FDD Talk: Smoothie King Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

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

• 2019, 2018, 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 30, 2019, December 31, 2018, December 31, 2017, December 31, 2016, December 31, 2015, and December 31, 2014, respectively

• 2019 vs. 2018, 2018 vs. 2017, 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

26 Things You Need to Know About the Smoothie King Franchise

Donates Over $1 Million in Smoothies to Essential Workers

1.  In mid-June 2020, Smoothie King announced that it had donated over $1 million in smoothies to essential workers and workplaces across the country. Smoothie King promised to help support the health and wellness journeys of essential workers nationwide during the COVID-19 pandemic. The result was an outpouring of support from Smoothie King franchisees, partners, team members, and guests which made it possible to meet Smoothie King’s donation goal of $1 million.

2.  CEO Wan Kim said, “This pandemic is like nothing we’ve ever seen before, yet essential workers everywhere are still expected to show up to work and put their health and safety at risk. By donating $1,000,000 in smoothies, we wanted to help these heroes on their health and wellness journeys while they helped others do the same. Our goal was to give back to the heroes keeping all of us safe, and we’re thrilled to have reached that goal.”

3.  Smoothie King franchisees and their team members were able to donate thousands of nutritious meal-replacement smoothies to feed essential workers and workplaces throughout the United States. Smoothie King also gave its guests the opportunity to help fulfill the $1 million in smoothies pledge. From the initiative’s onset, guests were able to purchase smoothies in store and online, intended for essential workers in their own communities, and the local Smoothie King would later deliver those smoothies firsthand to said workers.

4.  Kim added, “I couldn’t be prouder of how our entire company responded. It wouldn’t have been possible without our franchisees, partners and team members. Smoothie King is also thankful to those guests who participated and helped achieve the donation goal. Together, we helped provide thousands of healthier, on-the-goal meals to people that really needed it.”

Inks Exclusive Partnership with DoorDash

5.  In mid-June 2020, Smoothie King announced a new, exclusive partnership with DoorDash, which allows the lifestyle smoothie brand to expand its guest reach and inspire more healthy and active lifestyles by meeting guests where they are. Beginning in early May, guests near any of the nationwide Smoothie King locations could order all 83 purpose blends through the DoorDash app or website for delivery or pick up.

6.  Smoothie King CMO Rebecca Miller said, “As the world continues to face the challenges of living a new normal, Smoothie King’s partnership with DoorDash – a leader in the off-premise space – provides a convenient, safe, and nutritious meal-replacement option for guests when they need it most. Every smoothie on our menu is purposefully crafted to serve as an integral part of each guest’s health and fitness journey. We’re excited to expand our reach and help even more guests keep up with their healthy lifestyles wherever they are.”

7.  Starting June 15, Smoothie King is offering a “Try Me Free” promotion that will give new Smoothie King guests who order through DoorDash $0 delivery fees on orders of $15 or more. Additionally, Smoothie King is joining DoorDash’s subscription service, DashPass. DashPass offers customers unlimited $0 delivery fees from participating restaurants on orders of $12 or more for a monthly subscription fee of $9.99.

8.  Smoothie King orders can be placed via the DoorDash website or app, available for iOS and Android. Your favorite blends will be delivered with a “no-contact” delivery. Smoothie King delivery orders include tamper-resistant packaging.

9.  Smoothie King also began to use DoorDash Drive, DoorDash’s white label fulfillment platform. Smoothie King utilizes the DoorDash fleet of Dashers for door-to-door fulfillment of orders placed on the Healthy Rewards loyalty app and website. Guests can enroll in Smoothie King’s loyalty program by downloading the Healthy Rewards app.

Continues to Expand Franchise Footprint Despite Ongoing COVID-19 Pandemic

10.  In early August 2020, Smoothie King disclosed that it has maintained a steady development pace since the start of the year, opening 31 new domestic locations and 119 international locations while also signing 38 U.S. franchise agreements. The brand expected to open a total of 80 new U.S. locations by the end of 2020.

11.  “Our franchise system continues to grow because of our brand’s mission and vision and how we help our franchisees fulfill those promises,” said Smoothie King CEO Wan Kim. “As a result, we’re seeing more like-minded owners invest in our purpose-driven brand. Guests are going to be prioritizing their health and wellness even more going forward, and we fulfill those needs unlike any other concept.”

12.  Following the throes of the pandemic, Smoothie King is rebounding at an impressive rate, experiencing a 14-percent systemwide sales jump year-over-year for July. This includes the brand’s 400-plus drive-thru locations, which are averaging a 26-percent increase for the month versus 2019 sales data. Similarly, in June, Smoothie King’s franchisee in Greenwood, Indiana, set an opening-week sales record at their new location – recording $45,759 in total sales.

13.  “The momentum we gained during the pandemic by focusing on our guests’ needs has set us up for an exciting and dynamic year in terms of both sales and store growth,” said Kim. “I can’t wait to see what our franchise owners accomplish in the second half of 2020.”

14.  As Kim alluded to, Smoothie King has introduced several guest-focused initiatives since the beginning of the pandemic to meet the convenience and safety needs of guests. In February 2020, Smoothie King began rolling out its digital initiatives. The first step was launching online ordering for in-store pickup on its Healthy Rewards loyalty app and webpage. The brand then launched curbside pickup in early April and announced an exclusive delivery partnership with DoorDash in early May to make living a healthy and active lifestyle more convenient while expanding the brand’s reach.

15.  Kim added, “We were pleased that our digital rollout happened as quickly as it did. After we introduced online ordering, curbside pickup and delivery, digital sales surged well past our expectations. Moving forward, these initiatives will only continue to help both our company and our franchisees capitalize on shifting guest trends.”

16.  Smoothie King also introduced a new Immune Builder smoothie flavor; allowed Healthy Rewards members to add a complimentary immune support enhancer to any order; successfully donated $1 million in smoothies to essential workers and workplaces nationwide; and is working with Under Armour to provide premium fitness content to loyalty guests.

17.  To continue prioritizing the safety of its guests and team members, Smoothie King has announced that beginning August 5, facial coverings would be encouraged when visiting all U.S. locations. They would not be required when ordering at the drive-thru, when using curbside pick-up, or placing an order for delivery.

18.  The attraction to Smoothie King’s franchise opportunity is also due to the comprehensive support franchisees receive – which has been on full display since the beginning of the COVID-19 pandemic. To support its franchise owners during the pandemic, Smoothie King deferred all royalty payments and technology fees and completely waived national advertising for March and April. Consequently, Smoothie King franchisees were able to retain 100% of their cashflow to operate their businesses during the hardest months of the pandemic so far.

19.  According to Kim, “Our franchisees are family, and we understand how hard this time has been for them and their families. We wanted to show them how much we appreciate their efforts over the last couple months as they continued to help inspire guests to live healthy and active lifestyles. Without our dedicated franchisees, we cannot live out our mission and vision.”

20.  The Smoothie King development team has also worked diligently to support franchisees as they negotiated with their landlords to alleviate their monthly rent obligations by either deferring payments or forgiving them altogether. Other franchisee-support tactics Smoothie King has implemented during the current pandemic include holding weekly franchisee webinars covering topics like applying for PPP loans, developing a COVID response plan, and marketing promotions to encourage online ordering and drive sales.

21.  These purpose-driven efforts, from both a guest and franchisee perspective, have and continue to translate into growth for the brand. In 2020, Smoothie King added new locations in markets like New Orleans, Washington, D.C., San Antonio, Tucson, Baton Rouge, and Louisville. A total of 15 stores began blending in Q1, another 11 opened in Q2, and five opened in July. Additionally, the 38 signed-and-accepted franchise agreements are projected to produce 41 future locations. This is the result of 26 existing owners reinvesting in the brand and 12 new franchisees joining the system in 2020.

22.  “Joining Smoothie King is as much a commitment to our brand as it is to our business, and we believe our actions over the last couple months will only continue to attract the kind of owners we’re looking for,” said Kim.

Company History

23.  Smoothie King was founded in 1973 by Steve Kuhnau and his wife Cindy in Kenner, Louisiana. After Kuhnau learned that he was lactose intolerant, he started experimenting with making alternative treats to the milkshakes that he still craved. He began mixing real fruit, nutrients, proteins, and other supplements together until he developed a satisfying smoothie. Not only did the smoothies taste good, Kuhnau began to notice that they had a positive impact on his health. Kuhnau wanted to share his smoothies with others, so he opened the first Smoothie King with his wife.

24.  Over the next decade, the Kuhnaus continued to grow the Smoothie King business and they started franchising the concept in 1989. Smoothie King eventually became one of the largest smoothie franchises in the United States. The Kuhnaus owned and operated Smoothie King until 2012, when they decided to sell the company to Wan Kim – a South Korean Smoothie King franchisee since 2002.

25.  Under Kim’s leadership, Smoothie King pushed international expansion, especially in South Korea. Kim also began experimenting with selling salads and wraps at these South Korean locations. By the end of the 2010s, Smoothie King had more than 1,000 locations operating around the world. Today, there are Smoothie King shops in the United States, South Korea, the Cayman Islands, and Singapore.

Entrepreneur’s Franchise 500

26.  Smoothie King ranked No. 19 on Entrepreneur’s 2021 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 2020 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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  717
• Outlets at the End of the Year:  787
• Net Change:  +70

2018

• Outlets at the Start of the Year:  787
• Outlets at the End of the Year:  873
• Net Change:  +85

2019

• Outlets at the Start of the Year:  873
• Outlets at the End of the Year:  934
• Net Change:  +61

Company-Owned

2017

• Outlets at the Start of the Year:  26
• Outlets at the End of the Year:  28
• Net Change:  +2

2018

• Outlets at the Start of the Year:  28
• Outlets at the End of the Year:  29
• Net Change:  +1

2019

• Outlets at the Start of the Year:  29
• Outlets at the End of the Year:  38
• Net Change:  +9

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

• Under Part A below, Smoothie King has provided unaudited statements of average annual Unit Net Sales as of December 30, 2019, December 31, 2018, 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 2019 and 2018 calendar years, the 2018 and 2017 calendar years, 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 2019, 2018, 2017, 2016, 2015, and 2014

• The six tables below provide information on average Net Sales of Units during each of the 12-month periods starting January 1, 2019 and ending December 30, 2019; January 1, 2018 and ending December 31, 2018; 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 nine 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 30, 2019, and on December 31st for all other years 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, 2019 to December 31, 2019)

• As of December 30, 2019, there were 931 Units operated by franchisees and 38 Units operated by Smoothie King. Of the 969 Units, 838 Units operated by franchisees and 34 Units operated by Smoothie King had been open for the 13-month period ending December 30, 2019, meaning Units opened prior to December 1, 2018.

• Of those 838 franchised Units, 32 Units were excluded since (i) they were not scheduled to be open daily during the reporting period, (ii) they were closed for more than an 8-week period during the fiscal year 2019, including 20 Units that closed during the 2019 fiscal year, (iii) they did not use the POS system required by Smoothie King, or (iv) they sold non-Smoothie King approved items pursuant to prior versions of the franchise agreement (2 Units).

• Of the 806 franchised Units referenced in the below table, all reported sufficient financial performance information to be included in this financial performance representation.

• The information below does not include information from Units operated by Smoothie King.

Top 10%