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Ones to Watch | By Lynne Miller

Smoothie Factory

Like an athlete training for a big event, Smoothie Factory is gearing up for major expansion.

Thanks to a new financing package, the chain’s principals plan to more than double the number of locations in the next year and transition to a health and wellness café format. By the end of this year, about 90 stores should be up and running. New store openings are expected to jump to 160 by the end of 2009, says James Villasana, Smoothie Factory’s president.

“We keep seeing stronger growth year after year,” Villasana says.

The chain’s formula for success relies on two distinct revenue streams: made-to-order smoothies and juice drinks and a hefty selection of value-priced nutritional supplements, in stores that range in size from 1,200 to 1,400 square feet.

Soon after opening the first store, Villasana dropped the prices on the supplements and quickly gained the support of customers who loved the low prices. At established stores, the supplements typically generate twice as much sales revenue as the beverages.

The No. 1 selling smoothie is the Strawberry Patch, a blend of strawberries and banana mixed with protein, immune formula, turbinado sugar, and wheat-germ oil. The beverage generates 13 to 17 percent of smoothie sales in all markets, Villasana says. The No. 2 seller is the Meal-Replacement Smoothie, a high-protein, low-fat offering that’s a mix of vitamins and minerals, the customer’s choice of two fruits, and rice milk or water. The drink provides 42 grams of protein and two grams of fat. Other specialty smoothies include the Energizer, the Bulk Upper, the Light Delight, and the Immune Booster. All combine a mix of fruits with different vitamins.

The use of whole fruit sets Smoothie Factory apart from other juice bars, Villasana says. Many other chains rely on purées and concentrates. Customers at Smoothie Factory get hooked when they see employees behind the counter opening bags of whole berries and other fruits.

“We get quite a few comments on that,” he says. “They recognize the value of the product. If you get drinks made with mango concentrate and real mango chunks, real mango chunks taste better every time.”

Using whole fruit results in a more nutritious product, which is important for athletes and other consumers who want to eat healthy, Villasana says. While whole fruit drives up food costs, Villasana believes the focus on providing a higher-quality product pays off by inspiring customer loyalty.

Smoothie Factory’s look is designed to appeal to a variety of consumers—adults and young people. Stores have contemporary interiors decorated in bold shades of green, red, orange, and gold. While some older stores do not have seating, newer stores typically seat up to 13 people. Tinted, translucent “ghost” chairs, designed by Philippe Starck, add a stylish note to the dining areas. Supplement sales boost the average check to $10.91, Villasana says. Smoothies, available in three sizes, range from $3.39 to $6.38. Future stores will be designed as health and wellness cafés with computers for customers to access nutrition information on the products.

Smoothie Factory
President: James Villasana
hq: Richardson, Texas
Year Started: 1996
Annual sales: $20 million
Total Units: 59
franchised units: 59
Website:

Smoothie Factory offers potential franchisees three types of stores. The largest stores carry over $50,000 worth of nutritional supplements. The smallest models, located at airports, offer smoothies, health bars, and just a few supplements. Costs to open a store range from $150,000 to $220,000.

Smoothie Factory originally operated a few corporate stores but now exclusively franchises. That strategy is about to change. Next year the company plans to team up with investment partners to open eight stores. The partners will furnish the capital to open the stores, and Smoothie Factory will run the stores and share in the profits. Maintaining consistency from store to store has been a challenge, and Villasana believes corporate sites can serve as models for new franchisees.

“We want to get back in touch directly with customers, and we want to set a standard for the rest of the franchisees,” Villasana says. “That’s why we’re getting back into corporate stores.”