice joins a list of companies moving headquarters from California to Texas in a search for cheaper operating and labor costs.

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Gravel is scooped up by machinery Thursday, May 5, on FM 511 in Brownsville, Texas. Several companies are choosing to move their headquarters in a search for cheaper operating and labor costs.

Jason Hoekema/The Brownsville Herald/AP

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The beverage company that began as a San Francisco Bay-juice stand is moving inland, as Jamba Juice joins a migration from costly California to Texas.

Jamba Juice announced this week a plan to move the company headquarters from their 25-year home in Emeryville, Calif., to Frisco, Texas, a suburb north of Dallas. The company will move at the end of its 2016 lease to a location chosen for its "competitive operating costs," lower cost of living, access to skilled restaurant workers, and strategic geography.

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"The State of Texas meets all of these criteria and Frisco is a community committed to healthy living that aligns closely with our overall mission,” Jamba Juice Chief Executive Officer David Pace said in a statement.

Toyota announced a move to the Lone Star State in 2014, as did Los Angeles-based Occidental Petroleum and nearly two dozen tech companies from the Bay Area, Samantha Masunaga reported for the Los Angeles Times.

In 2015, Forbes named Texas the best state to make a living based on the state's tax rates, good wages, worker safety, and cost of living.

The state's traditional independence translates to making financial independence a priority in Texas, says Parker Luke, president of LukeGroup, Inc., in Sanger, Texas. A recent boom in natural gas and mining, pro-business politicians, and a state economy that recovered more quickly than most have "come neatly together," to make the state attractive for business and workers, Mr. Luke tells The Christian Science Monitor in an email.

He noted the lack of income tax in Texas gives workers moving to the state a raise without an actual increase in salary, which could appeal to the companies that cite rising labor costs when they move. 

The Lone Star State appears to welcome the newcomers, and Jamba Juice is receiving grants from both the city of Frisco and the Texas Enterprise Fund. "Another California company is moving to North Texas," wrote the Dallas Morning News after the announcement. 

But the move fuels a growing debate about whether California's regulation-heavy approach to business could hurt a state that already suffers from a high cost of living, George Avalos of the San Jose Mercury News warned.  

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San Francisco renters face the highest prices in the country: two-bedroom apartment goes for $4,690, according to Apartmentlist.com. In a recent survey one-third of Bay Area residents said they are likely to leave the region in the next few years over its lack of affordability, CNN Money reported. A quarter of those polled identified the city’s cost of living as its most serious problem.

Many California restaurants are struggling as labor costs rise, and if they cannot either pass on the costs or creatively re-franchise enough to cover the change, they might move to a state where the cost of operating or labor is cheaper.

"You're seeing them re-franchise in order to have a lower cost and a more predictable operating model,” Nick Setyan, a senior official in equity research at Wedbush Securities, told the Los Angeles Times. “If you're trying to cut costs, then you have to look at it across the entire business and look at your headquarters. If that results in lower costs, that's always on the table.”

Luke suggests that Texas has a "culture of lower consumption," which enables families to live within their means more easily and drives down the cost of living and labor. 

"The culture predominantly values equity wealth over noticeable wealth," he says. "Having a reliable Ford F-150 and financial security as well is, many times, more highly valued than having a lavish car or home and no savings or investments to fall back on."

Jamba Juice, which has some 885 stores worldwide, will continue to expand franchises throughout its original California market, where it has 407 stores, according to a statement. The move will impact 120 employees, some of whom will move with the company and join a mix of workers from Texas.