Smoothie King founder Steve Kuhnau opened his first store in 1973, began franchising the original smoothie concept in 1989 and last year sold his controlling interest in the 600-unit chain to SK USA and successful South Korean franchisee Wan Kim, who took over as CEO.
The company announced last week that it has signed 49 new franchise agreements, and Smoothie King is seeing signs that the post-recession funding shortage is starting to ease, Kim said this week. We talked with him Tuesday to get his thoughts on franchising and hear about what’s next for the New Orleans-based chain.
On motivating franchisees
I told my team “I think like a franchisee, I know what they need.” So for less than a year, I have been telling my team that whatever we do, we should be able to translate it into sales or profits to the franchisees, then they will understand why they have to do this. I think our company is getting there. I think a lot of franchisees see where I’m coming from. A lot of franchisors don’t realize what franchisees have to do, they think protecting the brand is like policing it.
This year, for the first time, for our 40th anniversary, for existing franchisees opening up to 40 new stores, we waived all the initial franchise fee if they opened this year. We wanted to show we appreciate their spending these years with us. And we sold out the 40.
On franchising versus organic growth
I think the previous owner, the founder of the company, didn’t want to take the risk. But right now we are not going that way — for the next five years, we will add an additional 1,000 stores in the U.S., and 200 will be company stores. I’m telling my people we need to set the examples and show franchisees how we can do better with company-owned stores.
Also right now, there is a project with WD Partners, we have almost finished our new brand strategy, and based on that, they’re going to come up with a new store design, probably in a couple of months. I think we will test it with company-owned stores first, make sure it works, then open it to franchisees. I really believe we need to be a good example. Without having company-owned stores, it’s really hard to say this works. For example, with quality assurance. At the store level, they’re trying to make more money. A lot of the time, franchisees forget that a good QA score, will lead to better sales and better profitability.
When there are new products or new tools we want to test, the company-owned stores should take that risk. If it fails, it should fail in company stores.
On the changing way consumers see the brand
There was a seasonality issue in some places, but from 2008, that changed as our menu really focused on moving from a snack to a meal. Right now, surprisingly, about 50% of customers who come in take our smoothie as a meal, that’s an amazing number and with that, a lot of the seasonality issues are gone.
We realized that we had products with proteins, complex carbs and good fats from almonds, so when you drink it, you get a full balance of nutrition, it’s a great meal. And when you have it, it stays in your body for four to five hours, so you don’t get hungry.
On competing for new franchisees
I will say, yes, there is more competition, but still I don’t think there are many brands that can claim a healthy business and still make money. Here, you see many franchisees who are health conscious, who like our concept and mission. You see a lot of great looking people, because they really live with the concept and believe in it. They work out, take care of themselves and care about what they do, that’s why they chose our brand.