Tropical Smoothie Cafe Was Reportedly Planning a $1 Billion IPO

This is an English adaptation of a FoodBud historical article originally published on January 21, 2022.

Bloomberg reported in January 2022 that Tropical Smoothie Cafe, a U.S. beverage and cafe chain, was preparing for a possible public listing in 2022 at an expected valuation of at least $1 billion.

Levine Leichtman Capital Partners acquired Tropical Smoothie Cafe in 2020. According to the report, Levine Leichtman was working with Morgan Stanley and Jefferies Group on the listing plan, although people familiar with the matter said the timing could still change.

Chain Scale and Growth Targets

Tropical Smoothie Cafe was founded in 1997 and operated 1,043 stores in the U.S. market at the time of the article. The company’s stated plan was to expand to 1,500 stores by 2024.

Despite the pandemic’s impact across North America, CEO Charles Watson described 2021 as the company’s most successful year to date. The chain opened 133 new stores in 2021, a company record, and signed 332 franchise agreements. More than 70% of those agreements were with existing franchisees.

Same-store sales in 2021 increased 22% versus 2020 and 29.4% versus 2019.

Menu Mix

In 2021, Mango Berry Cosmo Smoothie overtook Watermelon Mojito Smoothie as the company’s best-selling product.

The core product is the smoothie: a semi-solid blended drink typically made from fresh or frozen fruit, crushed ice, juice, slush, dairy ingredients, or similar components. Compared with juice, it is thicker and more meal-like, with fruit as the main ingredient.

Tropical Smoothie Cafe also sells sandwiches, wraps, and other food items.

Store Model

According to Tropical Smoothie Cafe’s website data cited in the article, a typical store was 1,200-1,800 square feet, or about 111.5-167 square meters. In 2020, average net revenue per store was $840,000, equivalent to about RMB 5.32 million.

The cited disclosure note stated: $840,662 systemwide average net revenues, based on calendar year 2020, including 555 cafes open for at least 12 months as of December 27, 2020. It excluded non-traditional locations and cafes open for fewer than 350 days in 2020.

Comparison With Dutch Bros

The article compared Tropical Smoothie Cafe with Dutch Bros, the coffee chain that went public in 2021.

Dutch Bros stores were typically 865-950 square feet, or about 80-88 square meters. Estimated total investment per store was about $1.35 million, or RMB 8.24 million. Average annual sales per store were about $1.7 million, or RMB 10.77 million.

On a simplified sales-per-square-meter basis, the article estimated Dutch Bros at RMB 126,000 per square meter, versus RMB 38,000 per square meter for Tropical Smoothie Cafe. It argued that this gap helped explain Dutch Bros’ strong share-price performance after listing.

Comparison With Smoothie King

Smoothie King was described as a closer product competitor to Tropical Smoothie Cafe. In 2012, it was acquired by its Korean franchisee for $50 million, and in 2015 became a subsidiary of Shinsegae Food, making it a Korean-owned brand.

According to Smoothie King’s website information cited in the article, the company had more than 1,300 stores and annual sales per store of about $830,000. The article viewed Smoothie King and Tropical Smoothie Cafe as direct competitors, while noting that both chains’ unit-sales figures involved selective presentation.

The cited Smoothie King disclosure note stated that $834,562 represented average gross sales for the top 25% of franchised units operating for the full 12-month period ending March 29, 2021. Of the 207 franchised units included in that top-quartile average, 80 units, or 39%, reached or exceeded that sales level. The disclosure appeared in Item 19 of Smoothie King’s Franchise Disclosure Document dated September 23, 2021, and stated that franchisee results may differ.

The article closed by noting that smoothie products were also moving along a meal-replacement positioning path, raising the question of when similar formats might gain traction in China.

Note: IPO plans, valuation figures, store targets, and forward-looking figures are historical as of January 21, 2022.