The King of Smoothie King: How An Unlikely Franchisee from Korea Bought the Company and Doubled Its Size

Image Credit: Zohar Lazar

Wan Kim has this strange ability to raise the gooseflesh. He doesn’t look like he could do it. He’s all slight build with glasses and mild manners. And yet: Goosebumps. Every time you talk to him.

He’s the owner and CEO of Smoothie King, which, again, doesn’t suggest a hair-raising lifestyle. But the business of blending fruits and protein powders is also, in its own way, the business of life and how to lead it. For Kim, it goes way beyond some “healthy-first” influencer-speak, or even the actual nutrition his smoothies provide at more than 1,300 locations around the world. For him the business of life and how to lead it is about pursuing something almost transcendent, the oldest of human quests: Our need to evolve, to rise above our origins and refuse what society deems acceptable for our lives.

Wan Kim has, after a long trial, succeeded in this quest.

When he tells you how — well, goosebumps.

We should probably start at the beginning. That’s in South Korea, during the Korean War. Wan’s grandfather died in the war when Wan’s father, Hyojo, was only eight. It’s hard to imagine the deprivations of that war: just death and scorched earth everywhere. Hyojo had to scrounge for food every day amid the dead bodies.

But it fueled him. As an adult, Hyojo built a company, Kyung In Electronics, that became a manufacturing behemoth, with Sony and Samsung as clients and profits north of $200 million a year — and ultimately, while Wan was growing up, an initial public offering on the South Korean stock market. Hyojo wanted to give his two sons the childhood he never had. In return for his first-class plane rides and postsecondary U.S. education, Wan knew Hyojo expected from him an undying fealty.

For a while, Wan acceded. After receiving an undergraduate degree in business from Boston University in 1995, he flew to San Diego the following year to oversee the company’s plant in Tijuana. This was Wan’s first test as heir apparent. He told Hyojo that the company should grow, expanding its customer base to include rising firms in China.

Hyojo refused. Growth meant change. Change meant debt. And debt was forbidden. Hyojo had built Kyung In without the help of any bank or outside financier. “From his perspective, I am a very fortunate boy,” Wan says. In fact, for Wan to suggest the company grow like this was really to suggest he was not grateful for the life Hyojo had given him.

From Wan’s perspective, though, Hyojo’s refusal was the latest example of a father denying his son the chance to author his own life. Wan was self-reliant, too, or at least ached to be. So after two years in San Diego, he told his father he was leaving the company. He was going to business school.

“Are you kidding me?” Hyojo asked, as Wan remembers the conversation. “Are you just going to abandon your dream?” As if being the heir apparent for Kyung In was a dream job, a dream life.

“It is your dream,” Wan said. “Not my dream.”

Image Credit: Courtesy of Smoothie King

So business school at the University of California, Irvine, and then — in those frothy days of the late ’90s in Silicon Valley — the founding of a VC firm that had Wan on pace to outearn in a couple of years what Hyojo had spent decades accruing.

Until it crashed. All of it.

By this point, Wan was approaching 30. He had a wife and two children and every friend and family member telling him he should apologize to Hyojo and accept whatever position his father would grant him.

Wan refused.

He had another venture in mind.

Back in those undergraduate years in Boston, fattened from the fast food he and his American dormmates ate, Wan had found one day a most curious offering: A store that sold smoothies. He had never heard of it, this “smoothie,” but when he walked in and ordered one, he thought the blended fruits, yogurt, and vegetables were delicious. More than that: Good for him.

He hit up that smoothie shop almost every day until he graduated. Along the way, he lost the 15 pounds that the fast food had put on his frame.

South Korea didn’t have smoothies. Wan was convinced that once South Koreans discovered them, though, they would reach the same conclusion he had. So he did something even bolder than refusing to ask Hyojo for work: He invited his father to invest in his smoothie idea.

Wan explained that the proliferation of Subway franchises worldwide and the ascendance of Whole Foods in the U.S. meant people were becoming more health-conscious. What’s more: Korea was becoming a developed country. By the early 2000s, the average Korean made roughly 39 million won a year (almost $30,000 in U.S. dollars). That was a middle-class life. The Kims could ride these waves and create a new market with the introduction of smoothies.

Hyojo kept listening.

Wan didn’t know how to make smoothies, but he would rely on the expertise of the largest smoothie franchise in America, Smoothie King, and would become a franchisee. The more success he had, the more Smoothie Kings Wan could open in Korea, and the more money the Kim family could make.

Where do you intend to put this first Smoothie King? Hyojo wanted to know.

Myeongdong, Wan told him. It was Seoul’s equivalent of Times Square.

Introduce a completely untested store, in a completely untested business sector, in the most expensive neighborhood in the country? Hyojo asked.

Wan nodded.

Don’t focus on the risk, Wan said. Focus on the opportunity.

The shop in Myeongdong opened on May 31, 2003, with the help of a loan from Hyojo. Should Wan’s plan actually work, Hyojo could convert his loan to an equity position. Wan manned the store and got his hands dirty — or at least stained with blueberry juice. It was amazing. It was exactly what he wanted: to not only run a business but work in it every day.

It was not successful, though. June rent was more than its sales. “I used the f-word a lot,” Wan says. He tried 100-hour work weeks, in-store promotions. He hired an outside marketing agency. But his shop, in a good month, only inched toward and never reached profitability. Wan took that as progress and expanded to a second location in Seoul, then a third. But with all that, the Korean public never really moved from its indifference to Wan’s grand vision. Even Hyojo still referred to smoothies as “juice drinks.“ A smoothie was not a Snapple!

Wan pitied himself. Blamed his plight on the ignorance of the public. Blamed his father. The commercial leases, the weather. His life got so stressful from three underperforming stores that one night in 2005, while he slept, he unwittingly ground his teeth to the point that he cracked one of them — just split the tooth wide open.

He yelped awake. When he looked in the mirror, the man he saw there appalled him even more than the cracked tooth. That man was haggard, cynical, and weighing the world by its risks instead of its opportunities.

What am I doing? Wan thought.

He stared longer: The one person he wasn’t blaming was himself.

He had to own his shortcomings, he realized. It was the only way he’d find solutions for them.

What can I do, today, to change the business? he thought.

Image Credit: Courtesy of Smoothie King

The answer started with a good attitude, which then spread to his employees. It was amazing how they’d been modeling his behavior all this time. What can I do, today, to change the business? was then applied to the Smoothie King near one of Seoul’s subway stations. The city had begun a reconstruction project there, effectively closing the traffic on which the store relied. Wan’s revenue was down 70% at that store.

What if we opened a catering business at that location? Wan thought. They order their drinks and we find ways to deliver it to them, either around the construction or at their offices.

It worked. Sales crept back up.

It turned out there was no problem Wan couldn’t address once he realized it was his to solve. This idea of ownership, of owning even your failures, Wan realized, was very powerful. As a result, by 2007, his stores posted their first yearly profits.

“It was like a sunrise,” he says.

From there he was unstoppable. Three stores became 10, and 10 became two dozen, with all of them flourishing. As he continued to expand, Smoothie King executives from the corporate office in New Orleans flew to Seoul.

Who is this Wan Kim guy? they wondered. They had to see for themselves.

“So they all came back [to New Orleans] and were like, ‘I worked my ass off,'” says Katherine Meariman, who is now Smoothie King’s vice president of training and operations services. By 2010, Wan had 120 Smoothie Kings in South Korea, nearly 20% of the brand‘s worldwide stores. He’d created the success that allowed him to buy out Hyojo’s equity. Now Wan had an idea even bolder than the proposal he’d once offered his father.

He had two ideas, in fact.

He flew to New Orleans.

Wan saw this visit in 2010 as the trip that would either change his life forever or stop it from evolving any more.

It played out one day at a restaurant just off the French Quarter. He sat down to lunch with Smoothie King’s founder, Steve Kuhnau. The two had been exchanging emails, so Kuhnau sensed what they might discuss.

Kuhnau had grown up allergic to dairy, wheat, and lots of nuts. To sate his hunger and give his body nutrients, he had grabbed his mom’s blender one day as a teenager and dumped in fruits and vegetables and vitamins. When he poured his drink, he loved it. He began to make it all the time. Later, in his 20s, working as a nurse in the burn unit of Brooke General Hospital in San Antonio, Texas, he thought his concoction might help patients’ wounds heal. The result was promising enough that Kuhnau left healthcare to open The Original Smoothie Bar in 1973 in his native New Orleans.

From that day to this lunch, a lot had changed. The Original Smoothie Bar had become Smoothie King, and then a franchise corporation, and then lost its way. The brand’s drinks in the U.S. were no longer healthy. They dumped in additional sweeteners and ice cream and inorganic protein powders that expanded its customer base beyond the health-conscious, which — OK, great, made for more profitable stores, but also offered up Big Macs you sucked through a straw. This affected perception. People close to Kuhnau, like Meariman, openly wondered by 2010 what the brand even stood for. Another issue with Smoothie King was what hadn’t changed since 1973: Kuhnau had no obvious successor.

So as the lunch progressed, Wan broached his first proposal.

Let me buy you out, Mr. Kuhnau.

Both men knew Kuhnau had been reluctant to sell — it was the theme of their previous emails — so Wan moved to the second of the day’s proposals.

Let me also return Smoothie King to its former glory: A healthy drink.

Wan remembers Kuhnau staring at him.

The truth was, Kuhnau was ready to retire. And here was Wan, a man who certainly had executive skills — 120 stores in eight years! — and endless passion for the brand.

Kuhnau took out a check from his wallet. He told Wan this check had been in various wallets of his since the 1970s. It looked the part: grimy and almost translucent. But it represented in 2010 what it would take for Kuhnau to sell Smoothie King.

He slid the check across the table.

Wan picked it up.

It was for $50 million.

With the help of a private equity investment, Wan Kim became Smoothie King’s CEO and chairman of the board. He moved his wife and three children to New Orleans, and then, in 2018, he relocated the corporate headquarters to Coppell, Texas, outside Dallas. Once he installed his own leadership team, he took on the brand’s largest issue — the hardest issue, the one he had vowed to solve: overhauling its U.S. menu.

But franchise businesses are hard. You have to please millions of customers and hundreds of franchisees. All of these people had been loyal to the old Smoothie King. Franchisees, for one, did not exactly appreciate the new guy coming in from Korea — a guy who didn’t speak English fluently, saying he wanted to lower the calorie counts and clean up the menu and almost certainly nosedive their sales to live up to some mission statement of his: Inspire people to lead a healthy and active lifestyle.

“Franchisees were like, ‘I’m gonna kill Wan Kim,'” he says, only half joking. Because it got very testy in meetings.

“Some of the things franchisees said to us — they were awful. Awful,” says Dan Harmon, who became Smoothie King’s new president and COO in 2019.

Wan tried to stay firm. Told the franchisees that Smoothie King would now use whole fruits and organic vegetables, and remove added sugar and unhealthy additives. And somehow, amid all this change, his hope was to not alter the flavor profile of the smoothies.

But expenses rose. Because real fruit is costly.

And sales plummeted. Because new drinks taste different.

Customers and franchisees alike wanted Wan to return to the old methods.

The thing is, they had a point. “Numbers are a universal, unemotional language,” says Thomas Kim (no relation), the CFO that Wan brought in after the move. Profits were down about 5%, with no bottom in sight.

“I was scared,” Wan says.

What if his success in Korea was just that? What if he couldn’t lead in the U.S.? What if he couldn’t oversee a worldwide brand?

There is no one thing Wan Kim did to convince reluctant customers to return or franchisees to quiet down. There was only the question that had guided Wan’s career: What can I do, today, to change the business?

For years, he and his team taste-tested everything. That meant hundreds — maybe thousands — of sips of every iteration of each smoothie on the menu, tinkering with recipes and fruit and vegetable blends along the way. By October 2019, they had not only made the menu healthier by overhauling 70% of it but, to their minds, they had improved the flavor of each drink, too.

Then the pandemic hit. Wan and his team met every day, even weekends, for two months, trying to figure out how to keep the stores open, thinking about what they had to do to evolve, which again meant what they had to do, today, to improve the business.

Out of that came online ordering and contactless delivery and ultimately, a subscription program, where Smoothie King sent customers the healthy ingredients the stores themselves used.

Sales skyrocketed. In the past three years the average annual revenue per store has gone from $300,000 to $600,000. “The franchisees that were against [the changes],” Thomas Kim says, “are now like, ‘Man, it’s doubled? You can’t knock that.'” The brand today has around $600 million in annualized systemwide sales. Year over year sales have increased by 17%.

In other words: Wan Kim succeeded in completing that oldest of quests: to evolve, to rise above what society deems acceptable, and to convince others to do the same. Harmon, the president, likes to tell a story about Wan, because it raises the gooseflesh on his arms.

One day, the two were talking sales figures and franchisees. They saw numbers in the spreadsheets they didn’t like. Sales weren’t where they needed to be in a test market.

Wan looked at Harmon. “Do you think it’s my fault?”

Harmon made a face. Are you crazy? he seemed to ask. Wan was the CEO of a corporation with more than 1,300 locations, each with its own issues and staffed by its own franchisees. “No,” he said. “I’m not trying to blame anyone.”

Wan nodded his head. A moment passed between them.

“What about: Is it your fault?” Wan asked.

“Oh,” Harmon said, and stumbled a bit, because he saw himself as an accountable person but also someone who could assess a situation objectively. “I don’t — I’m not thinking that it is.”

Again: This was one problem existing within a small subset of stores, in an almost innumerably faceted company.

Wan looked at him. “I think you need to rethink that.”

That evening, Harmon says, recounting the episode, “I was like, if the health reward [for a customer] isn’t working, or the team member at the front doesn’t know how to operate it or explain it, that really does come back to me.”

He had to own what was in his dominion. And pretty much everything was.

So Harmon went back to work the next day, telling Wan he was grateful for the question and ready to execute and —

Wan interrupted him. “Dan, it’s not your fault. It’s really my fault, because I should have probably noticed sooner. I should have asked more questions.”

And that’s when Harmon realized: Wan had wanted him to rethink, trusting he would reach the conclusion Wan had, that this was a way to approach all the company’s failures.

What can I do, today, to change the business?

“It’s a powerful idea in any business,” Wan said.

https://www.entrepreneur.com/article/435856