Franchise Costs: Detailed Estimates of Tropical Smoothie Cafe Franchise Costs (2017 FDD)

This post was updated on June 12, 2017 to reflect information from Tropical Smoothie Cafe’s 2017 FDD (updated).

Detailed Estimates of Tropical Smoothie Cafe Franchise Costs Based on Item 7 (Estimated Initial Investment) of Tropical Smoothie Cafe’s 2017 Franchise Disclosure Document

1.  Initial Franchise Fee:  $12,500 to $25,000

• Franchisees wishing to open more than one Franchised Business must sign a Franchise Agreement and pay an initial franchise fee for each additional location. The initial franchise fee for the second and each subsequent Franchised Business is $15,000.

2.  Architect:  $5,500 to $12,000

• You will be provided a set of plans for recommended construction in conformity with mandatory design specifications. You may be required by local codes and regulations to retain a licensed architect or equivalent professional to review or certify the plans and/or to oversee construction.

• The lower ranges assume that the site was formerly used as a restaurant so that the plans can utilize existing plumbing, electrical, etc.

3.  Store Fixtures, Furniture, Equipment, and Technology:  $87,000 to $145,000

• Fixtures, furniture, equipment, and technology needed to operate the Franchised Business include (without limitation) tables and chairs, wall cabinets, merchandise display units, millwork, shelving, sinks, microwave, worktables, ovens, steamers, smallwares, ice machine, blenders, refrigerators, mixing bar, ice wells, freezers, menu boards, artwork, point-of-sale/cash register system, and software.

• You must purchase the equipment, furnishings, and other items from these designated suppliers before your Franchised Business opens.

• The cost of these items, purchased new, ranges from $87,000 to $145,000, depending on type and quantity of equipment as well as freight and storage costs. The types of costs are uniform among franchisees, but may vary depending on factors like the size and layout of the Franchised Business and whether new or used fixtures and equipment are utilized.

• Payment is due upon receipt of invoice and is non-refundable.

4.  Leasehold Improvements:  $87,000 to $214,200

• These amounts are the franchisor’s best estimate of finish-out costs only. Labor and material costs may vary significantly in accordance with local variations in wage rates, labor efficiency, union restrictions and availability, and price of materials. Finish-out costs are based on leasing unfinished space that consists of walls, plumbing, concrete slab, lighting, HVAC, and electricity.

• The franchisor is unable to calculate the exact real estate investment required of each franchisee for a Franchised Business due to the many factors which influence the total project costs, such as location, amount of leased space (1,200 to 2,000 square feet), amount of remodeling needed, and so forth.

• The lower range of the estimates anticipates that landlord improvement incentives will be available to construct much of the improvements.

• Also, some sites may have shells left vacant from prior tenants so that it costs less to convert the Stores to conform to the franchisor’s specifications. The availability of such sites may be limited or absent in your market.

• The amount does not reflect an investment in real estate, since it is assumed that you will lease your premises.

5.  Signage:  $4,400 to $15,000

6.  Uniforms:  $400 to $2,000

7.  Initial Inventory:  $4,000 to $12,000

8.  Initial Training Expenses:  $1,200 to $11,600

• You are responsible for all transportation, meals, and other expenses associated with the initial training program for you and/or your managers, designees, and employees. The cost will depend on the distance you travel and the type of accommodations you choose.

9.  Insurance Deposits:  $400 to $5,200

• This amount may vary depending upon how many Tropical Smoothie Cafe Stores you develop and operate.

10.  Initial Deposits:  $1,700 to $14,600

11.  Licenses, Bonding, and Permits:  $750 to $6,300

• This may include building inspection fees, occupational license fees, food service licenses, and the like, and will vary from one jurisdiction to the other.

12.  Legal/Accounting:  $420 to $5,000

13.  Grand Opening Contribution:  $7,500

• If you have not previously developed and opened a Tropical Smoothie Cafe Store, you must conduct a Grand Opening Marketing Program for your Franchised Business in accordance with the franchisor’s Manuals, utilizing the tools, timing, technologies, services, and products it authorizes and directs.

• You must spend at least $7,500 (not counting cost of food and smoothies) on a grand opening marketing program for the Franchised Business during the Grand Opening Time Period beginning approximately 60 days before opening the Franchised Business through 30-60 days afterwards.

• You will pay to the franchisor the Grand Opening Contribution and it will administer payments to service providers and other vendors out of such funds. If, for any reason, the franchisor is unable to collect the Grand Opening Contribution from you when you sign your Franchise Agreement, then you must pay to the service providers and vendors as and when the franchisor directs in accordance with the Grand Opening Marketing Plan and Budget.

• If you have previously developed and opened a Tropical Smoothie Cafe Store, you must spend a minimum of $2,500 (exclusive of the cost of food and smoothies) to conduct a Grand Opening Marketing Program for your Franchised Business during the Grand Opening time period beginning approximately 60 days before opening the Franchised Business through 30-60 days afterwards.

• The franchisor will not collect this amount and you will be obligated to pay vendors and service providers directly.

14.  Additional Funds (Working Capital – 3 to 6 Months):  $10,000 to $50,000

• This estimates your start-up expenses. The estimate is intended to cover items such as possible initial operating losses, additional insurance, rent and security deposits, miscellaneous additional pre-opening costs, payroll, utilities, additional legal and accounting fees, and payments to any governmental agency that are necessary to open the Franchised Business.

• In addition, you should be prepared to have cash available to pay your personal living expenses during the first 3 to 6 months of operation. This is only an estimate, however, and the necessary amount of working capital will vary considerably with each franchisee.

15.  Total:  $222,770 to $525,400

• The franchisor has relied on historical experience provided by its franchisees and data from its predecessor, TSFDC, to compile these estimates.