Deal to Watch: Juice and Smoothie Bars Coming to Your Hometown

Key Stats:

Summary

Pure Green Franchise has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the ​top 10% of our deal diligence funnel​. If you have questions regarding our deal diligence and selection methodology, please reach out to ​hello@kingscrowd.com​.

Problem

Poor diet is the number one cause of poor health in America. Over 700,000 Americans die from poor eating each year, a rate that far exceeds that of car accidents or other leading causes of death. Moreover, the U.S. spends a tremendous amount on healthcare each year, and roughly $480 billion of that spending is directly caused by poor diet (another $1.24 trillion is indirectly related to poor diet). 

America’s nutritional crisis has certainly become more and more of a focus for American consumers. LEK Consulting’s 2018 food and beverage survey found that 93% of consumers want to eat healthy at least some of the time, and the majority (63%) try to eat healthy most or all of the time. The report also found that consumers will pay more for food that delivers on health benefits. 

Juice and smoothie bars have emerged as a leading category within healthy eating and wellness. The juice and smoothie bar industry grew at a modest but steady 1.4% between 2013 and 2018, and the industry was valued at $2 billion in the United States in 2018. Many juice and smoothie bars focus on packing superfoods into their menu: superfoods, such as kale or blueberries, are nutritionally dense and offer a number of health benefits. 

A number of consumers look toward juice and smoothie bars to get in their daily fruit and vegetable servings, particularly as an alternative to sugary drinks. Despite the popularity of juice bars, smoothies, and acai bowls within pockets of the United States, a leading national wellness-focused juice and smoothie brand is yet to emerge. 

Solution

Pure Green is a smoothie and juice bar franchise currently serving superfood-powered drinks and bowls to customers at five retail locations in New York City. Pure Green’s menu includes 12 superfood smoothies, six acai and pitaya bowls, and a selection of bottled juices. Smoothies and bowls at the current New York City locations range between $9-$10.50 each. 

It is important for investors to note that Pure Green operates as two separate legal entities: the Pure Green wholesale and distribution business, which produces and distributes Pure Green bottled juices, and the Pure Green franchise business, which owns the current five New York City locations and plans to aggressively expand to additional states in coming years. Investors will receive equity in the franchise business only, but the Pure Green franchise business benefits from direct ordering and brand awareness thanks to the Pure Green wholesale distributor arm. 

Moving forward, Pure Green is launching a franchise model that will allow affiliate franchisees across the United States to open additional Pure Green retail locations. Pure Green has secured relationships with sub-franchisors (experienced franchisees that operate many franchise businesses) in several states and incentivizes these associates to locate and support Pure Green franchisees. 

Pure Green’s franchise model requires less start-up capital than many franchise businesses because the wholesale distribution arm of Pure Green provides bottled juice directly to stores, eliminating the need for expensive juice-pressing machinery. Beyond loosening the capital requirements for start-up, this direct ordering system simplifies ongoing inventory management for franchisees and cuts down on labor costs by reducing complexity of menu production. 

Pure Green franchisees pay an initial $30,000 franchise fee per unit opened, plus a six-to-seven percent royalty on gross revenue and a national marketing fee totalling two percent of gross revenue. One third of royalty fees and half of franchise fees go to sub-franchisors. Franchisees receive ongoing support from local sub-franchisors and Pure Green’s corporate headquarters. This support includes training initiatives like Pure Green University, which coaches franchisees and their employees on the hospitality-focused Pure Green customer service method. 

Pure Green’s retail units generated approximately $2.69 million in revenue in 2019, up only slightly from $2.66 million in revenue for 2018. It seems as though Pure Green’s wholesale business may have exhibited growth during this period (as the company alludes to year-over-year growth on their fundraise page), but the franchise portion of the business did not grow significantly. 

Team

Pure Green was founded by fitness enthusiast and experienced business-builder Ross Franklin. Franklin began working in the fitness industry after college, first as a personal trainer and later as a consultant turning around struggling fitness brands. Through his consulting interactions with the fitness and wellness space, Franklin discovered opportunity in the juice bar market and founded Pure Green in 2014. Franklin is a thought leader in fitness and wellness. He has received various accolades from the industry, including an award from Thrive Global as a top-five wellness entrepreneur. 

Pure Green’s only other full-time employee is Michael Cecchini, Director of Operations. Cecchini has a background in theater, and he previously worked as an electrician, producer, and aerial rigger for a variety of shows. 

Growth Plan

Pure Green has aggressive expansion plans for 2020 and beyond. The company hopes to secure 50 individual signed franchise deals by the end of 2020 and to continue to double the number of franchise locations opened each year thereafter. 

Pure Green intends to use the bulk of capital raised to open additional company-owned retail locations (not franchise locations), including a new food-hall kiosk opening in New York City in mid-2020. Pure Green also intends to use a portion of raised capital to fund marketing initiatives targeted at potential franchisees. 

Why We Like it

• Low-friction franchise model: Pure Green has clearly worked to develop an attractive and marketable franchise opportunity to entrepreneurs nationwide. Unlike other juice bars (and some other fast-casual franchise businesses), Pure Green franchisees do not have to invest in complex machinery to produce menu items. Pure Green juices are shipped from the company’s distribution center and have a long shelf-life for easy inventory maintenance. The simplicity of fulfilling Pure Green menu orders also reduces labor costs for franchisees. In sum, Pure Green franchisees sign on to a lower commitment relative to many franchise opportunities, increasing Pure Green’s likelihood of meeting its goal of 50 franchise locations in 2020.  
• Proven traction in NYC: Pure Green has demonstrated product-market fit with more than $2.5 million in annual revenue across five retail locations in New York City. While investors should be wary that retail revenue only barely increased between 2018 and 2019, Pure Green’s retail locations are still operating at a small profit (of approximately $30,000 in 2019), and the company’s bottom line stands to benefit from a low-overhead franchise model.  

  
  

• Support from an in-house (though legally distinct) distributor: Pure Green franchisees order bottled juices directly from the Pure Green wholesale distribution center, which also drives juice sales in over 30 states and establishes brand recognition for Pure Green outside of its retail locations. Franchisees benefit from the supply chain logistics and branding of an entity that is (relatively) uncorrelated to the success of Pure Green’s retail franchise operation. The downside of Pure Green’s two distinct businesses is that investors can only profit from the success of the franchise operation, not wholesale revenue from bottled juice.

The Rating: Deal To Watch

Pure Green is a successful New York City retail juice bar and national bottled juice distributor primed for national expansion through a low-friction franchise model. With an experienced founder, several million in lifetime revenue, and a franchise opportunity sweetened by low start-up costs and the support of a nationwide distributor, Pure Green is well-positioned to open a significant number of franchises nationwide. Each additional franchise opened increases company revenue and furthers the growing Pure Green brand. 

Prospective Pure Green investors should note a couple of key details about the company’s fundraise before deciding to invest. First, Pure Green’s distribution business and franchise business are separate legal entities. Investors are only receiving equity in the franchise business and do not directly benefit from the success of the distribution business. Second, Pure Green’s New York City retail locations did not significantly expand revenue between 2018 and 2019. While that lack of growth is not necessarily a red flag, it does heighten the need for a successful franchise launch in order for Pure Green to deliver returns to investors. 

Some successful franchise food businesses ultimately launch on the public markets, but private equity and franchise conglomerate acquisitions are also common liquidity events. For instance, Panera Bread listed on the NASDAQ in 1991 after steady growth but was acquired by JAB Holdings (owners of Green Mountain Coffee and Krispy Kreme) in 2017. 

Pure Green has the potential to become a successful nationwide franchise capitalizing on consumers’ move toward healthy eating and superfoods. With an attractive franchise model and the infrastructure of a nationwide distributor, Pure Green’s franchise opportunity offers advantages over other juice bar competitors. That’s what makes Pure Green a Deal to Watch.