Tropical Smoothie Cafe is being sold to private equity firm Blackstone.

The deal is reportedly for nearly $2 billion, according to the Wall Street Journal. The better-for-you chain, currently owned by Levine Leichtman Capital Partners, has nearly 1,400 shops in the U.S.

“The key to this business is delivering an outstanding experience for each guest who walks through our doors,” Tropical Smoothie CEO Charles Watson said in a statement. “From high-quality products to exceptional guest service, our franchisees make our mission to become a beloved brand a reality day in and day out, and we are thrilled to see how the brand will continue to grow with Blackstone’s outstanding global resources behind it.”

The announcement comes about four months after Reuters reported Levine Leichtman Capital Partners was looking to sell the company for roughly $2 billion. Sources told the publication that the parent company hired Robert W. Baird & Co. to start a sales process. The private equity firm bought the brand in 2020 when it had around 870 shops. 

Tropical Smoothie finished 2023 with $1.25 billion in systemwide sales and an AUV of $980,000. Its unit count grew by a net of 174 shops year-over-year, making it one of the fastest-growing chains in the country. More than 70 percent of openings were with existing franchisees; the chain also signed 258 franchise agreements. Additionally, 2023 marked the 12th straight year of positive same-store sales. That was fueled by increases in digital sales, which mixes 37 percent.

Bloomberg reported at the start of 2022 that the company was considering going public. Sources told Reuters that Tropical Smoothie decided against it after the IPO market became too volatile.

CEO Charles Watson said at last year’s QSR Evolution Conference that Tropical Smoothie has the potential to expand to 4,000 or even 5,000 units. By early September, there were 825 units in the pipeline, and that was expected to grow to 850-860 by the end of 2023. If these developments proceed as historically, with an 85 percent conversion rate to operational restaurants, the company would exceed 2,000 outlets. Watson believes the fast casual has the necessary market presence, branding, and product offerings to double this count.

He is confident due to lower development costs and adaptable store layouts, with 40 percent of the current system featuring drive-thrus. About 45 percent of the 170-plus shops opened in 2023 included the popular off-premises channel.

The goal is to focus on the 44 states where Tropical Smoothie resides. The six markets without one are Hawaii, Alaska, Montana, Vermont, Oregon, and Wyoming. Watson has been staunch on the fact that he wants the brand to get the U.S. correct before it goes international.

Blackstone has recently been active in the restaurant space. The firm reportedly had off-and-on discussions with Jersey Mike’s for an $8 billion sale. Also, the group became an equity investor in 7 Brew, a quickly growing coffee chain. The company has expanded from nine units to more than 200 in just three years.

“Tropical Smoothie Cafe has had an impressive growth trajectory consistently building on its loyal customer base as it has scaled nationwide,” Peter Wallace, a senior managing director for Blackstone’s private equity business, said in a statement. “Blackstone has deep experience helping accelerate the expansion of leading franchise businesses as one of our highest-conviction investment areas. We believe our capital and resources will help position Tropical Smoothie Cafe for continued success and innovation for the benefit of its guests and franchisees.”

Beverage, Fast Casual, Finance, Franchising, Growth, Story, Tropical Smoothie Cafe