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

• Section I – Background information on the Tropical Smoothie Cafe franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Tropical Smoothie Cafe franchise, based on Item 7 of the company’s 2020 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Tropical Smoothie Cafe franchise, based on Items 5 and 6 of the company’s 2020 FDD

• Section IV – Number of franchised and company-owned Tropical Smoothie Cafe outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Tropical Smoothie Cafe’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019, 2018, and 2017 average, median, highest, and lowest net revenues, number of stores, and number and percentage of stores that surpassed the average net revenues in the category for the top 10%, top 25%, top 50%, top 75%, bottom 10%, bottom 25%, bottom 50%, bottom 75%, and all franchised traditional Tropical Smoothie Cafe stores that had been open for at least one full year as of the end of the company’s fiscal year

Section I – Background Information

18 Things You Need to Know About the Tropical Smoothie Cafe Franchise

Signs More Than 200 Franchise Agreements and Opens 124 Cafes in 2019

1.  Tropical Smoothie Cafe kicked off 2020 by announcing the company’s significant achievements in 2019, reporting its eighth consecutive year of same-store sales growth. During 2019, the brand opened 124 cafes in key markets throughout the U.S. such as Dallas-Fort Worth, Tampa, and Chicago and signed 213 franchise agreements, with more than 60% of those agreements coming from its existing franchisees.

2.  As a result of its rapid expansion and success achieved, Tropical Smoothie Cafe was recognized as one of Fast Casual’s Top 100 Movers and Shakers, Nation’s Restaurant News’ Top 200 and Top 10 Fastest Growing Chains, Franchise Times’ Fast and Serious, as well as Entrepreneur’s Best Franchises for Any Budget, in 2019.

3.  Charles Watson, CEO of Tropical Smoothie Cafe, LLC, said, “We’re proud to reflect on 2019, recognizing it as a record-breaking year for Tropical Smoothie Cafe as we opened more cafes and sold more franchise agreements than any other year in our company history. To top it off, we experienced same-store sales twice the industry average, further positioning us as a standout brand in the segment and a viable investment strategy for experienced multi-unit operators or those looking to franchise for the first time. As we enter a new decade, our goal is to continue propelling the success and profitability of our dedicated franchisees, existing and new, by investing heavily in operations execution and support, the digital guest experience and technology to support cafe operations.”

4.  The brand’s aggressive growth goals for the Midwest and Western United States resulted in major milestones: the brand opened its 750th cafe in Sugar Land, Texas and its 800th cafe in Arlington Heights, Illinois. These expansion efforts have been followed by the signing of several multi-unit franchise agreements in various markets throughout the two regions.

5.  Cheryl Fletcher, SVP of franchise development for Tropical Smoothie Cafe, LLC, added, “This year we’ve achieved numerous development milestones for the brand that position Tropical Smoothie Cafe for even greater accomplishment in 2020. Our franchisees’ unparalleled commitment to the brand and the communities they serve drive our expansion efforts and sustain the growth momentum we are experiencing. We will continue our targeted growth throughout the U.S. with the goal of having 1,500 cafes open and reaching an AUV of $1 million over the next five years.”

Aims to Donate 100,000 Smoothies to Local Healthcare Workers and First Responders

6.  Near the end of March 2020, Tropical Smoothie Cafe announced its goal to donate 100,000 smoothies nationwide to local healthcare workers and first responders as part of its #InItTogether campaign to help support those on the front lines of the COVID-19 pandemic.

7.  According to Charles Watson, CEO of Tropical Smoothie Cafe, LLC, “In cafes across the country, the Tropical Smoothie Cafe family is working tirelessly to support our local communities, which are currently facing unprecedented hardship. Our safety is dependent upon the selfless, hard work of our local healthcare workers and first responders and we want to help them in any way we can. The 100K smoothie giveaway is a simple, but impactful example of one way we can show our gratitude and bring a smile to their face – one sip at a time.”

8.  To reach the goal of 100,000 smoothies, Watson added, each cafe has been challenged to donate at least 100 smoothies. In the first days of the campaign, several franchisees jumped on board to donate more than 600 smoothies each. As of March 27, Tropical Smoothie Cafe has delivered approximately 20,000 smoothies across over 20 states and over 30 markets. The brand’s focus has been on supporting all local communities, the same communities where franchise owners and the cafe employees live and work.

9.  Nick Crouch, a multi-unit franchisee with Tropical Smoothie Cafe and the CEO of DYNE Hospitality Group, said, “As a small business owner, I was grateful for the opportunity to show our local first responders and healthcare workers who go above and beyond for us every day. Even if it is just in a small way, we want them to know we appreciate their hard work that we’re all in this together!”

Launches 1 Million Smoothie Giveaway Nationwide

10.  At the beginning of May 2020, Tropical Smoothie Cafe announced its One Million Smoothie Giveaway for customers nationwide. Coming off the heels of donating over 200,000 smoothies in April to the frontline heroes in the COVID-19 pandemic, Tropical Smoothie Cafe’s new goal is to spread even more sunshine by giving away one million free smoothies to people across the country.

11.  Charles Watson, CEO of Tropical Smoothie Cafe, LLC, said, “We were humbled by the incredible response to the 200,000 smoothies our franchisees donated to frontline heroes nationwide. The smiles we saw and stories we heard inspired us to think bigger and explore how we could do even more to support the communities we serve. Our guests have always told us our smoothies provide a refreshing, momentary escape and we figured everyone could use a little escape right now. So, we decided to extend our smoothie giveaway to everyone in America by offering 1,000,000 free smoothies.”

12.  In support of National Nurses Appreciation Month in May, Tropical Smoothie Cafe also pledged to donate $100,000 to the American Nurses Foundation’s COVID-19 Response Fund upon reaching its goal of giving away 1,000,000 smoothies.

13.  According to Kate Judge, executive director of the American Nurses Foundation, “The support Tropical Smoothie Cafe already gave to nurses and other healthcare professionals is tremendous. We appreciate them doing even more by giving away 1 million smoothies and making a generous donation to the American Nurses Foundation’s Coronavirus Response Fund for Nurses. Their donation will help the Foundation support critical areas where frontline nurses need immediate and ongoing support like mental wellness, direct financial assistance and national advocacy.”

14.  In support of Tropical Smoothie Cafe’s ongoing efforts to promote social distancing, guests can only participate by visiting www.FreeSmoothies.com, where they can sign up to receive a single-use promo code, redeemable online only, for one free smoothie. Once the online order is placed, smoothies can be picked up at the designated Tropical Smoothie Cafe location. Free smoothies cannot be requested directly at the cafe for the safety of guests and crews. All offers are subject to applicable terms and conditions.

Company History

15.  Tropical Smoothie Cafe was founded in 1993 by Eric and Delora Jenrich and David Walker in Destin, Florida. Initially, Tropical Smoothie Cafe started out as a small smoothie shop selling drinks made with real fresh fruits. In 1997, the Tropical Smoothie Franchise Development Corporation was established and the following year the first franchised store opened in Tallahassee, Florida.

16.  After a few more years of growth, Tropical Smoothie Cafe expanded its menu to include healthy foods such as sandwiches and wraps. At this time, individual stores redesigned their store decor to offer a beach house theme with bright white walls, an open kitchen concept, vibrant colors, and tropical artwork.

17.  Over the next few decades, Tropical Smoothie Cafe continued to grow around the United States. By 2006, the chain had grown to 200 locations. A few years later, in 2012, private equity firm Buckhead Investment Partners (BIP) bought a controlling interest in Tropical Smoothie Cafe. Founders Eric Jenrich and David Walker have remained on the board of directors. Today, there are Tropical Smoothie Cafe stores all across the U.S.

Entrepreneur’s Franchise 500

18.  Tropical Smoothie Cafe ranked No. 18 on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Tropical Smoothie Cafe franchise costs, based on Item 7 of the company’s 2020 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Tropical Smoothie Cafe’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  539
• Outlets at the End of the Year:  627
• Net Change:  +88

2018

• Outlets at the Start of the Year:  627
• Outlets at the End of the Year:  718
• Net Change:  +91

2019

• Outlets at the Start of the Year:  718
• Outlets at the End of the Year:  833
• Net Change:  +115

Company-Owned

2017

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2018

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

2019

• Outlets at the Start of the Year:  1
• Outlets at the End of the Year:  1
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• The following tables provide historical sales information for Tropical Smoothie Cafe franchised restaurants (“Restaurants”) that were open at least one full year as of: (a) the calendar year 2019 for 652 Restaurants; (b) the calendar year 2018 for 569 Restaurants; and (c) the calendar year 2017 for 485 Restaurants.

• The tables do not include any financial performance information for any other types of franchises, such as non-traditional locations (i.e. college campus or other captive locations) or seasonal locations, and do not include any franchises of any type that had not been open for at least one year on December 29, 2019, December 30, 2018, and December 31, 2017, respectively.

• The information presented is not a forecast of future potential performance.

• For purposes of the tables below, Net Revenue means all revenue related to the sale of products and performance of services at the Restaurant, whether cash or credit, and regardless of collection in the case of credit, and income of every kind or nature related to the Restaurant, less any discounts. Net Revenue does not include (i) bona fide refunds to customers, (ii) revenues from sales taxes or other add-on taxes collected from customers by you and actually transmitted to the appropriate taxing authority, (iii) sales of used equipment not in the ordinary course of business, or (iv) sales of gift cards or similar products (but the redemption of any such card or product will be included in Net Revenue).

• The tables provide the average and median net revenues for the following categories of Restaurants in 2019, 2018, and 2017 on a category and cumulative basis:

• (a) the top 10% revenue producing Restaurants (meaning the average net revenue for the number of Restaurants that are in the top 10% of net revenues for that year);
• (b) the top 25% revenue producing Restaurants (which includes the Restaurants that are in the top 10%);
• (c) the top 50% revenue producing Restaurants (which includes the Restaurants that are in the top 10% and the top 25%);
• (d) the top 75% revenue producing Restaurants (which includes the Restaurants that are in the top 10%, the top 25%, and the top 50%);
• (e) the bottom 10% revenue producing Restaurants (meaning the average net revenue for the number of Restaurants that are in the bottom 10% of net revenue for that year);
• (f) the bottom 25% revenue producing Restaurants (which includes the Restaurants that are in the bottom 10%);
• (g) the bottom 50% revenue producing Restaurants (which includes the Restaurants that are in the bottom 10% and the bottom 25%); and
• (h) the bottom 75% revenue producing Restaurants (which includes the Restaurants that are in the bottom 10%, the bottom 25%, and the bottom 50%).

• The franchisor presents the average net revenue for the year in that category as well as the number and percentage achieving or surpassing the average net revenue in that category alone and cumulative for all Restaurants. For example, 61 of the 163 Restaurants in the top 25% for 2019 (or 37%), 52 of the 142 Restaurants in the top 25% for 2018 (or 37%), and 48 of the 121 Restaurants in the top 25% for 2017 (or 40%) achieved or surpassed that average.

Part 1 – Average Net Revenues in 2019

Top 10%