What is in this article?:
- Tropical Smoothie Café: Menu innovation, financing drives expansion
- What's up next
CEO Mike Rotondo discusses the quick-service operator's aggressive growth plans.
After the first quarter of 2014, many quick-service restaurants reported a long winter in which severe weather hurt their same-store sales, but Atlanta-based Tropical Smoothie Café shared a much sunnier picture.
Chief executive Mike Rotondo said the food-and-smoothie chain’s outperformance was due to much more than its strong footprint in warmer states in the Southeast. Much of Tropical Smoothie Café’s unit expansion is happening in the Mid-Atlantic, Northeast and Midwest. The brand’s menu innovation, including the successful introduction of Island Green Smoothies, helped grow same-store sales 6.4 percent in 2013, after increasing 1 percent in 2012.
Through the end of May, Tropical Smoothie Café’s same-store sales have risen 9 percent year-to-date for 2014.
Atlanta-based private-equity firm BIP Opportunities Fund L.P. acquired the chain in 2012 to kick-start its growth, and this year the firm has provided capital for an internal Franchisee Finance Program to turn Tropical Smoothie Café’s promising single-unit operators into multiunit franchisees. The program has helped the brand stay on track for 55 openings in 2014 and target 80 new locations next year.
Rotondo spoke with Nation’s Restaurant News about Tropical Smoothie Café’s aggressive growth planned beyond its current 380 locations in 36 states.
What began this three-year run of same-store sales growth? What decisions did the brand make that allowed for so much expansion?
If we want to continue to win, we have to make people No. 1. When you go back to when the brand was purchased by BIP, I started to have the flexibility to add more people to the team that could take the brand to the next level. … Everything we did had that focus, from the team at the support center, to being more collaborative with our franchisees, to me focusing on myself as a leader. All that trickles down to making the customer experience in the cafes, and that’s where the big payoff comes.
Which new menu items coincided with that?
A lot of that menu innovation started even earlier, when we rolled out flatbreads and the like several years ago. When we introduce new products, the customers seem to respond. Last year, when we rolled out tacos for the first time ever, they were the No. 1-selling item during the period we promoted them. The same thing happened with Island Green Smoothies — they rocketed to the top, and now they are 7.1 percent of total sales, right after its first anniversary this past March, and that number continues to climb.
This year, it will be more of the same, with the Cucumber Mojito Smoothie. We have another green smoothie with spinach and kale coming, this time also with celery and cucumber. We’re also working on a fresh beet smoothie.
Did you have to innovate on the funding side for your franchisees?
One of the things blocking people from becoming multiunit franchisees is they couldn’t acquire financing. Maybe they weren’t in business long enough for traditional SBA loans to work for them, but they’re great operators, and we believe in them. So we do a complete check on these people and underwrite the loan. We’re the bank, and BIP helps put the financing together.
To date, we have approved a dozen loans, and those loans together exceed $2 million for our franchisees, who already have opened two units this year, with eight more to open through the end of the year via this program. It’s not offered to anyone who isn’t a franchisee yet, and that’s key. The operators see that we care about their growth and their profitability, specifically for existing franchisees to get that second or third or fourth store open.