New Orleans Recipe Creates No. 1 Healthful Food Franchise

State Business Magazine of Louisiana

NEW ORLEANS - When people think of New Orleans cuisine, they typically conjure up images of shrimp po' boys, fully dressed; deep-fried beignets dredged in sugar; red beans and rice, served with fatty sausage or fried chicken; grits and grillades with plenty of gravy; and other dishes dripping with saturated fat and sodium. So when Steve Kuhnau opened his first smoothie store back in 1973, a lot of people felt sorry for him.

He was a curiosity, something of a lone voice crying in the wilderness, preaching a foreign message to the people of the most obese city in the United States. "Have a smoothie! Eat healthy! You have nothing to lose but an extra 40 pounds!"

But surprisingly-and over time-the message took hold. Fourteen years after opening their first store in Jefferson Parish, Steve and his wife Cindy got the idea to franchise their operation and decided on the name "Smoothie King."

"I was looking for a name with the same initials as mine, and I thought of Smoothie King," Kuhnau laughs. "It was pretty bold, considering we only had one store. But the trademark office approved it, and the name stuck."

It took another two years for the company to spawn a second store, however. It was 1989 when the second Smoothie King finally arrived,

serving the work place crowd in downtown New Orleans. Growth has been steady since. Today, Smoothie King is the nation's fastest growing "healthful foods" franchise and has been rated No. 1 in its category by Entrepreneur magazine every year since 1992. Smoothie King now has 210 stores in 18 states and will boast 220 stores by the end of 1999. Of those, nine are company owned units; the rest are franchises.

Rags-to-riches story

Kuhnau himself began making and drinking smoothies as a teen-ager after reading the book Feel Like a Million, which emphasized the importance of good nutrition. He applied some of the ideas to his own diet and became excited by the results. He began to experiment with fruits and juices to create healthy drinks for customers of the drive-in restaurant where he worked. As Steve suffered from a variety of allergies, including dairy products, he stayed away from smoothies that contained milk, yogurt or ice cream and focused instead on those containing fruit and juices. When Kuhnau was 26, he mortgaged his home to launch his dream business-the health food store in Jefferson. Along with the vitamins, minerals and nutritional supplements he sold his customers, Kuhnau also offered them something unique: "nutritional smoothies." Twelve years later, the franchise was born.

Word of mouth advertising

"It all spread by word of mouth," Kuhnau insists, and his advertising budget backs him up. "Heavy users of our product come to us and say they want to open up a store. That's actually how we got our first store out of state. A LaPlace customer got transferred to Houston and couldn't find anything comparable to Smoothie King in his new environment. So he bought a franchise and opened up a store.

"Now we have 60 stores in Texas." According to Kuhnau, customers have even been so gung-ho about becoming franchise owners, they have been willing to leave home to do so. "If there is no opportunity in one of our saturated markets, such as New Orleans or Houston, we've had people move to Cincinnati, Lexington and Louisville to open up stores," Kuhnau says, calling his converts "pioneers - absolutely pioneers. They go into a brand new place where no one has ever heard of a smoothie and start passing out free samples. People love them, and that's how they build their clientele."

Quality product control

Smoothie King obviously has a product that sells itself, once people are given a chance to try it. To maintain that quality, as well as the confidence of its customers, Kuhnau has strict controls about the ingredients that go into his smoothies. The company offers 36 different kinds of drinks, each made from a unique blend of fruits, natural juices, and other nutritious ingredients, such as protein powder, chromium picolinate, whey, electrolytes, immune builders and other special function foods or supplements. All of the drinks are low fat, and most are low calorie, as well (Smoothie King does offer The Hulk for those in need of extra calories - either for weight gain or to replace nutrients lost to illness or a workout). In recent years, the company has added beverages sized, designed and named to appeal to kids. These include Choc-A-Laka, Smarti Tarti and Gimme-Grape.

"We're competing with every other fastfood restaurant out there when people are hungry and it's time to eat," Kuhnau says. "Kids typically like all our smoothies, but they can't drink a whole one. That's why we created special products just for them."

Benefiting from the boomers

Kuhnau attributes a great deal of the success of his business to the aging of the baby boomers-his own generation. "A lot of us are turning 50 at a rapid rate and just taking a closer look at what we're putting into our mouths. There are plenty of restaurants offering junk. People come to us when they're tired of junk, when they want to balance out their diets with something that's good for their bodies. We're one of the few healthful alternatives out there." Kuhnau looks at the rising popularity of supplements, "functional foods," and even products like Benecol (a cholesterol lowering spread) as evidence of the greater emphasis Americans are placing on nutrition, even on a sporadic basis. Government-sponsored programs, such as the "Strive for five" slogan, which reminds Americans to try to consume five servings of fruits and vegetables each day, also help to reinforce the healthy-eating trend. Smoothie King helps make the message palatable. "I believe that most Americans want to eat more fruit," Kuhnau says, "but that doesn't mean they want to peel a banana five times a day. They get bored. They want something good and different. We provide that product."

So many communities, so little time

Smoothie King is one of the more affordable franchises available, at $25,000 for a single-unit franchise. Multi-unit franchises are also available, for which the fees are $25,000 for the first unit; $17,000 for the second through fourth units; and $15,000 for each unit after that. Total start-up costs per franchise location range from $90,500 to $198,500, depending on the store size, real estate costs and other local market variables. When locating franchises, Kuhnau's management team looks for vacancies in densely populated communities of 30,000 or more, in strip centers, shopping malls or downtown business districts. The ideal location is highly visible, has multiple traffic generators and offers the space to accommodate an 800- to 1,200-square-foot store. Obviously, there are a lot of suitable communities beyond the 18-state range of Smoothie King.

"We currently have stores as far away as San Jose and San Diego, California, and New York City and Maryland," Kuhnau says, "but right now our attention is focused on the Southeast and the East Coast. We're trying to make sure that when anyone east of the Mississippi River hears the word 'smoothie,' they think 'Smoothie King.' " Kuhnau says the company's best locations usually are those right in the heart of booming retail areas that already support a number of fast-food outlets and other restaurants. "Like I said, many people help put balance back in their diets by having a smoothie three or four times a week. it's not a snack;- it's a meal replacement, an important part of their diet."

Although the company's management team is currently focused on domestic expansion, Kuhnau and a group of executives recently returned from a road trip to Europe, where they found plenty of fertile ground for Smoothie King transplants. "England, Germany, the Netherlands, Switzerland-we didn't see anything comparable to a Smoothie King anywhere," Kuhnau says. "We did see plenty of opportunity for healthier eating almost everywhere we looked." Although the success of Smoothie King has attracted imitators, for now Kuhnau is not too worried. "It's easy to add smoothies to the menu, but if you're selling doughnuts or hamburgers, you're really missing the point. All the smoothie is likely to add is calories, particularly the 'dessert smoothies' with ice cream, which is what a lot of restaurants serve. But when people come to a Smoothie King, they feel as if they've done something good for themselves, and good for their bodies."

For Smoothie King's franchise owners and the larger Smoothie King organization, they're also doing something good for business. Smoothie King is one of the more affordable franchises available, at $25,000 for a single-unit franchise.

Tracking the growth

• 1973 - Town and Country Health Foods, Kenner, LA
• 1987 - Birth of a franchise, Smoothie King
• 1989 - Second store opens in downtown New Orleans
• 1990 - Third store opens in Metairie, La.
• 1995 - Franchise now has 65 stores

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