In this FDD Talk 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 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Smoothie King franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Smoothie King outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Smoothie King’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017, 2016, 2015, and 2014 average, median, high, and low net sales for Smoothie King franchised units that had been open for the 13-month period ending December 31, 2017, December 31, 2016, December 31, 2015, and December 31, 2014, respectively
- 2017 vs. 2016, 2016 vs. 2015, 2015 vs. 2014, and 2014 vs. 2013 average and median net sales percentage (same-store sales) increase for Smoothie King units based on a comparison of net sales for a comparable period in both years
Section I – Background Information
17 Things You Need to Know About the Smoothie King Franchise
Continues Record Breaking Momentum Into 2018
1. Smoothie King ended 2017 on a high note as the company opened 96 new stores across 28 states over the year. The brand built on that momentum with a record-breaking number of franchise agreements, closing out the year with 147 franchise agreements for a total of 204 committed stores. The company also reached a milestone with the opening in New York of its 900th location with franchisee Bob Viani.
2. Smoothie King has continued this strong growth into 2018 and signed 36 new franchise agreements in 14 states during the first quarter of the year. The brand has plans to open at least 150 new locations by the end of 2018. Smoothie King plans to grow across the country but will focus on 16 key markets: Dallas, Texas; Miami, Florida; Baltimore, Maryland; Indianapolis, Indiana; New York; Cincinnati, Ohio; Denver, Colorado; Phoenix, Arizona; San Antonio, Texas; Chicago, Illinois; Orlando, Florida; Austin, Texas; Washington, D.C.; Charlotte, North Carolina; Columbus, Ohio; and Jacksonville, Florida.
3. Wan Kim, CEO of Smoothie King, credits the company’s continued growth to its Cleaner Blending initiative and its ongoing focus on Smoothies With A Purpose. Kim said, “Our customers are recognizing our vision — that Smoothie King is an integral part of their health and fitness journey. As a result, we are attracting multi-unit and experienced operators that are committed to supporting healthy and active lifestyles. With five consecutive years of positive same-store sales, we see a real opportunity to combine vision and financial success.”
4. Late last year, Smoothie King launched its Cleaner Blending initiative, eliminating high fructose corn syrup, trans fat, hydrogenated oil, gluten, and ingredients prohibited by any regulatory lists monitored by NSF (an American product testing, inspection, and certification organization) from all its smoothies. Already in 2018, it has added whole blueberries and spinach to its ingredient list, and will remove artificial flavors, artificial colors, artificial preservatives, added hormones, GMO fruits and vegetables, and all added sugar from more than 50 smoothies by the end of this year.
5. According to Kevin Kang, chief development officer of Smoothie King, franchisees have been reacting positively to the changes. Kang said, “Many of our existing franchisees are expanding their franchise agreements, adding new locations and new markets. They are inspired by Wan’s commitment to Smoothies With A Purpose and see the opportunity to make a living by inspiring people to live a healthy and active lifestyle.”
Signs 60-Unit Expansion Deal
6. At the end of June 2018, Smoothie King announced that it had signed with a new franchise partner to bring the brand to cities in Ohio, Kentucky, Indiana, and central Florida. John Clancy and his team at Smoothie King Midwest have signed an agreement to develop 60 locations, starting in Indianapolis, Indiana and Palm Beach County, Florida.
7. Clancy, a longtime Planet Fitness franchisee with a strong background in real estate and finance, has an aggressive growth plan for the brand. Under a separate development agreement, Clancy and his team, along with business partner Bob Viani, opened three Smoothie King locations in the past year.
8. In a press release, Clancy said, “This is the right time to invest in brands that cater to healthy living, and Smoothie King stands out in that space. Wan Kim’s leadership and commitment to the company vision, combined with its superior products, finely tuned franchise organization and strong financials make this a great opportunity for our team. At the same time, it gives us the opportunity to inspire thousands of customers to achieve their health goals.”
Announces Shift to Cleaner Blending
9. In early September 2017, Smoothie King announced plans for its Cleaner Blending initiative. At the centerpiece of the new initiative, Smoothie King will remove added sugar from more than 50 smoothies and will remove artificial flavors, artificial colors, artificial preservatives, and added hormones from all smoothie ingredients and introduce non-GMO fruits and veggies.
10. Prior to the new initiative, Smoothie King previously eliminated high fructose corn syrup, trans fat, hydrogenated oil, gluten, and ingredients prohibited by any regulatory lists monitored by NSF International (an American product testing, inspection, and certification organization).
11. At the time of the announcement, Smoothie King said that the changes would roll out to all of its locations over the next year and a half. Wan Kim, CEO of Smoothie King, said, “At Smoothie King, every decision we make is based on helping to support our guests’ health and fitness journeys. We’re always improving what we put into our smoothies, so our guests can feel good about what they’re putting into their bodies. That’s our purpose and our commitment, and we could not be more excited to announce the Cleaner Blending initiative.”
12. As the Cleaner Blending initiative rolls out across the Smoothie King system, the brand added whole organic spinach to its menu in early March 2018. Customers can now add spinach to any of their smoothies. Smoothie King also introduced two new blends that highlight the new ingredient: the Vegan Pineapple Spinach Smoothie and the Veggie Lemon Ginger Spinach Smoothie.
13. Mitchell Grittman, food scientist for Smoothie King, said, “Our new veggie smoothies are packed with fiber, potassium, vitamin A and vitamin C, making them nutritious additions to our Cleaner Blending menu. Not only will these smoothies help guests fill the ‘whole’ in their diets, they also stay true to our promise to create better-for-you blends with quality ingredients.”
14. The idea for Smoothie King came from the company’s founder Steve Kuhnau in the early 1970s. Kuhnau was lactose intolerant and wanted to find an alternative to the malts, shakes, and floats he couldn’t enjoy. After experimenting with mixing real fruit, nutrients, and proteins in a blender at home, Kuhnau decided that he wanted to share his smoothie blend with others, so he opened the first Smoothie King store in 1973 in Kenner, Louisiana.
15. After opening a few more Smoothie King locations over the next decade, Kuhnau started franchising the concept in 1989 with the first franchised location opening in New Orleans. To celebrate the brand’s 30th anniversary in 2003, Smoothie King opened its first international location in South Korea.
16. In 2012, Kuhnau sold Smoothie King to Wan Kim, the South Korean master franchisee. That same year, Smoothie King moved its headquarters to Jefferson Parish, near the original store. In 2013, the brand updated its logo, which features a red crown hovering over the words Smoothie King. Today, there are Smoothie King locations in the United States, South Korea, Trinidad & Tobago, and the Cayman Islands.
Entrepreneur’s Franchise 500
17. Smoothie King ranked No. 35 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Smoothie King franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Smoothie King’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 590
- Outlets at the End of the Year: 633
- Net Change: +43
- Outlets at the Start of the Year: 633
- Outlets at the End of the Year: 717
- Net Change: +84
- Outlets at the Start of the Year: 717
- Outlets at the End of the Year: 787
- Net Change: +70
- Outlets at the Start of the Year: 22
- Outlets at the End of the Year: 26
- Net Change: +4
- Outlets at the Start of the Year: 26
- Outlets at the End of the Year: 26
- Net Change: 0
- Outlets at the Start of the Year: 26
- Outlets at the End of the Year: 28
- Net Change: +2
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- Under Part A below, Smoothie King has provided unaudited statements of average annual Unit Net Sales as of December 31, 2017, December 31, 2016, December 31, 2015, and December 31, 2014.
- Under Part B below, Smoothie King has provided information on the average annual Net Sales percentage increase for Units comparing the 2017 and 2016 calendar years, the 2016 and 2015 calendar years, the 2015 and 2014 calendar years, and the 2014 and 2013 calendar years.
- All Units offer substantially the same products and services to the public. New franchisees will receive substantially the same services as those offered to existing franchisees.
- Smoothie King obtained these historical financial results from the information submitted by its franchisees. Neither Smoothie King nor an independent certified public accountant has independently audited or verified the information.
Part A – Statement of Average Net Sales for 2017, 2016, 2015, and 2014
- The four tables below provide information on average Net Sales of Units during each of the 12-month periods starting January 1, 2017 and ending December 31, 2017; starting January 1, 2016 and ending December 31, 2016; starting January 1, 2015 and ending December 31, 2015; and starting January 1, 2014 and ending December 31, 2014.
- The term “Net Sales” is defined as all products and services sold in or from the Unit, including off premises catering and delivery, but excluding excise or sales taxes, as well as returns, allowances, and discounts.
- The data below is a representation of average Net Sales for Units broken into 9 segments: top 10%, top 25%, top 50%, top 75%, bottom 10%, bottom 25%, bottom 50%, bottom 75%, and total/all.
- Net Sales information is provided on Units open for the consecutive 13-month period ending on December 31st of the period presented, including those Units closed for a period of less than 8 weeks for remodeling purposes.
- Units presented exclude those Units not scheduled to be open daily throughout the period (excluding holidays), such as Units within office buildings that close for the weekend and Units on college campuses that close for the summer period.
Table A-1 – Average Net Sales of USA Units (January 1, 2017 to December 31, 2017)
- As of December 31, 2017, there were 787 Units operated by franchisees and 28 Units operated by Smoothie King. Of the 815 Units, 684 Units operated by franchisees and 25 Units operated by Smoothie King had been open for the 13-month period ending December 31, 2017, meaning Units opened prior to December 1, 2016.
- Of those 684 franchised Units, 24 Units were excluded since they were not scheduled to be open daily during the reporting period, or were closed for more than an 8-week period during the calendar year 2017, including 24 Units that closed during the 2017 calendar year.
- Of the 660 Units referenced in the table below, all reported sufficient financial performance information to be included in this financial performance representation.