It’s been about two and a half months since Blackstone finalized its acquisition of Tropical Smoothie Cafe. During this period, CEO Charles Watson and his team have met with the private equity firm a few times.
His feedback from those discussions is quite simple—nothing big is changing for Tropical Smoothie. The focus on serving franchisees, supporting unit-level economics, and pleasing customers remains in place. Those aren’t complicated ideals, Watson says, and he knows Blackstone understands. That’s due in large part to Nigel Travis, former CEO of Dunkin’ and Papa Johns, who was named chairman of the beverage concept as part of the transaction. Watson also points to Blackstone’s experience with franchising in other sectors, like Servpro and Hilton Hotels & Resorts. The company has proven that it’s possible to make money and grow a franchise business at the same time.
“That’s great for the consumer and great for franchisees and their economics as well,” Watson says. “So we’re looking to do more of the same there and the model that they’ve really created with Hilton and Servpro. I think Tropical Smoothie is a great fit to do the exact same thing— to continue on the growth trajectory that we’re on and just continue to get better as a consumer brand and get better as a brand for our franchisees.”
Franchisees are bullish as indicated by Tropical Smoothie’s pipeline of 950 locations. About 70 percent of those are existing franchisees. In 2023, the chain opened 176 stores, a 14 percent growth rate year-over-year. The company also signed 258 franchise agreements, earned its 12th straight year of positive same-store sales, and grew digital mix to 37 percent. The chain has more than 1,400 restaurants nationwide across 44 states.
Watson cautions that Tropical Smoothie has seen increases in development costs, permitting delays, and a lack of available real estate in the market. On top of that, the chain is faced with meeting its own success. If it manages to hit 176 stores again in 2024, that’s a high figure, but it could be viewed as slowing down since it’s not bigger than 2023.
“But it’s still a pretty darn good number,” the CEO says. “So we want to make sure that our franchisees are finding the best real estate and they’re signing leases that are going to give them the great opportunity for success. We’re not as concerned with the overall number of openings. It’s opening great locations in great real estate and that’s going to take a little bit longer in this environment.”
The chain is primarily east of the Mississippi, but it’s also big in Phoenix, Las Vegas, Denver, and Texas. Watson sees “plenty of markets and plenty of whitespace to go open in, and lots of franchisees and prospective franchisees that are looking to develop with us.”
As Blackstone takes over, Tropical Smoothie continues to fare well in the tougher macroeconomic environment. Plus, franchisees are experiencing disinflation. The chain is seeing a “little bit” of consumer pullback, but not as much as quick-service competitors. That’s because the brand was never in the value game to begin with. Over time, Tropical Smoothie has been keen on taking the right amount of price, to where it sits somewhat above fast food but below fast-casual peers in terms of average check. The chain attracts consumers in the $50,000 to $150,000 household income range, which tells Watson that guests coming to visit have the discretionary income to pay for something healthier.
Tropical Smoothie isn’t immune to traffic loss, but through this year, it’s seen positive same-store sales and it’s performing between 200 to 300 basis points higher than the industry average when it comes to comps and transactions. Watson believes the company can accelerate business regardless of tightening wallets.
Instead of going after discounts, Tropical Smoothie focuses heavily on quality of products and services. It also wants more investment in its loyalty program. In early August, the chain ran its Tropic Fan Fest, a week-long promotion offering rewards members a free smoothie with any food purchase. The company is targeting customers on third-party platforms like DoorDash as well.
“We just don’t want a blanket fire out from a value perspective,” Watson says. “So we’ll continue to do to do those things that are pretty targeted at the guests that we want to see, and we’re going to continue to lean into getting more tropical rewards members. We have to do that at the cafe level and through our marketing as we move into the coming years. And in 2025, we’ll look hard at how we operate in an environment where value and the wallet is tightening. What are some of the changes that we’ll make? Those are plans that are in process right now.”
In addition, Tropical Smoothie is 60 percent smoothie and 40 percent food, and the chain sees opportunity to engage more guests with the latter. The company is asking itself what food complements smoothies the best. The brand already has wraps, flatbreads, and salads, but it’s looking to enter more avenues. Fifty-seven percent of guests only buy a smoothie; how can the brand entice those customers to attach a food item?
One answer is adding to the bowl lineup, which Tropical Smoothie launched in January with a national advertising campaign and its first-ever celebrity spokesperson, “Saturday Night Live” cast member Chloe Fineman. This month, the brand added the Bahama Mama and PB Protein Crunch bowls to the original lineup of Mixed Berry Greek Yogurt, Açaí, and Chia Oatmeal Pudding.
Watson also highlights the company’s commitment to optimizing smoothies by offering more transparent sweetener options and introducing dairy-free alternatives. Additionally, Tropical Smoothie will introduce benefit-driven “boosts,” such as energy enhancers or vitamin C, to further customize the smoothie experience. And the brand will lean into its tropical roots by featuring new flavors like guava, key lime, and passion fruit, ensuring that its menu reflects its heritage while catering to evolving consumer preferences. These initiatives should start in October.
“So 2025 is going to be very exciting from a menu revamp or launch perspective. So we’re excited to share some of those things,” Watson says.
