Mike Rotondo joined Tropical Smoothie Cafe Inc. as vice president of operations in 2008 — and climbed the corporate ladder about every two years. He became COO in 2011 and CEO in July 2012. While at Tropical Smoothie, Rotondo has focused on taking the company from the entrepreneurial enterprise created by its owners, Erich Jenrich and David Walker, to what he calls “the next level” — a more structured and systematically run organization poised for faster growth.

As a result of this transformation, when Rotondo was promoted to CEO last year, the private equity firm BIP Opportunities Fund bought a controlling interest in Tropical Smoothie Cafe. Jenrich and Walker remained on the company’s board, and BIP partner Scott Pressly became the company’s chairman.

Rotondo recently spoke with Smart Business about how he has steered the company through the transition from entrepreneurial company to mature organization with greater resources to grow.

Q. Looking back over the past few years, what do you consider the most important business leadership challenge you’ve faced?

My main challenge has been working with our company’s founders to determine the best course of action to move our brand forward.

Back around 2008, when I started with Tropical Smoothie, we were starting to see some negative signs. Obviously, it was a very tough time for the economy. Our comp sales were down about 6 percent in 2008 and down another 2 percent in 2009. The turnout at our franchisee convention was very low; we only had about 35 percent of our franchisees attend.

Some of our franchisees and area developers were starting to point a finger at us, saying ‘You’re not giving us the support we need.’

So we saw that we had to make some changes. On one hand, we wanted to keep all the good things that the founders of Tropical Smoothie had developed for the brand. But at the same time, we wanted to put systems and processes in place to mature the brand and professionalize it. It was about recognizing and celebrating all the great things the founders had done, but then taking it to the next level.

Q. What were some of the key systems you introduced to turn things around and to mature the Tropical Smoothie brand?

In 2008 and 2009, we were all about creating programs and increasing our visibility. We put out training programs; we put out marketing programs. We went out to the franchisees and met with them. My team and I made ourselves very accessible to the system.

We got rid of some people who were not meeting the culture and the needs of the business.

But the key thing was we started giving our franchisees new opportunities with training and marketing programs. This energized them, and at the same time, it made them more accountable because it put the responsibility on them to execute those programs.

Q. Did you make changes in the area of quality control?

Yes. For example, not long after I started in 2008, I was visiting our cafes with one of our key operations people, and I noticed that at every cafe they made the smoothies a little bit differently. Some put the ice in first. Some put the fruit in first. Sometimes they blended it a little differently or added something a little bit different.

What it really came down to, at that point, was that our procedure for making smoothies was about 80 percent art and 20 percent process. And I said, ‘We’re never going to get consistency if we do it that way. The average Tropical Smoothie sells about 50,000 smoothies a year. How many of those smoothies can we afford to go across the counters that are less than perfect?’ The answer is none.

So we came up with a program called One Perfect Smoothie. It was a full training kit. We broke it down and put processes in place so that you know how to properly prepare the fruit, how to build the smoothie the right way, how much of each ingredient goes in, which blender settings to use. We turned the procedure around so that it’s now 70 to 80 percent process and 20 to 30 percent art.

Our franchise community has embraced this program. They tell us it has improved the consistency of the smoothies, and it has helped them from a productivity and a food cost standpoint: ‘We’re blending our smoothies faster. We have more consistency. We’re going through fewer strawberries than we were before.’

Q. What other systems have you put in place to move the brand forward?

One process we’ve introduced is a brand audit for our cafes. At first it was just a 20-question checklist, but we expanded it into a full-blown audit. We look at the quality of the products, the hospitality level in the cafe, the cleanliness of the cafe and how well the brand is being represented in the cafe. It’s a four-hour audit and inspection.

We went from a very basic to a much more detailed and a much more mature process of evaluating the compliance in our cafes. As a result, we have cleaner, better-running cafes than we’ve had in the past. The customer surveys we do reflect that.

Another key aspect of the audit is that we use it mainly as a training tool for the franchisees. You never want this type of thing to be looked at as a hammer — ‘Uh oh, you’re having your compliance audit today.’ We look at it as a training tool. If one of our team is out there and they’re doing an audit and the franchisee is shorthanded, we’re going to put the audit down and jump in and start helping. We really believe that our main responsibility is to service our franchisees.

Q. Have you made any changes to your product mix?

We’ve streamlined our menu and, at the same time, put greater emphasis on our food offerings with a program we call our Focus On Food. We started this about two years ago. While we felt there was still some market upside with our smoothies, we felt that we had a lot more room to grow with our food offerings.

We had always joked that food is our best-kept secret — unfortunately. So we started focusing on it more. We started spotlighting some of our special menu items like our Chipotle Chicken Club Flatbread, our Chicken Pesto Flatbread and our Jamaican Jerk Chicken Wrap.

This has worked well for us. People have started to look at us as more than just a place to get a smoothie and a snack — they can also come to our cafe and have a terrific lunch. Since we started doing this, our food incidence is up 25 to 30 percent from where it was two years ago. By this, I mean the number of food items that we sell each day — how many wraps, how many sandwiches, etc. Our food transactions are up 25 percent from where they were two years ago.

The other piece that’s measurable for us is our combo incidence — the percentage of our transactions in which the customer is buying both a smoothie and a food item. As a result of our Focus On Food program, that combo figure has increased from 25 percent to 45 percent.

Q. What advice would you offer other CEOs faced with a similar challenge — the need to upgrade and mature their brand to move it forward?

The first thing I would say is protect the brand. Don’t get cute. Don’t try to change what everybody loves about the brand.

The second thing is, as you start to take on some of these challenges, you’ve got to have the right team in place. And sometimes you have to change the makeup of the team. You can’t be afraid to make those changes. You have to surround yourself with smart people, give them their marching orders, and then do the best you can to stay out of their way.

The third thing is communication. To mature and grow the brand, you’ve got to communicate. You’ve got to keep people informed at all the different levels — franchisees, support staff, investors — about what’s going on. You have to keep everybody on the same page: the process of taking an entrepreneurial business, maturing it, then getting acquired by a private equity firm and how to manage through that has been a learning experience.

The private equity firm is allowing us to do our thing, and while ultimately our brand hasn’t really changed that much, we’re much stronger than we were because we now have the processes and structure in place that a private equity firm will hold you to.

That has been huge for the Tropical Smoothie brand in terms of the resources that we have and the ability to bring in the people we need to keep moving forward. That transition has been incredible for this brand.

How to reach: Tropical Smoothie Cafe Inc., (770) 821-1900, www.tropicalsmoothie.com

Takeaways

Introduce systems and structure.

Make processes consistent.

Evaluate compliance through audits.

The Rotondo File

Mike Rotondo

CEO

Tropical Smoothie Cafe Inc.

Born: Chicago

Education: Illinois State University

Looking back over your years in school, what business leadership lessons did you learn that you use in your work today?

My major was criminal justice, so I took a lot of classes in psychology, sociology and counseling. I learned how to communicate with people on many levels, how to have tough conversations, how to listen and how to make sure they know you’re listening.

Tell me about an early job you had and the business lessons you learned from it.

In high school and college, I helped manage a store for a Baskin-Robbins ice cream franchise. This was back in 1982-83. I did payroll. I ordered inventory. I hired. I trained. Working at that Baskin-Robbins really got me going in this industry.

Do you have a main business philosophy that you use to guide you?

As a franchisor, I think the most important things are communication, driving the economics for your franchisees, and showing people that you care. Basically, everything we do is geared toward improving our people, our sales, and our profits.

What trait do you think is most important for an executive to have to be a successful leader?

If you want people to follow you, you have to be willing to get into the trenches. You have to educate yourself. It’s very important to be educated and informed about all the different disciplines your business is involved in.

What’s the best advice anyone ever gave you?

To ask open-ended questions — in other words, questions that have multiple parts and that make people have to think. You can really uncover a lot of important things by doing this. That advice was given to me by Chuck Bengochea. He was vice president of operations when I worked at Honey Baked Ham.

Published in Atlanta