Tropical Smoothie Café’s recent momentum isn’t just a snowball rolling downhill—it’s more like a full-on avalanche.
The company, founded in 1997, opened a record-breaking 124 units in 2019 and signed 213 franchise agreements. Over the past three years, the chain has grown by 54.6 percent. Tropical Smoothie has reported same-store sales growth for eight straight years. In the past six years, the company has averaged more than 7 percent comp sales growth. Average-unit volume is at $763,000, the highest in history.
CEO Charles Watson, whose tenure began in 2019, has three words that capture his excitement about the future: “Just getting started.”
“I don’t see an end in sight,” Watson says. “I think we can continue to go. I think this is the right brand for the times. I think we are healthier fast food at the end of the day, and I think that our franchisees and the communities where we operate are buying into that. I think we are truly inspiring better across the United States and I think that’s going to fuel our growth.”
The approach in 2020 is aggressive, but methodical. Tropical Smoothie is scheduled to open 130 units, which is in step with the brand’s plan to add about five units to its annual growth each year. The chain wants to sign more than 200 franchise agreements this year, as well. Watson noted that 36 have already been signed, a number that was whittled down from more than twice as many choices to ensure high-quality growth. Tropical Smoothie is targeting markets like Chicago; Kansas City, Missouri; Indianapolis; Houston; Dallas; and Columbus, Ohio.
The brand has 840 units—all are franchised except for one corporate store—and more than 500 units are in the pipeline. The goal is to reach 1,000 locations by 2021 and 1,500 units and an average unit volume of $1 million in the next five years.
“I’ve seen people grow and open, 300, 400, 500 locations, and I’ve also seen the end results of that,” Watson says. “I’m saying, hey, let’s not do that. Let’s open an additional five a year because we can grow this brand very well opening 130, 140 a year. We don’t need to immediately go to opening 200 cafés a year. … We try not to bite off more than we can chew.”
Watson describes the chain’s culture as franchisee-first, and attributes much of the company’s success to local operators. There are several layers in which the corporate support center conveys its unified message to franchisees. Among these are the franchisee promise (show care, communicate deeply, and drive profitability), the TRUST acronym (Transparent, Responsible, Unique, Service-oriented, and Tenacious), and four core values (fostering relationships, thinking bigger, going all in, and celebrating).
Watson says those elements fit into Tropical Smoothie’s overall purpose of “inspiring better.”
“By inspiring better, what we mean by that is, how do we inspire better in our franchisees?” Watson says. “How do we inspire better in our associates at our support center, in the communities where we operate? It’s like, ‘Man, I’m doing good, but how can I help you even better?’ And I think it speaks to the opportunity both on an individual level and as an organization of, ‘Man we went this far, how can we go further?’ For some people it might be running a marathon. For some people it might be having a smoothie for lunch. For some people it might be donating to the American Cancer Society or reading their kid a book at night.”
To support franchisees, the brand is working on a learning management system and back-office solution for food and labor costs. Last year, the chain implemented a guest contact center and a tech help desk. There’s also the newly formed Tropical Franchise Council, comprised of 12 of the chain’s most influential franchisees. The council oversees various committees and serves as two-way communication between the corporate support center and franchisees.
Watson is most proud of the fact that 60 percent of franchise agreements signed in 2019 came from existing partners.
“To me, that is the best pat on the back you could give us,” Watson says. “That speaks to, franchisees are making money. That is a stat that tells me franchisees are making money and they want to open more Tropical Smoothie Cafés. … I think the culture of who we are and trying to become an iconic brand, I think our franchisees are on board with, but we’re not a corporate-owned restaurant café. I have to give credit to the franchisees because that’s what’s driving the growth ultimately.”
Sixty percent of sales come from smoothies, while the other 40 percent comes from food items. More than 22 percent of sales and transactions are digital, but Watson—who praised the portability of the company’s products—sees that number increased to more than 50 percent in the near future. Aiding in that digital goal will be chief marketing officer Mark Montini and chief information and digital officer Michael Lapid, who were hired in October.
Those interested in becoming a franchisee should have $125,000 in liquid assets and a minimum net worth of $350,000. The initial investment ranges from $246,500 to $580,500.
Aside from the requisite business experience, Watson says the No. 1 priority when seeking franchisees is finding those who have passion for the brand.
“You have to believe in the mission,” Watson says. “You have to believe in the fact that we want to become the most beloved restaurant brand, and we’re going to get there by sharing the fun and craveability of the tropics. If you can’t believe in that, you’re not going to have a great experience with Tropical Smoothie.”