Tropical Smoothie is a new, rising, and popular smoothie chain. Originally serving only smoothies, they have since expanded to offer various food items. With a style reminiscent of its first Florida location, Tropical Smoothie franchises are meant to bring the customer to a tropical beach experience with tasty smoothies. The success of the brand is astounding, now reaching over 1,100 locations.
It may be time for you to start your own business. If you have been saving for a while and dream of the prospect of running your own business, you might be thinking of the best business opportunities for you as an entrepreneur. Starting a profitable venture, however, can be hard. This is especially true if you do not have the exact knowledge to help drive the location to profitability. You might be feeling hesitant to go alone on your own venture. The prospect of franchising might be attractive to you since franchises usually come with a successful business model. Franchises also include support networks, among more benefits of franchising. Picking the right franchisor can help you on your path to success.
As you are exploring your franchise options, you are likely rightly considering your budget and what you will be able to afford between the total investment and the costs that you will owe to the corporate company. While you might be considering cheap franchises to start, you might also be wondering if spending more will generate higher profit margins. You may have heard of Tropical Smoothie and are wondering if this is the franchise for you.
You have come to the place for all your Tropical Smoothie franchise information needs. In this post, we will review the Tropical Smoothie franchise, the advantages and disadvantages of franchising with Tropical Smoothie, the requirements to franchise, the Tropical Smoothie cafe franchise cost, the franchise profitability, and the application process. We’ll cover the following topics in-depth in this article:
Tropical Smoothie Cafe, LLC traces its founding back to 1993 in the Florida panhandle. The current headquarters of the company is in Atlanta, Georgia. Originally, the franchise only served smoothies. After reaching success with their delicious smoothie products, they expanded to the franchising model. In 1999, as the business was beginning to take off, Tropical Smoothie introduced food options into its menu, which became wildly popular.
The split of the food and drink sales is now almost equal. Tropical Smoothie offers a menu including sandwiches and wraps. The stores are designed to make one feel as though they are at the beach while they enjoy the experience of delicious food and smoothies.
Tropical Smoothie Cafe is one of the fastest-growing franchises in America. If you are interested in franchising, you should consider the advantages of owning a location.
Advantages of Owning a Tropical Smoothie
Owning a Tropical Smoothie franchise has become popular for a reason: the brand is experiencing a lot of growth and success. An advantage to franchising with Tropical Smoothies is getting to be a part of a brand that is experiencing large growth. This is likely due to their great product selection, using real fruit, and offering of great food options. In any case, the business model of Tropical Smoothie has proved to be great, especially in the franchise industry. The company has sustained its growth even through the pandemic.
One of the other benefits of Tropical Smoothie is that the company is extremely franchise-centric, meaning there are not a lot of company-owned stores. The CEO of Tropical Smoothie, Charles Watson, recently said that 99.9% of franchises are franchisee-owned. While this statement may not seem like such a great benefit at first, understanding the implications of the incentives for franchisor behavior can provide you with important insight into the brand.
Since the company is composed of so many franchisees, the franchisor is dependent on revenue from franchisees. This means that they want to extract as much revenue as possible from franchisees without making franchisees upset. This is the key incentive. If franchisees become frustrated with a company policy, the franchisor will likely be incentivized to change it. This is because the franchisor is dependent on the success and happiness of its franchisees.
Tropical Smoothie also has the advantage of offering a compelling menu, culture, and brand for its customer base. Its smoothies are made from real fruit, and its menu includes vegetarian and vegan options. The flexibility and direction of the Tropical Smoothie brand likely attract many customers, helping to add to the success of the brand. The franchise also has a laid-back culture, from the way they design their restaurants to their promotions of wearing flip-flops on national Flip-Flop Day. They help to attract customers through their use of modern and fun promotions and activities. The brand also gives back to charity, establishing a good reputation in the communities they operate in.
In all, there are many great reasons to franchise with Tropical Smoothie. You should consider what is important to you and assess your criteria against what Tropical Smoothie can offer.
Disadvantages of Owning a Tropical Smoothie
While there are many advantages to owning a Tropical Smoothie, there are also some disadvantages that you should consider in your decision-making process.
One of the disadvantages of owning a Tropical Smoothie is due to some recent news. There was a Hepatitis A outbreak in some of the strawberries at Tropical Smoothie locations. As a result, some people were hospitalized. The brand worked to correct this and resolve the sourcing problem with strawberries from Egypt, but the reputational damage past this might stick around. Of course, this news story does not serve to help. It might affect the reputation of your future franchise inadvertently.
Another challenge with owning a Tropical Smoothie is the sheer competition. Making a smoothie is nothing revolutionary, and the low-cost model for starting a location has allowed many smoothie shops and franchises to start. Smoothie King is one example. Facing this competition can reduce your earnings, which is why picking a location with less competition is important. It is better to choose a location with few locations of an existing Tropical Smoothie as well, so as to prevent intra-brand competition.
One of the other disadvantages might be the costs of franchising. When you think about the Smoothie business, it should not be hard to make smoothies of a certain type. Franchising just for access to the ingredients and products may not make sense. If you would rather avoid the fees and hassle of following franchise guidelines, it might make sense to just pursue your own smoothie shop, design your own menu, and run your own location. This downside will really just depend on what you are looking for in a business. For some, paying these fees will make perfect sense, as they might prefer the defined product line and corporate support.
As you might see, you will need to consider your own criteria for what makes a good investment before moving forward in deciding on what a good business investment is.
Requirements for Opening a Tropical Smoothie
Once you have considered the benefits and downsides of franchising a Tropical Smoothie and are interested in moving forward with an application, you need to make sure that you are eligible to apply.
When discussing the requirements for opening a Tropical Smoothie franchise, there are two general financial requirements. These are a net worth requirement and a liquid capital requirement. The net worth requirement is $350,000 for Tropical Smoothie, which is low for the fast food industry. For smoothie shops, this net worth requirement is more normal. You might be wondering if you can meet this requirement.
To check and make sure that you are eligible, you need to determine your net worth. Start by adding the values of all of the assets you own. This includes your house, cars, cash, savings, and any other assets that you can sell for money. Then, calculate the total of the debt that you have outstanding. Subtract your debt from your assets to get a net worth figure. If you have at or above $350,000, you are still eligible to apply for a Tropical Smoothie franchise.
There is also a liquid capital requirement. Liquid capital, or liquid assets, is the amount of cash or cash equivalents that you have on hand. This could mean both the cash you have, your savings, and any stocks that you could quickly convert into cash if needed on short notice. The total amount of these is known as your liquid capital. For Tropical Smoothie, the liquid capital requirement is $125,000. This is also pretty low across franchises, but it may be more in line with smoothie shop franchise requirements.
Cost of Starting a Tropical Smoothie
If you meet the requirements of a Tropical Smoothie franchisee, you are on the road to starting your Tropical Smoothie franchise. Before you decide to franchise, however, you may want to assess the estimated costs and profitability of a franchise. You would be correct in doing so.
Generally, there are two main sections of costs that you can divide franchising costs into. These are corporate costs or fees that you will pay to the franchisor for the right to license the franchise. The other part of the costs is general investment costs that would have to be made regardless of the franchise status. These concentrate more on real estate, construction, equipment, and inventory, although there can be an overlap with corporate costs. These costs can also happen at the start or be ongoing fees that will create obligations for your franchise.
Starting with the costs paid to your franchisor, the first fee is known as the initial franchise fee. The franchise fee is an upfront lump sum fee paid to the franchisor at the signing of the franchise agreement. This fee is used by the franchisor as revenue, but it also serves to help establish the relationship between the franchisor and the franchisee. It is used to help fund training and the initial cooperation on the development of the franchise.
The initial franchise fee for Tropical Smoothie is $30,000. While this is about an average franchise fee, there are other costs that will make your total upfront costs more expensive.
One of the less-known fees at the outset of franchising your Tropical Smoothie is their grand opening marketing fee. This fee is $10,000. This is certainly not a small amount of money. The money here is used as an initial investment into the marketing pool, but it also helps your business advertise.
Combined, you might consider the total initial investment paid to corporate to be about $40,000 between the two fees. While this is expensive, if you are considering a multi-unit franchise, the cost can get cheaper. For example, when opening additional units, you only need to pay $20,000 per unit. This can make opening additional units of Tropical Smoothie cheaper, but if you are only intending to open one unit, the fee can be steep.
There is one more possibility to get your fee lowered. That depends on your status as a veteran. If you have served, you qualify for a 10% discount on the franchise fee. This means saving you $3,000, which can be valuable to put toward other business expenses.
These collectively represent the startup costs paid to corporate. However, there are also ongoing costs that you will have to pay. These ongoing fees to corporate will likely be paid monthly, so you should prepare for them early on in the operation of your franchise business.
The first of these fees is the royalty fee. The royalty fee is a fee that is typically paid monthly, usually as a percentage of gross sales, to the franchisor. This helps continue the franchisor and franchisee relationship, and it helps to fund the operations and brand of the franchise. The royalty fee charged by Tropical Smoothie is 6% of gross sales, which is pretty average to the slightly high end of franchising fees in the franchising industry.
The next fee is the National Marketing Fee, which is typically known in the franchising industry as the marketing fee or advertising fee. The National Marketing Fee is a charge of a percentage of gross sales that helps to fund national marketing efforts for the Tropical Smoothie brand. The fee charged by Tropical Smoothie is between 3% to 4%, which would initially be low for an advertising or marketing fee, but this fee does not encompass another requirement of the franchising agreement costs.
That cost is called the Local Advertising Cooperative Contribution, which is another monthly fee assessed by Tropical Smoothie on your gross sales. This fee helps to contribute to marketing at a local level, as the name implies, for your Tropical Smoothie location. The fee charged by Tropical Smoothie is a minimum of 2%. While this fee does more directly help your franchise in the way of advertising, it is another non-discretionary fee that you will have to pay. Ultimately, your attitude toward this should be determined by your investing criteria and what you think is important in a franchisor.
While these fees represent the costs paid to the franchisor, there are also costs involved in actually starting your franchise location. These include real estate, construction, equipment, inventory, and other business-related costs to the establishment and opening of your franchise business.
There is a small difficulty in determining the likely amount that you will pay for your total investment in starting a Tropical Smoothie franchise. This is because Tropical Smoothie offers a variety of options when you select what kind of store you would like to run.
Options for setting up your Tropical Smoothie location include end-cap stores, free-standing stores, in-line stores, and flexible sites with or without drive-thrus. The ability to decide which store type affects the size of your location and hence estimated costs. Additionally, choosing to buy or rent the land on which your Tropical Smoothie location will be located will affect the overall investment you make. As a general estimate, total investment into a Tropical Smoothie franchise location can be between approximately $275,000 to $580,000.
As you can tell, there is quite an investment range of possibilities when it comes to what kind of franchise development you will have. In any case, you can get a more complete version of the costs inside the Franchise Disclosure Document (FDD), which you will receive from Tropical Smoothie upon getting further into the process of franchising.
How Profitable Is a Tropical Smoothie?
While understanding the range of costs of starting a Tropical Smoothie is important, it is also vital to estimate your potential profits in a Tropical Smoothie location. By looking at both profits and costs, you can determine if the investment is worth it for you. This might also be important to determine how long it will take you to recover the capital that you are putting forward into this business. In any case, understanding overall profitability is key to the success of your franchise.
Some estimates believe that a Tropical Smoothie location with an initial investment of about $409,000 can produce $126,000 or so in profit in a year. If this is true, Tropical Smoothie can be a really profitable franchise. This might explain why the franchise is so attractive to start and operate.
In any case, it is important to step back and assess the reality of the numbers. While it is good that average estimates point to high profits for a Tropical Smoothie location, you should understand that these numbers will not represent your specific situation. Some franchisees have likely done much better, and others have likely done much worse. In any case, it is important to take a general idea into account to consider applying for a Tropical Smoothie location. Once in conversations with the franchisor, they can help you estimate your earning potential more accurately. You can also get more clarity by acquiring the FDD.
Training for Tropical Smoothie
As you are preparing to apply for a Tropical Smoothie franchise, you might be getting nervous about your ability to successfully run the location. After all, if you have not had experience with a fast-casual restaurant enterprise before, you might be worried that your investment will not be as successful as possible.
While this is a rational fear, there is a lot of comfort to be found in the training program provided by Tropical Smoothie. Tropical Smoothie will have selected your application because they believe in your ability to be a successful franchise owner. Moreover, they have developed a comprehensive training program to help you succeed in your Tropical Smoothie location.
The training program that Tropical Smoothie provides is a 4-week program involving many different learning dynamics to help franchisees understand their franchise locations. The first two weeks of the four-week program are spent in a nearby Tropical Smoothie Cafe, where franchisees will learn the operations of a franchise and how to succeed in running one. After this initial training, the franchisee will go to Atlanta, Georgia, to have classroom training with the corporate company’s support center for one week. This will help you become an expert on the brand and your franchise. The final ten days of training will be spent at your restaurant, preparing your location for the grand opening.
After this training program, you will likely be confident in your ability to manage your franchise and operate it to success. One of the benefits after the program is that your business will still be in a relationship with corporate, where they can provide you technical support if you need it and, of course, the logistical arrangements to help your business be profitable.
Process of Starting a Tropical Smoothie
If you have decided on starting a Tropical Smoothie franchise, now is the time to start your application.
The first step is to head to the Tropical Smoothie website. There, they have a form that you can fill out with your contact information and financial information to let them know that you are interested. Alternatively, they have a phone number there that you can call. Once you fill out the interest form, someone from the corporate development team at Tropical Smoothie will give you a phone call to discuss more of the details. They will also be available to answer any of your preliminary questions about the franchise or the franchising process.
After the phone call, you move on to the next step. That step is the formal application for starting a Tropical Smoothie franchise. The application contains four pages worth of questions. Spending time on this application can help your chances of getting approved for starting your franchise.
The application will ask you several questions, including questions about your background, your work and personal experience, your finances and ability to fund parts of your business, how you manage people, the goals you want to achieve in your franchise and franchising relationship, and your general interests. You should spend a lot of time and effort in making sure that these answers are not just representative of yourself but that they also put the best foot forward for you as a franchisee applicant.
If your application continues along, Tropical Smoothie will then provide you with the FDD. The FDD will provide you with comprehensive data on the success of franchisees, the fees that they will need to pay to the franchisor, and the business plan of the Tropical Smoothie plan. You should carefully consider the information contained in this document and think about incorporating it into your decision. Now that you are equipped with empirical information, you should decide if this investment is really right for you.
At the same time, Tropical Smoothie will provide you with business planning tools to help you prepare to start your franchise.
After this step, you will receive a Virtual Brochure Presentation. This presentation is designed to provide you with more information on the franchisee program. This includes the support that Tropical Smoothie gives to franchisees, the procedures related to real estate purchases and related recommendations, the process for designing and constructing a business, and the marketing schemes related to the franchise at both a national and local level.
This stage helps you to provide all the information you need to make your formal decision on franchising with Tropical Smoothie. The next step is the executive committee approval.
Your application will be reviewed by the executive committee. The franchise leadership team is part of this committee which will review your application. If you are successful, Tropical Smoothie will request documents from you in order to draw up a franchise agreement and start the signing process.
That leads you to the final step of the Tropical Smoothie franchising process. You simply need to sign the franchise agreement. Now, you will start the process of working with corporate to select a site for your store. Finally, you will be ready to open your first Tropical Smoothie franchise.
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