Tropical Smoothie Café was on record-breaking pace before COVID-19. The company, founded in 1997, opened 124 locations in 2019—more than any single year in its history. It also signed 213 franchise agreements. In just the past three years, Tropical Smoothie ballooned its unit count 54.6 percent. Same-store sales have climbed eight for consecutive years. And, in the past six, the brand averaged more than 7 percent comp sales gains as average-unit volumes hit $763,000—also a top figure in Tropical Smoothie’s 23-year-old journey.
So, it’s safe to say the 840-unit chain was storming into a fresh decade. CEO Charles Watson, who took the reins in 2019, said Tropical Smoothie’s goal was to eclipse 1,000 restaurants by 2021 and 1,500 locations with AUVs of $1 million in the next five years. The company planned 130 in just 2020; signed 36 of a hopeful 200 franchise agreements by March; and was well on its way to adding five units to its annual growth model each calendar year—a path that would take it past the four-digit goal.
When COVID-19 struck the restaurant landscape in mid-March, Tropical Smoothie turned to charity first. It pledged 1000,000 smoothies to first responders and hospital workers nationwide. Next, it focused on franchisees. The company decreased royalties by 50 percent (from 6 to 3 percent), deployed hyper-local marketing strategies to drive business within a 1–2-mile radius of cafes, and began paying for support mechanisms for each franchise location, including a technology helpdesk, voice of the consumer, and back-office systems.
And Tropical Smoothie hit pause on any projects that created additional costs. While growth might take a step back thanks to coronavirus, Watson believes these moves will position the company to emerge quickly.
He took some time to chat with QSR about Tropical Smoothie’s response and strategy so far, and how different the industry might look on the other side.
Let’s start with Tropical Smoothie Cafe’s two-pronged response. What were those early talks like behind the scenes? When did you realize this was going to be as crazy as it’s become, or at least to some degree?
The idea for this campaign originated a little more than three weeks ago during a conversation with our Franchisee Council. Some of our franchisees, including Debbie Pike and her daughter Meghan Cook in Atlanta, were already delivering smoothies to hospitals, and we unanimously agreed that this was a fantastic gesture and the perfect way to spread some sunshine during a troubling time. When then discussed how we could expand on that generosity across the nation.
To reach our goal of 100,000 smoothies we challenged each of our more than 830 cafes to donate at least 100 smoothies to local healthcare and first response organizations. Within the first day, several local franchisees jumped on board and donated more than 600 smoothies each, and the donations just kept growing from there.
Beginning with the 100,000 smoothie donation to first responders and hospital workers, how critical did you see the charitable element being during the crisis?
Giving back to first responders and hospital workers was imperative to us during this crisis. The importance of it stems from a basic reason—they are all on the front lines. They happened to be in healthcare, and this global pandemic has fallen on their lap. They’re working tirelessly and are willing to answer the call in real time, and anything we can do to support them is top of mind.
What went into actually executing this? How quickly did the team mobilize?
The campaign started very organically. A couple of Tropical Smoothie Cafe franchisees had begun donating smoothies to some area hospitals and first responders. Our local business owners saw a very important need to give back, so they started by contacting a few hospitals, police stations, firehouses, etc. to see if they were interested in a smoothie break from Tropical Smoothie Cafe as a way to thank them for their hard work during this time.
We immediately wanted to support this at a larger level, so we made a decision to make this a national movement. Our donations were received very well within the first few days, and our franchises were able to deliver more than 20,000 smoothies in just the first weekend. Through the entire campaign we’ve given out about 3,000 smoothies a day.
Generally speaking, do you think more restaurants should be doing this, and playing a role in feeding essential workers around the country?
The hospitality industry is centered around serving communities—that’s what is at our core as hospitality professionals. If restaurant businesses have an opportunity to support essential workers during this crisis, then it feels like a no-brainer to give back in whatever way possible.
I firmly believe that we need to give back to get through this. This beauty of this campaign is that while our business has been cut in half on some days, our franchisee’s focus on serving others is boosting morale and positivity. While we aren’t scientists, we like to think that every smoothie donated helps to increase serotonin and that “feel good vibe” to the brain. We want bring a little smile and be the reason for that feel good moment, even if it is a fleeting moment. This mindset drives our franchisees to serve the communities and they can feel great about the work they are doing.
Jumping to the franchisee side, where did Tropical Smoothie Cafe start? And what are some relief efforts you’ve implemented to help operators stay afloat, from decreased royalties to open lines of communication?
Franchisees rallied around the camaraderie and joy this brought during an otherwise grim time, and to show our gratitude to them for jumping on board so quickly, Tropical Smoothie Cafe is contributing $2 per smoothie back to our franchisees because as small business owners, they have been significantly impacted financially by this pandemic.
We continued to ensure measures were implemented to help franchisees move forward during the epidemic, including cutting royalties in half, from 6 to 3 percent, pausing projects that would create additional costs, and working hard to implement new initiatives like curbside delivery which was originally scheduled to launch in the fall.
How have you stayed in touch with the needs of franchisees directly? In what ways can they reach out?
We continue to keep a very open line of communication with all franchise owners during this time. We hold weekly, and oftentimes daily, calls with our Tropical Franchisee Council to keep a pulse on the franchise community sentiment and to discuss strategic initiatives we’d like to implement to offset the downturn to our business. Additionally, we have launched a pulse survey through Franchise Business Review that will provide feedback specific to our current business environment and franchisor/franchisee relationship. The pulse survey is supplemental to our annual franchise survey that will go out later this year.
Franchisees also have a direct line to me at all times. They have my email and cell number and I am in contact with many on a daily basis. They are also able to seek support from their field operations and marketing representatives on respective topics at any time as well.
I firmly believe that communication and trust drive success in business. I implement a TRUST model every day with both corporate employees and franchise owners:
T: Transparent—“Being an open book.”
R: Responsible. “It’s work, it’s not a vacation. We have to be responsible.”
U: Unique. “It speaks to how we are today. I don’t care if you wear Crocs. If you are the greatest programmer, I want you. Allowing people to be unique.”
S: Service-oriented. “It doesn’t matter what you sell – we’re in the hospitality business.”
T: Tenacious. “It’s about having no quit in you.”
Talk specifically about the hyper-local marketing strategies. What was the thinking there and what does it look like on the ground level?
To combat a decline in sales, our franchises across the country have joined forces to show our guests we are still here to serve them every day. This means deploying tactics that we are not used to doing, including curbside pickup, discounting, free smoothie giveaways, and continuous community outreach - which is where the 100K smoothie giveaway came into play.
To positively market Tropical Smoothie Cafe to new and existing customers, we are monitoring EVERY transaction to see the attach rate. We are watching volume increases on marketing tactics, monitoring all sales channels, and adjusting our strategy as needed.
In terms of the support mechanism for each location, technology help desks, back office systems, how is Tropical Smoothie Cafe making sure it supports each restaurant on a case-by-case basis?
In addition to the communications channels available to every franchisee mentioned above, we also have a dedicated team of technical support technicians to manage any issues that may arise. A franchisee can reach out to the Cafe Tech Support Team via mobile app, web portal, or phone.
What are some innovative ways Tropical Smoothie Cafe is still serving guests? What kind of shift in off-premises business have you seen, mix wise? What did the company’s delivery program look like before? Are you doing more carryout?
We’re serving our guests in the safest way possible from our regional cafes and delivery platforms. While the crisis changed day by day, we continued to ensure all franchise owners took the necessary health and safety precautions. From an operations standpoint, we also encouraged our franchise owners to expand the delivery platforms they currently used, and to utilize new platforms that were available in their areas.
We’ve monitored our operational approach closely and have rolled out new techniques where we saw fit. A perfect example of this agile rollout approach is our new Curbside program. We launched this out of necessity to support markets where it is the only sales option, but also creates optionality for cafes nationwide.
Broadly, how do you think COVID-19 will change the restaurant business? Where is the biggest shift going to take place?
The restaurant industry has been decimated through this. I can tell you that COVID-19 has directly impacted our business, and Tropical Smoothie Cafe business has been down more than 50 percent on some days. I think the biggest shift will take place for those restaurants that can’t be open right now. As a fast-casual concept, we’re lucky to have a business model that allowed us to easily transition to grab-and-go, curbside and delivery only.
Customer loyalty is pivotal right now. All of our cafes are independently owned and operated, and in most cases, they are locally-owned and operated. The guests who support local businesses in and around their communities are the ones we give the credit to because their loyalty to our cafes is what has ultimately made this initiative possible. Because of our amazing guests, our franchisees and the communities they serve, including those on the front lines of this pandemic, will get through this.