Levin Leichtman Capital Partners, a private equity firm in Los Angeles, announced Tuesday that it has acquired Tropical Smoothie Cafe.
The terms of the deal were undisclosed. The brand, which has more than 870 units in 44 states, will be run by CEO Charles Watson and the existing leadership team.
Levin Leichtman is taking over a company that’s seen record-breaking results amid the pandemic. In July, Tropical Smoothie grew same-store sales by 25.5 percent and comp transactions by 5.8 percent. The chain has opened more than 55 stores in 2020 and expects to add more than 30 by the end of the year. By July, the company signed 103 new franchise agreements, including 49 since March 1—67 percent of which are existing operators.
Franchisees secured more than $29 million in forgivable loans from the Paycheck Protection Program, and negotiated $1.8 million in rent relief for about 250 stores. To assist franchisees, Tropical Smoothie utilized hyper-local marketing initiatives, leveraged curbside and delivery, and offered a 50 percent reduction in royalty relief for eight weeks.
"My team and I are very excited to partner with LLCP as Tropical Smoothie Cafe seeks to enhance its market-leading position,” Watson said in a statement. “Having the opportunity to leverage LLCP's extensive franchise expertise will be pivotal in driving further growth and supporting franchisees in inspiring better in our guests.”
The chain’s success is coming off a 2019 in which it recorded eight straight years of same-store sales growth and opened a record-breaking 124 units and signed 213 franchise agreements. In the past three years, Tropical Smoothie’s footprint has skyrocketed 54.6 percent. The company’s goal is to reach 1,500 units and an AUV of $1 million in the next five years.
Levin Leichtman’s past investments include Cici’s Pizza, Beef ‘O’ Brady’s, Bertucci’s Italian Restaurant, Quiznos, and Wetzel’s Pretzels. Here's a look at their current portfolio.
Tropical Smoothie marks the fifth investment from Levin Leichtman’s Fund VI, which closed 2018 with $2.5 billion in committed capital. Prior to Tropical Smoothie, Fund VI totaled $552 million in capital investments.
"We are excited to partner with Charles and the rest of the management team who have led the tremendous growth of Tropical Smoothie Cafe,” said Matthew Frankel, managing partner of Levin Leichtman, in a statement. “We look forward to working with them as they continue to increase system-wide sales, improve franchisee unit economics and expand unit count in the significant remaining whitespace."