'The restaurant business has been absolutely decimated': Tropical Smoothie Cafe CEO

Tropical Smoothie Cafe CEO Charles Watson joins Yahoo Finance’s Zack Guzman to discuss how the company is navigating the coronavirus pandemic.

Video Transcript

ZACK GUZMAN: Meantime, we're also tracking plans to reopen local economies across the South-- southern states-- including Georgia and South Carolina, weighing those and moving full steam ahead. And we do have one company who's navigating in some of those states, that company being Tropical Smoothie Cafe. And their CEO joins us now to discuss how it's navigating those plans to reopen and how it's protecting its workers during these uncertain times. And Charles Watson joins us on the show.

Charles, thank you so much for taking the time. When we're looking at this, though, how have you been navigating the slowdown, and then also trying to figure out how to allocate resources here as reopening plans move forward?

CHARLES WATSON: Sure, absolutely. Well, Tropical Smoothie Cafe, we've got 850 locations in 44 states. We're a healthier, quick, casual restaurant chain. And it has been-- it has been tough. The restaurant business has absolutely been decimated.

However, I'm very grateful. Some of my full-service brethren in the restaurant business are completely closed. So we're happy to be in the game, as it were. So from a navigating perspective, it's basically about two things. It's-- staying very simple-- which is decreasing costs and increasing revenues, right, [CHUCKLING] the basics 101.

We're 99.9% franchise, so our average franchisee owns about two locations. So this is, in fact, a small business. It's a locally-owned and operated small business. So it is all about us providing support to our franchisees, so that they can keep their doors open.

Some of the things we've been doing around that-- we've decreased our-- our franchise royalties 50% for an eight-week period. We've been working very closely with them on rent abatements and deferrals. A big, fixed cost of theirs, obviously, is their real estate and working a lot with them on the PPP program. So first things first, let's get the costs down. And then, second, from there, it's about hyper-local marketing for us. The consumers that are out there that are essential, et cetera, we want to be able to let them know that we're open, that we're here, and we're available for them.

Obviously, from a health and safety perspective, there is nothing more-- no dollar is more important than someone's life. And so we've gone to great lengths from a deep cleaning perspective, from shutting down the dining rooms, which we did previous to any-- anyone telling us to, to keep our employees, our guests, and our franchisees safe. That's the number one priority, always.

ZACK GUZMAN: Yeah, I know-- I know that you had about 20% of your franchises applying for PPP and receiving funding there. But when we look at the point you just made, obviously, health would come first here. So you-- if you did make that decision to kind of close down shop or the restaurant, the actual in-person location there, before those orders came into place, how do you kind of navigate this as a CEO, looking at some states reopening here? Do you also say, all right, maybe that's too quick? How do you actually make that call when you're kind of trying to deal with states making different rules at the same time?

CHARLES WATSON: Well, Tropical Smoothie Cafe is actually headquartered in Atlanta. So our Governor Brian Kemp is out of the gates quickly on this call. The best meme that I've seen-- if you remember the last Super Bowl the Falcons were in, I saw a meme that said, the state of Georgia, 28, COVID, 3 at the half. So it was-- it was relatively humorous.

I think we're out a little bit fast. We're instructing our franchisees to stay as we are with dining rooms closed certainly for the next week to two to be in abundance of caution, right? Nothing is worth spreading any sickness. And quite honestly, our business through digital channels is performing pretty darn well. When we talk about third-party delivery, we talk about online orders, and we talk about our app, as well as our curbside services, our consumers are responding to work with us through digital channels. So we're seeing a lot of success there, and we don't think it's necessary right now to open the dining rooms to still have success.

ZACK GUZMAN: Yeah, I know. I mean, it's just very interesting when you think about these orders being lifted at different paces across the country. I know that they're dealing with different case counts and things like that, but I'm sure as a small business owner out there and all your franchises, it's hard to kind of keep track of all these things. But optimistic to hear that you guys are still able to get product to consumers in the end, anyways. But Charles Watson, thank you so much for joining us, and good luck with everything.

CHARLES WATSON: Thanks, Zack. Have a great day.