Who is tropical smoothie owned by?

Tropical Smoothie Cafe is an American fast casual restaurant franchise that serves smoothies, sandwiches, wraps, flatbreads, bowls, and other healthy options. The company was founded in 1997 in Destin, Florida by Mike Rotondo and Eric Denomme. Tropical Smoothie Cafe is owned by private equity firm Advent International.

Advent International acquired a majority stake in Tropical Smoothie Cafe in 2019. Headquartered in Boston, Massachusetts, Advent International is one of the largest global private equity firms with over $75 billion in assets under management. The firm specializes in buyouts and growth equity investments in five core sectors, including business and financial services; healthcare; industrial; retail, consumer and leisure; and technology.

Some key highlights about the ownership of Tropical Smoothie Cafe:

In August 2019, Advent International announced that it had acquired a controlling interest in Tropical Smoothie Cafe.
The terms of the deal were not disclosed, but it was reported that Advent was acquiring a majority stake of around 67% in the franchise business.
Tropical Smoothie Cafe founders Mike Rotondo and Eric Denomme retained minority stakes in the company after the transaction.

The acquisition helped position Tropical Smoothie Cafe for its next stage of growth under Advent’s ownership.
Advent has expertise in franchise businesses and saw an opportunity to accelerate Tropical Smoothie’s expansion in the US.

With over 900 locations across the United States, Tropical Smoothie Cafe is now among the top fast casual restaurant franchises since Advent’s acquisition.

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History of Tropical Smoothie Cafe

To understand who owns Tropical Smoothie Cafe today, it helps to look back at the history of the company:

Tropical Smoothie Cafe was founded in 1997 by Mike Rotondo and Eric Denomme in Destin, Florida.
Rotondo was operating smoothie cafes on beach boardwalks and approached Denomme with the idea of opening a smoothie franchise.

They opened their first Tropical Smoothie Cafe location in Tallahassee, Florida in 1997 using $10,000 of their own savings.
The founders aimed to offer nourishing food and smoothies to customers seeking healthier on-the-go options.
The brand grew steadily as Rotondo and Denomme focused in the early years on perfecting store operations and the menu.

In the 2000s, Tropical Smoothie Cafe began franchising and accelerating growth:

The first franchise location opened in Jacksonville, Florida in 1999.
In 2003, there were 18 locations in Florida, and the brand began franchising nationwide.

By the end of 2005, there were 49 cafes open across the country.
In 2010, Tropical Smoothie had 166 locations and entered new markets like Chicago and Texas.
The company continued to open dozens of new restaurants each year, reaching 500 locations in 2015.

Mike Rotondo served as CEO leading the growth until 2006. Eric Krebsbach then became CEO and led an era of innovation from 2006 to 2011. That included growing into new markets, enhancing operations, and updating technology systems.

In 2011, Mike Rotondo returned as CEO while still splitting ownership of the company with co-founder Eric Denomme. Rotondo helped expand Tropical Smoothie to new heights:

By 2015, there were over 465 franchised cafes in operation under Rotondo’s renewed leadership.

Systemwide sales surpassed $300 million in 2014 as average unit volumes grew.
Tropical Smoothie entered rankings of top fast casual franchises and top food franchises.
In 2016, Entrepreneur magazine ranked Tropical Smoothie Cafe #1 in the juice bar category.

Rotondo and Denomme owned and operated the company for over 20 years before the investment by Advent International starting in 2019.

Advent International Acquires Majority Stake

In August 2019, Tropical Smoothie Cafe announced that Advent International had acquired a controlling interest in the franchise:

Advent International is a global private equity firm based in Boston, MA with $75 billion in assets under management.

The company agreed to acquire a 67% equity stake in Tropical Smoothie Cafe, leaving founders with minority stakes.
Specific financial terms were not disclosed publicly.
Advent said the investment would fuel Tropical Smoothie’s growth while founders preserved their involvement.

Advent has invested in over 380 private equity transactions in 41 countries since inception in 1984.

Advent has extensive experience investing in franchises and multi-unit businesses like Tropical Smoothie Cafe. Some examples:

In 2017, Advent invested in Straight Teeth Solutions, the company behind orthodontist franchise SmileDirectClub.

The firm acquired a majority of fast casual hamburger chain Elevation Burger in 2013.
Advent owns stakes in franchises Rita’s Italian Ice and First Watch restaurants.
Other investments include restaurant chains Zoës Kitchen, FoodFirst Global Restaurants (owner of Brio), and Benihana.

Advent saw an opportunity to use its expertise to expand Tropical Smoothie Cafe, which only had about 769 locations at the time of the deal. In comparison, top smoothie brand Jamba Juice had over 800 locations even after closing nearly 100 stores. With health-conscious consumers and interest in plant-based menus growing, Advent viewed substantial runway for new tropical smoothie cafes.

Part of Advent’s strategy involves giving management control to operate with an entrepreneurial mindset. The private equity firm saw potential to accelerate openings of new Tropical Smoothie Cafes with Mike Rotondo continuing as CEO after the transaction.

Growth and Performance Since Advent’s Acquisition

In the few years since Advent International acquired a majority stake in Tropical Smoothie Cafe in 2019, the franchise has continued its rapid growth:

By the end of 2021, Tropical Smoothie Cafe opened its 1,000th location, crossing that milestone for the first time.
It took the company 18 years to reach 500 locations in 2015, but just 6 more years to double that with 1,000 stores by 2021.
In 2022 and 2023, Tropical Smoothie plans to open 130 more new locations as it marches towards 1,500 total.

Same-store sales grew by double digits in 2020 and 2021 as the brand boomed during the pandemic.
Average unit volumes now exceed $850,000 on an annual basis, among the highest in the industry.
Franchise Business Review named Tropical Smoothie Cafe a top franchise in its 2022 report.

Tropical Smoothie Cafe CEO Charles Watson credited Advent International for their role in the brand’s success:

“Having Advent International as an investment partner the last two years has propelled our brand growth. The power of their platform, expertise, and resources has strengthened our organization.”

Advent has helped drive growth by improving Tropical Smoothie’s digital capabilities, analytics, and technology systems. The private equity firm also assisted with supply chain enhancements. This allowed the franchise to navigate pandemic and inflationary challenges successfully.

With Advent’s backing, Tropical Smoothie Cafe aims to become a top fast casual franchise with 2,000 locations. It is currently the 9th largest quick service restaurant chain by units in the United States. Continued menu innovation, store remodels, international expansion, non-traditional growth, and introducing more drive-thrus represent opportunities for Advent and Tropical Smoothie Cafe to continue growing the brand.

Financial Performance

Tropical Smoothie Cafe does not disclose detailed financial results publicly. However, some key financial highlights provide a picture of how the company has performed since Advent’s investment:

Franchise Disclosure Documents show systemwide sales for all cafes exceeded $830 million in 2021, up from $674 million in 2019.
Average unit volumes grew from $727,000 in 2019 to over $850,000 in 2021 on an annual basis.

Same-store sales rose 10.7% in 2021 as order volumes soared, building on a 13.6% increase in 2020.
Digital sales via online ordering and the mobile app surged to over 50% of total sales during the pandemic.
Restaurant contribution margin was 20.2% in 2021 according to FDDs, an increase from 18.9% in 2019.

This strong financial performance demonstrates how Advent International’s investment has paid dividends. Systemwide sales, average unit volumes, same-store sales, and profitability have all improved to franchise record levels since 2019.

Leadership

While Advent International owns a controlling 67% stake in Tropical Smoothie Cafe, the founders preserved minority stakes and leadership roles:

Mike Rotondo has continued as CEO of Tropical Smoothie Cafe since the Advent deal.

Rotondo co-founded the company in 1997 and helped grow it to 500 locations before stepping down as CEO from 2006 to 2011.
Co-founder Eric Denomme serves on the Board of Directors and is involved operationally as Chief Development Officer.
Charles Watson was appointed Chief Operating Officer in 2020 after serving as Chief Financial Officer.

Watson has helped oversee Tropical Smoothie Cafe’s rapid growth trajectory.
Other executives include Chief Marketing Officer Deborah Hohlderk and Chief Legal Officer Yasmin Farooqi.

Advent International partner David Mussafer represents the private equity firm on Tropical Smoothie Cafe’s Board of Directors. Mussafer oversees Advent’s retail and consumer investments.

The existing management team has provided important continuity through the ownership transition to fuel Tropical Smoothie’s expansion. With founders preserving minority stakes and ongoing involvement, it has remained an entrepreneur-led brand focused on guest experience and franchisee profitability.

Franchise Ownership Model

Tropical Smoothie Cafe operates as a franchise system:

Local franchisees independently own and operate their restaurant locations.

Franchisees pay an upfront franchise fee to open each new Tropical Smoothie Cafe, typically around $49.5K.
Royalty fees equal 6% of weekly gross sales and support the corporate team and brand marketing.
An ad fund contribution of 2% of sales funds local brand marketing initiatives.

Franchisees sign 10-year agreements with options to renew for more terms.
The parent company controls brand direction, marketing, product sourcing, and technology systems.
There are over 130 franchise business owners across the Tropical Smoothie Cafe system.

This franchise model means that Advent International does not directly own or operate the restaurant locations. Local owners make significant investments to open and build out new cafes while following Tropical Smoothie’s brand standards.

Through its 67% stake in the franchisor parent organization, Advent oversees marketing, operations, menu, and technology strategy. The private equity firm profits from royalty fees off the sales of all franchised units in the system.

Real Estate and Expansion

A key priority for Advent International since acquiring Tropical Smoothie Cafe has been driving expansion through:

Opening new locations via franchisees in existing and new markets nationwide.
Targeting strip malls, lifestyle centers, transportation hubs, college campuses, and other high traffic areas.
Introducing more drive-thru locations to enhance convenience and serve customers on-the-go.

Renovating and modernizing the look of existing cafes through remodels.
Entering new international markets like Canada through master franchise agreements.
Increasing non-traditional growth via corporate offices, hospitals, airports, military bases, and other channels.

Tropical Smoothie Cafe aims to reach 2,000 total locations in the coming years. Advent International’s expertise and investment allow the brand to accelerate new store development through:

Site selection assistance and data-driven market analysis.
Increasing the number of restaurant openings each year.

Enhanced resources allocated to real estate, construction, and design.
Leveraging Advent’s relationships with commercial developers.
Focusing growth in markets with proven success like Texas, Georgia, and Florida.

With its store count still under 1,100 units, Tropical Smoothie Cafe has ample white space available to expand its footprint further under Advent’s ownership.

Menu Innovation

Part of Tropical Smoothie Cafe’s growth strategy involves menu innovation to attract new customers. This has continued since Advent International’s acquisition:

Category expansions like new wraps and bowls introduced more choices.

Limited-time offers like gingerbread smoothies drove seasonal interest.
In 2021, Tropical Smoothie debuted its first-ever plant-based protein shake.
New organic cold-pressed juice formulations launched for health-focused consumers.

Advent encouraged more menu innovation via analytics, testing, and customer feedback.

Menu enhancements under Advent have helped broaden Tropical Smoothie’s appeal beyond just smoothies into a fast casual destination for food, snacks, and other beverages.

Introducing trendy options like plant-based and organic has attracted new Millennial and Gen Z customers. Advent likely views menu innovation as a sales growth lever to stay competitive in the evolving fast casual segment.

Technology Improvements

To help enable rapid expansion, Advent International worked to upgrade Tropical Smoothie Cafe’s technology capabilities:

A new POS system and payment terminals modernized cafe operations.
Revamped online ordering was rolled out via tropicalsmoothiecafe.com and the mobile app.

These tech upgrades powered digital sales growth to over 50% of orders.
Tablet devices were implemented for line busting and contactless payment.
Advent helped build analytics teams and tools to derive insights from customer data.

Updated IT infrastructure and cybersecurity measures improved data protection.

These technology investments provided the tools for franchisees to thrive and supported the skyrocketing to-go business during COVID-19. Advent likely views improving the digital customer experience as essential to competing in the fast casual space going forward.

Conclusion

In summary, Tropical Smoothie Cafe is owned by private equity firm Advent International after an acquisition in 2019:

Advent International, based in Boston, MA, acquired a 67% controlling stake in Tropical Smoothie Cafe.
Tropical Smoothie founders Mike Rotondo and Eric Denomme retained minority positions and leadership roles.
With Advent’s investment, Tropical Smoothie Cafe accelerated new store openings towards 1,500 locations.

Sales, profitability, same-store sales, and average unit volumes have surged to record highs.
Advent helped drive growth through technology upgrades, supply chain improvements, menu innovation, and real estate expansion.
Tropical Smoothie Cafe aims to become a top fast casual franchise with 2,000 locations in coming years.

Under Advent International’s ownership, Tropical Smoothie Cafe has maintained its entrepreneurial roots while accelerating systemwide growth. With a strengthened foundation, the future looks bright for the tropical-inspired smoothie franchise.