Report: Tropical Smoothie Cafe is exploring a sale

The report about Tropical Smoothie Cafe’s sale exploration comes the same week as a similar report about Chuck E. Cheese, signaling that restaurant M&A activity may be picking up.

Seems the M&A market is picking up steam at the end of the year. Reuters reported Thursday that Tropical Smoothie Cafe might be exploring a sale targeting a price tag as high as $2 billion.

The smoothie chain, which was acquired by private equity firm Levine Leichtman Capital Partners in 2020, finished 2022 with just under 2,000 U.S. units, according to Datassential. This marked a 160% year-over-year increase versus 2021, making it one of the fastest growing chains in the industry. Tropical Smoothie finished 2022 with $1.1 billion in sales, a 15.6% increase over 2021.

The report comes the same week Reuters also reported that Chuck E. Cheese is also exploring a potential sale and FSC Franchising announced its acquisition of Newk’s Eatery. Otherwise, aside from Subway’s deal to Roark Capital and Darden’s acquisition of Ruth’s Chris, the M&A market has been relatively slow this year.

During a recent interview, Mike Esposito, Franchise Equity Partners’ co-founder and managing partner, predicted mergers and acquisitions activity would start to pick up after a slow 2023 that was driven by sellers who were reluctant to go to market because of weakening earnings and traffic patterns.

“There will be more (M&A) activity in 2024 than 2023, but sellers will settle for less. So, there will be more activity and deals getting done, but at lower multiples,” he said.

Source: NRN