Opening a Tropical Smoothie franchise requires an initial investment of between $274,550 and $585,850. This covers the franchise fee, buildout costs, equipment, and initial inventory and supplies. Ongoing fees include an ongoing royalty fee of 6% of gross sales and a marketing fee of 2% of gross sales.
What is the franchise fee for Tropical Smoothie?
The franchise fee for Tropical Smoothie ranges from $25,000 to $45,000. This one-time fee allows you to use the Tropical Smoothie name, recipes, systems, and marketing materials. It also covers your initial training at Tropical Smoothie University.
How much are the buildout costs?
Buildout costs for a new Tropical Smoothie location range from $150,000 to $300,000. This covers renovating or building the space to Tropical Smoothie’s specifications. Costs include flooring, lighting, equipment, signage, and décor that meets the Tropical Smoothie branding style.
What is the cost of equipment and initial inventory?
You’ll need to budget between $75,000 and $175,000 for purchasing equipment like blenders, juice extractors, refrigerators, freezers, and ice makers. Initial inventory and supplies like cups, straws, and smoothie ingredients will run you $15,000 to $30,000.
What are the ongoing fees?
Ongoing fees for a Tropical Smoothie franchise include:
- Royalty fee – 6% of gross sales
- Marketing fee – 2% of gross sales
- Purchasing co-op fee – 0.5% of gross sales
The royalty fee covers your continued use of the Tropical Smoothie system and brand name. The marketing fee goes into a national ad fund. The purchasing co-op fee lets you buy equipment and supplies at a discount through Tropical Smoothie’s approved suppliers.
How much working capital do you need?
Tropical Smoothie recommends having $125,000 in working capital when you open your franchise. This will cover your rent, payroll, insurance, inventory, utilities, and other operating expenses as you ramp up operations.
What is the total investment?
The total investment to open a Tropical Smoothie franchise breaks down as follows:
| Expense | Low End Cost | High End Cost |
|---|---|---|
| Franchise Fee | $25,000 | $45,000 |
| Buildout | $150,000 | $300,000 |
| Equipment & Initial Inventory | $75,000 | $175,000 |
| Working capital | $125,000 | $125,000 |
| Total | $274,550 | $585,850 |
As you can see, the total investment ranges from $274,550 to $585,850 according to Tropical Smoothie’s estimates. Your actual costs will depend on your location, store size, equipment choices, and other factors.
What is the profit potential of a Tropical Smoothie franchise?
Tropical Smoothie reports that the average store generates $847,038 in annual sales. After expenses, the average estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) is $178,104 per year.
The top 25% of Tropical Smoothie franchises bring in over $1.2 million in gross sales. At this level, EBITDA can exceed $270,000 annually.
Keep in mind, your profitability depends on your location, local competition, operational costs, and ability to manage the business. Tropical Smoothie does not guarantee you will achieve these financial results.
How long will it take to recover your investment?
Given the estimated first year revenue and expenses, it will likely take 1.5 to 3 years to recover your initial franchise investment. Profitability depends heavily on your sales volume, costs, and ability to operate the business efficiently.
What financing options are available?
As a franchise business, you may have an easier time securing financing for a Tropical Smoothie location compared to an independent startup. Financing options include:
- SBA loans like the 7(a) and 504 programs
- Equipment leasing for kitchen equipment
- Rollovers for retirement funds
- Private lending
- Crowdfunding
- Bringing on an equity partner
Tropical Smoothie does not offer direct financing but can refer you to preferred lenders. Having good credit and meeting lending requirements will help you get approved for small business loans.
What are the ongoing fees?
Ongoing fees for a Tropical Smoothie franchise include:
- Royalty fee – 6% of gross sales
- Marketing fee – 2% of gross sales
- Purchasing co-op fee – 0.5% of gross sales
The royalty fee covers your continued use of the Tropical Smoothie system and brand name. The marketing fee goes into a national ad fund. The purchasing co-op fee lets you buy equipment and supplies at a discount through Tropical Smoothie’s approved suppliers.
How much inventory do you need to purchase upfront?
Initial inventory and supply costs range from $15,000 to $30,000. This covers items like:
- Smoothie cups
- Straws and lids
- Fresh produce
- Frozen fruit
- Yogurt
- Juices and other ingredients
- Paper goods
- Cleaning supplies
Tropical Smoothie provides details on types and quantities of inventory to order based on your projected sales volume. You’ll need to replenish inventory continuously based on daily sales.
What kind of insurance do you need?
Tropical Smoothie requires franchisees to maintain the following minimum insurance policies:
- General liability – $1 million per occurrence
- Property damage/contents – Replacement cost value
- Business auto liability – $1 million
- Workers compensation – As required by state law
- Employer’s liability – $500,000
- Umbrella liability – $3 million
You may need additional policies depending on your location and local requirements. Tropical Smoothie can refer you to approved brokers to get quotes.
How much space do you need?
Tropical Smoothie cafe locations are typically between 1,200 and 1,800 square feet. This includes customer seating, food prep and storage areas, restrooms, etc. Drive-thru locations may require more space.
Ideal spaces have strong visibility and foot traffic, ample parking, and are often located in malls, shopping centers, or strip retail developments. Tropical Smoothie can help you evaluate potential locations.
Can you run a Tropical Smoothie franchise from home?
No, Tropical Smoothie does not offer a home-based franchise model. All locations must be separate commercial spaces open to the public. This allows Tropical Smoothie to maintain brand standards for the customer experience.
Do you need experience in the food/restaurant industry?
Restaurant or food service experience is not required to own a Tropical Smoothie franchise. However, some experience managing a retail business is preferred. The most important qualifications are a willingness to learn and follow Tropical Smoothie’s system, strong customer service skills, and sufficient capital to invest.
How long is the training program?
Tropical Smoothie provides 2-4 weeks of initial training. First, you’ll complete 5 days of training at Tropical Smoothie University in Atlanta to learn operations, marketing, food safety, and more. Additional 1-2 weeks of hands-on training takes place at an existing Tropical Smoothie location.
Ongoing training is provided through annual conferences, periodic refresher courses, and other support.
Can you operate multiple locations?
Yes, multi-unit franchising is encouraged at Tropical Smoothie. Your agreement will grant you the rights to open additional locations in your territory after achieving certain performance benchmarks at your first store.
About 35 percent of Tropical Smoothie’s 400+ franchisees own more than one location. Some franchisees own 10 or more stores.
Do employees need to be trained?
Yes, you will need to train your Tropical Smoothie employees on customer service, food preparation, point-of-sale systems, safety procedures, and company policies. Tropical Smoothie provides some training materials and job aids for your staff.
Managers may also attend training at Tropical Smoothie University. You are responsible for ongoing employee training and compliance at your location(s).
What support does Tropical Smoothie provide?
Tropical Smoothie provides franchisees with support such as:
- Site selection assistance
- Store design, layout, and buildout guides
- Opening team support
- Initial and ongoing training programs
- Central purchasing and approved supplier network
- National and regional marketing campaigns
- Ongoing field operations support
- IT systems and support
- Menu R&D
- Franchise conventions and ongoing communications
You will have access to the franchise support team for assistance with operations, marketing, technology, training, purchasing, and all other aspects of managing your Tropical Smoothie franchise.
How long is the franchise agreement term?
Tropical Smoothie franchise agreements have a 10-year term. At the end of the term, most franchisees renew for an additional 10-year term. There is no limit on renewals as long as you meet Tropical Smoothie standards and wish to remain in the system.
Are there any other fees?
Along with the ongoing royalty fee, marketing fee, and purchasing co-op fee, other fees include:
- $30k – $50k for opening advertising and grand opening marketing
- Possible travel lodging expenses during training
- Point-of-sale software fees and maintenance
- Credit card processing fees
- Legal fees for lease review
You are also responsible for all costs of operating the business including rent, payroll, taxes, utilities, permits, and other typical expenses.
Are there restrictions on where I can locate?
Tropical Smoothie grants franchisees an exclusive territory protected by radius restrictions. No other Tropical Smoothie can locate within a certain radius of your site without permission.
However, Tropical Smoothie reserves the right to distribute products through other channels like colleges, malls, airports, military bases, etc. There are also density requirements regarding minimum distances between locations in rural vs. metro areas.
Can I sell my Tropical Smoothie franchise?
Yes, franchisees can sell their Tropical Smoothie franchises with approval from the corporate office. The new franchisee must meet Tropical Smoothie’s current qualifications and complete training. A $5,000 transfer fee is assessed.
Tropical Smoothie has the right of first refusal to purchase the franchise back if you decide to sell.
Conclusion
Buying into a Tropical Smoothie franchise requires an investment of $274,550 to $585,850 for the franchise fee, buildout, equipment, inventory, and working capital. The total investment depends on the size and location of your cafe.
In return, you gain access to Tropical Smoothie’s proven business model, training, branding, and ongoing franchisee support. Profitability potential is strong with top-performing stores generating over $1 million in sales annually.
With plenty of demand for quick, healthy food options like smoothies and wraps, Tropical Smoothie remains an attractive franchise investment opportunity. Do thorough research and create realistic financial projections to determine if the investment makes sense for your goals.
