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Tropical Smoothie Franchise Cost Worth the Profit Potential?

Tropical Smoothie franchise

Written By Brooks Gammill

Last Updated: October 12, 2021
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Tropical Smoothie Franchise offers customers a variety of premium, handcrafted smoothies made with select fruit and vegetables blended fresh in the cafe using proprietary recipes, as well as specialty sandwiches, flatbreads, wraps, and bowls. A Tropical Smoothie Cafe is a better-for-you, fast-casual restaurant business offering freshly prepared food and smoothies served in a fun, friendly environment. There are currently 913 franchised locations and 1 company-owned restaurant.

Tropical Smoothie Cafe is a Georgia LLC organized on June 25, 2012. Charles Watson has been the CEO since December 2018. Tropical Smoothie Cafe was recognized as one of the Top 10 Fastest-Growing Chains as well as Entrepreneur’s Best Franchises for Any Budget. We will examine if the initial Tropical Smoothie Franchise Cost is worth the potential return.

 

How Much is a Tropical Smoothie Franchise?

The Tropical Smoothie franchise fee is $30,000. This is the upfront fee that must be paid when opening a Tropical Smoothie Cafe franchise. You will also pay a grand opening marketing contribution of $10,000.

If you qualify to develop and operate multiple Tropical Smoothie Cafe’s, then you will pay $20,000 for each additional unit you decide to open.

 

Tropical Smoothie Franchise Cost

The estimated total investment necessary to begin operation of a Tropical Smoothie cafe ranges from $257,500 – $560,500.

Tropical Smoothie franchise

Additional Cost Breakdown

The following costs are part of the upfront costs included in the initial investment. Many of these are one-time fees that are needed to launch the franchise.

Additional Cost Breakdown

Professional Fees$6,500 – $15,500
Restaurant Fixtures, Furniture and Equipment$76,500 – $134,000
Leasehold Improvements$143,500 – $260,500
Signage$4,000 – $13,000
Initial Inventory$4,500 – $18,500
Initial Training Expenses$5,000 – $9,000
Initial Deposits $1,000 – $17,000
Grand Opening Contribution$5,000 – $10,000
Additional Funds (Working Capital 3-6 months)$1,000 – $53,000
Total$257,500 – $560,500

Tropical Smoothie On-Going Cost and Fees:

Royalty Fee: 6% of Gross Sales

Local Advertising Cooperative Contribution: 2% of Gross Sales

How Much Do Tropical Smoothie Franchise Owners Make?

Tropical Smoothie Cafe Franchise Sales Figures

The table below represents 555 franchise locations that were in traditional units and have been in operation for at least 350 days in 2020.

Average Net Revenues in 2020

  Top 10% 25% 50% 75% Total
No. of Restaurants 55 139 278 416 555
Avg. Net. Revenues $1,512,328 $1,264,227 $1,079,747 $953,141 $840,622
Median Net Revenues $1,436,476 $1,170,520 $1,003,104 $892,617 $795,833
No. that Attained or Surpassed Stated Result in Category (Cumulative) 19 52 100 166 251
Percent that Attained or Surpassed Stated Result in Category (Cumulative) 35% 37% 36% 40% 45%
Range (Lowest-Highest) $1,224,646 – $2,552,230 $1,321,323 – $2,552,230 $795,833 – $2,552,230 $615,478 – $2,552,230 $244,404 – $2,552,230

The highest-earning franchise made over $2.5 million in revenue while the lowest-earning franchise made $244,000. These figures indicate that there is a widespread of the potential earnings you can make and it depends on how well the business is run, the location, and amount of time in operation. It is estimated that based on average net revenue of $840,000 and a profit margin of 15%, the average tropical smoothie franchise owner salary/ compensation is $126,000 per year.

From the moment you allocate your capital to invest in a food franchise, it can take up to a year to open the location and pass the breakeven point.

Based on a midpoint investment of $409,000 with estimated profits of $126,000, we expect it to take a little over 4 years to recoup the initial investment in a Tropical Smoothie franchise. 

Tropical Smoothie franchise

Tropical Smoothie Franchisor Income Statement

Consolidated Statements of Operations

 SuccessorPredecessor
202020202019
Revenues:   
Franchise royalty revenues$12,384$28,738$34,198
National advertising fees$5,208$11,608$13,865
Local advertising fees$4,137$9,370$11,546
Initial franchise fees$384$913$1,725
Company-operated restaurant sales, net$220$529$1,037
Miscellaneous revenues$4,100$10,318$13,503
Total revenues $26,433$58,476$75,874
    
Cost of revenues and operating expenses:   
Restaurant food, beverage and packaging$72$193$402
Restaurant labor, occupancy, and other$149$410$709
Area developer fees$307$1,206$7,905
National advertising expenses$4,766$12,761$12,726
Local advertising expenses$4,542$7,265$11,181
General and administrative expenses$5,968$12,656$17,964
Other expenses, net$1,729$1,701$8,147
Depreciation and amortization$18,197$5,157$2,389
Tatal cost of revenues and operating expenses $35,760$41,349$61,423
(Loss) income from operations $(9,327)$17,127$14,451
    
Other expense:   
Acquisition expenses$(3,687) 
Interest expense, net$(7,112)$(4,438)
Impairment of Tin Drum Holling Company, lnc.$(2,351)$(1,902)
Equity in losses of Tin Drum Holding Company, Inc.$(78)
Total other expense$(3,687)$(9,463)$(6,418)
Net (loss) income$(13,014)$7,664$8,033

 

Tropical Smoothie Cafe Income Statement Key Insights

*Analysis based off Predecessor 2020*

Overall, Tropical Smoothie Cafe is a profitable business, with a net income of $7.6 million in 2020. Total revenues were $58 million while expenses were only $41 million indicating a healthy profit margin of around 30%. One of the biggest expenses seen in the income statement is $12 million spent in national advertising indicating the franchisor’s commitment to expanding and growing their brand which in turn will help franchisees see success.

Tropical Smoothie Franchisor Cash Flow Statement

Consolidated Statements of Cash Flows

 SuccessorPredecessor
202020202019
Cash flows from operating activities:   
Net (loss) income$(13,014)$7,664$8,033
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization$18,197$5,157$2,389
Loss on disposal of assets$71
Non-cash interest income$(34)$(50)
Non-cash interest expense$1,989$327
Non-cash rent (income) expense$(1)$4$46
Equity-based compensation expense$788$317$379
Equity in losses of Tin Drum Holding Company, Inc.$78
Impairment of related party receivables$1,845
Impairment of Tin Drum Holding Company, Inc.$506$1,902
Change in operating assets and liabilities:   
Accounts receivable$107$109$(98)
Inventory$(37)$74$12
Prepaid expenses$1,670$(1,606)$(213)
Deferred commission expense$(362)$3,029$(529)
Other assets, net$42$(26)$(569)
Accounts payable and accrued expenses$264$(320)$736
Deferred franchise fees$1,874$118$2,544
Other liabilities, net$(15)$(15)
Cash provided by operating activities$9,486$18,811$15,058
    
Cash flows from financing activities:   
Purchase of acquired company (Note 2), net of acquired cash$(485,225)
Capital expenditures, net of $906 in tenant allowances in 2019 (Predecessor)$(127)$(618)$(540)
Issuance of notes receivable$(211)$(27)
Principal payments on notes receivable$25$18$22
Re-acquired area development rights$(2,900)$(65,692)
Cash used in investing activities$(488,227)$(66,503)$(545)
    
Cash used in investing activities:   
Deferred loan costs $(240)$(545)
Proceeds from senior credit facility$65,692
Proceeds from revolving line of credit$2,500
Proceeds from notes payable$2,029
Principal payments on senior credit facility$(500)$(250)
Principal payments on revolving line of credit$(3,500)
Principal payments on notes payable$(542)$(845)
Repurchase of member units$(151)
Contributed equity from Parent$423,241
Proceeds from exercise of options$168
Advances from Parent, net$73,214
Distributions$(6,495)$(1,892)$(6,220)
Cash provided by (used in) financing activities$489,960$63,547$(7,843)
Net increase in cash and restricted cash$11,219$15,855$6,670
Cash and restricted cash, at beginning of year/period$15,458$8,788

Cash and restricted cash, at end of year/period

$11,219$31,313$15,458

 

Tropical Smoothie Cafe Cash Flow Statement Key Insights

In 2020, Tropical Cafe Smoothie had a net income of $7.6 million, and their cash, cash equivalents, and restricted cash was $31.3 million at the end of 2020 an almost 100% increase from the cash they started with at the beginning of the year. This extra cash flow is mainly from proceeds from revolving line of credit which accounted for $65 million.

How many Tropical Smoothie Cafe units have opened and closed?

System-wide Outlet Summary

Outlet type Year Outlets at the Start of the Year Outlets at the End of the Year Net Change
Franchised 2018 627 718 +91
2019 718 833 +115
2020 833 913 +80
Company-Owned 2018 1 1 0
2019 1 1 0
2020 1 1 0
Total Outlets 2018 628 719 +91
2019 719 834 +115
2020 834 914 +80
 

On average there has been 100 openings per year for the last three years. The strong consistent growth indicates the success that Tropical Smoothie Cafes have been experiencing. It would be important to find out how many franchisees have multiple cafe locations.

  Tropical Smoothie franchise

Should you invest in Tropical Smoothie Cafe?

Tropical Smoothie Cafe has been seeing rapid franchise location growth with almost 100 new restaurants a year opened in the last three years.

Tropical Smoothie Cafe is in a new emerging market of healthy food options. However, this market is starting to grow in popularity with other companies such as Juice it Up, Jamba Juice, and Smoothie King capitalizing on the new wave of healthy eating and living.

We strongly recommend you speak to at least 5 Tropical Smoothie  franchisees to better understand the financials (see questions to ask).

Think Tropical Smoothie is the right franchise for you, or are you interested in other franchise opportunities in the healthy food industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.

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