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FDD Talk 2016: The Smoothie King Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on September 5, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Smoothie Franchise

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Smoothie King Interior Photo

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Smoothie King franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Smoothie King franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Smoothie King’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015, 2014, 2013, and 2012 average gross sales for franchised traditional Smoothie King locations that were in operation for at least 12 months as of the end of the calendar year
  • 2015, 2014, 2013, 2012, and 2011 average annual gross sales percentage increase for franchised traditional Smoothie King locations that were in operation for the entire 24-month period ended December 31 of the respective calendar year
  • number, percentage, and average gross sales for franchised traditional Smoothie King locations that achieved gross sales of $500,000 or more in the last five calendar years (2011-2015). Smoothie King refers to the group of units with $500,000 or more of gross sales in a calendar year as the King’s Club.
  • number, percentage, and average gross sales for franchised traditional Smoothie King locations that achieved gross sales of less than $500,000 in the last five calendar years (2011-2015)

Section I – Background Information

Smoothie King’s Success Driven by Passion for Health and Wellness

Steve Kuhnau founded Smoothie King in 1973, after looking for ways to alleviate his food allergies and to improve his overall health. After trying several methods to cure his ailments, Kuhnau turned to blending his own mix of supplements, nutrients, and fresh fruit. His health greatly improved and he was inspired to bring his nutrient-rich drinks to the masses.

Kuhnau opened the first Smoothie King location in Kenner, Louisiana and franchising officially began in 1989. Driven by his passion for sharing healthy eating, Kuhnau quickly and successfully expanded the franchise throughout the U.S.

In 2003, to celebrate Smoothie King’s 30th anniversary, they launched their first international location in South Korea. Less than 10 years later, in 2012, Kuhnau sold Smoothie King to SK (Smoothies Korea) USA, Inc., the same company that opened the first South Korean Smoothie King location in 2003.

Smoothies Korea CEO Wan Kim, who shares Kuhnau’s commitment to spreading good health, took over as CEO of Smoothie King after the acquisition. Steve Kuhnau continues to be a part of the Smoothie King company as a consultant and brand ambassador; continuing to spread his passion for health and wellness.

Continued Success by Pushing Rapid Global Expansion

When Wan Kim took over as CEO of Smoothie King, he set a goal of opening enough new locations to reach 1,000 total units by the end of 2017. So far, Smoothie King seems to be on track to reaching its goal with the opening of its 800th location in the beginning of August.

Earlier in the year, Smoothie King signed six new major area development agreements with plans to open new locations in Chicago, Tucson, Orlando, Dallas, Virginia, and Baltimore.

This push to open new locations to meet consumers’ growing demands for healthy food options seems to be paying off; Smoothie King has seen a 12.4% increase in same-store sales in the first half of 2016.

In May of this year, Kim brought in Kevin King as the new Chief Development Officer. King, a well-known name in the franchise world who previously worked for Domino’s Pizza and Papa Murphy’s, will lead franchise development and hopes to maintain Smoothie King’s momentum.

Sponsorship of the New Orleans Pelicans

In February of 2014, Smoothie King became the official sponsor of the National Basketball Association’s New Orleans Pelicans. Smoothie King reached a 10-year agreement, with the option to renew for another 10 years, to rename the New Orleans Arena to Smoothie King Center. This is the arena’s first and only sponsorship deal since opening in 1999.

Smoothie King CEO Wan Kim hopes the sponsorship will give the franchise global brand recognition and aid in their plans for international expansion. The deal took over a year as the NBA wanted to ensure that all of Smoothie King’s products met their supplement ban requirements. After the testing, less than 1% of Smoothie King’s ingredients failed to meet the ban and were quickly eliminated from the menu.

The Smoothie King Center now has two Smoothie King locations and the company hopes to attract other franchises to the arena.

Smoothie King Keeps on Top of Current Food Trends

Smoothie King keeps its menu from going stale by continually offering new and limited-run drinks. In 2014, Smoothie King launched a line of vegan smoothies to meet consumers’ growing needs for plant-based protein options. Smoothie King teamed up with Sunwarrior, a company specializing in vegan protein powders, to launch vegan friendly smoothies.

The vegan line includes the flavors Mango Kale, Dark Chocolate Banana, and Nutty Super Grain. The Nutty Super Grain smoothie includes almond milk, which is the first non-dairy milk option in the franchise’s history.

Staying Hydrated for the Summer

Smoothie King’s current offering for Summer 2016 is a line of Hydration Smoothies. These limited run flavors include Watermelon Hydrator, Passionfruit Peach Hydrator, Strawberry Mango Hydrator, and Watermelon X-treme. Each smoothie contains a blend of Vita Coco Coconut Water, Vitamin C, and Potassium.

To celebrate the summer smoothies, Smoothie King has an ongoing social media contest. The contest urges people to post photos on Twitter, Instagram, and Facebook showing how they #DontSweatIt with Smoothie King’s Hydration Smoothies. The winner will receive the opportunity to meet pro U.S. beach volleyball players in Miami.

Voted Number One in Nation’s Restaurant News Consumer Picks for 2016

Smoothie King topped Nation’s Restaurant News Consumer Picks for Limited-Service Restaurants in the Beverage-Snack Category. This win puts Smoothie King ahead of top brands like Starbucks, Krispy Kreme, Cinnabon, and competing smoothie bar chain Jamba Juice. The franchise placed 6th in the overall list with an overall score of 67% in customer satisfaction.

Consistently Ranked Number One in Its Category

Smoothie King ranked No. 92 on Entrepreneur Magazine’s 2016 Franchise 500 list. This year’s ranking is a small drop from 2015’s No. 79 spot. Smoothie King has always done well in Entrepreneur’s annual list; their highest rank was No. 67 in 2009. The franchise has managed to continually place in the top quarter of the rankings and was at their lowest placement in 2012 at No. 122.

Though Smoothie King’s rank tends to fluctuate, they have been named No. 1 in their franchise category 20 times by Entrepreneur Magazine.

Section II – Estimated Costs

  • Please click here for detailed estimates of Smoothie King franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis

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