What's the secret to getting restaurant-quality frozen drinks at home?

You might have better luck if you use ice that is composed of margarita ingredients (lime juice and water, I guess). Unless you're referring to margaritas on the rocks, many restaurants actually have something akin to a slushy machine that is used for margaritas, so there is no ice added to the drinks. Instead, the actual margarita ingredients are frozen while stirring to prevent adding anything that will water it down.

Just mix your margaritas (including tequila) and put them in the freezer the night before. A gallon milk container would work fine, leave some headspace to be safe. With the right amount of alcohol, the margaritas will be slushy, not frozen. Here's a sample recipe: Margarita Slushy

If you like other mixers, that's fine, just keep the alcohol level about the same. The recipe I linked to is just over 10% alcohol (10.3448275862069% to be precise:) assuming 80 proof tequila and 60 proof Triple Sec. That meshes with what I was able to find online concerning almost but not completely freezing alcohol. Of course, the perfect ratio depends upon the temperature of the freezer, and how long the mixture stays in the freezer. Sugar and salt play a role too, but a small one compared to the other factors.

Mix your margaritas, know that the proof of liquor is twice its percentage of alcohol, and you are aiming for about 10% alcohol, or just over. Check its 'slushiness" in the morning, and again a few hours before you plan to drink it. It may take some tweaking to get it just perfect, but it could be really fun experimentation.

See also: How to make a homemade Phrostie?.

The best way to achieve the perfect texture for your frozen drink takes a little more time, but is worth it in the end.

First, take a couple cube trays full of ice and add them to your blender. You want to break them down so that they will combine more easily with your mix. Pulse them a few times to break them up - you generally want pieces that are no more than a centimeter across. Take the pulverized ice out of the blender (if a small amount sticks to the bottom, that's okay) then add your mix. Add a small amount of your crushed ice back to the blender and pulse a few times to combine. Repeat this process several times, adding just a handful of crushed ice at a time and letting it combine before you add the next batch. When it looks just about right, add a final handful and give it a few extra-long pulses to finish.

This way, you're starting out with much finer ice and blending/melting it down even further, and you will ensure that you don't add too much ice. You can also add a little bit of simple syrup to increase the viscosity of your mix and help keep the ice suspended in the liquid.

By the way, if you can make simple syrup, you're halfway to making your own margarita mix. All you then need are a few limes and an orange for juicing. It's worth the effort.

Margaritas in restaurants are typically made by combining the ingredients in bulk in what amounts to a slushie machine; the machine uses a refrigerated cylinder with an impeller that keeps the liquid inside moving and the sides clear of ice, while the refrigerant cools the cylinder below freezing. The result is a suspension of small ice crystals in liquid.

Blenders create a slush the opposite way; you freeze the liquid solid, then break the ice up into small pieces that melt a little, but the volume of ice involved still keeps it from melting too quickly.

Suggestions:

• Less ice, more drink in the blender. If you're ending up with snow cones when you want slushies, you're using too much ice.
• Pre-blend the ice before adding mix. If you're adding liquid to cubes before you start the blender, then at a certain point the ice is being "lubricated" by the liquid and can more easily move aside as the blade passes by instead of getting further pulverized.
• If you drink quickly, you can expect to be left with an ice ball. It happens even with restaurant-grade machines. Pace yourself.
• You might try using "warm ice", at the point of melting, versus hard frozen ice. Commercial ice makers cool the ice tray directly, and don't spend as much energy keeping the entire bin cold (the ice itself does a pretty good job). The result is ice closer to its melting point which won't clump as easily.
• Freeze some of your mixed margarita beforehand, and use that as the ice. Great suggestion by the other answerer; the alcohol and sugars in the mix will keep the cubes from freezing really hard, so you'll end up with something like a popsicle, which will more easily break down in the blender. Your drink will also stay at the same strength regardless of how fast you drink; using water ice, really throwing them back will give you a stronger drink followed by ice water, while nursing your drink will give you a more watered-down taste throughout.
• If you are really into frozen drinks, especially if you entertain a lot, a foodservice-grade slush machine wouldn't be a bad buy. Prices vary, but you'll probably want the style with a clear hopper and the impeller at the bottom, as these are smaller and fairly easy to clean and maintain compared to other restaurant styles, without being cheap "home-grade" machines that are basically just fancy blender designs. A single-hopper design holding a gallon of mix will set you back about $1200, and they run to up to three grand for multi-hopper designs (giving you multiple flavors, or one hopper ready to serve while a fresh batch is chilling in the other).

Is it the blender maybe?

100%

I'm a huge fan of blended drinks, too, and I always want them to be ridiculously creamy, smooth, while being so thick you can eat them with a spoon. This is almost impossible to do with a cheap blender, and it's trivial to do with a good blender.

I have both a Vitamix and a Blendtec, and they are both equivalent for this purpose. You'll be absolutely shocked the first time you use one, because you can fill them to the top with ice and they absolutely obliterate it almost instantly. If you're accustom to cheap blenders, this is a revelation.

To get it really smooth and creamy, you need to blend it for a good 30 seconds or so (again, with a really good blender), and to get it thick, you need a lot of ice. These are sometimes at odds with one another. If you have too much ice, and air bubble can form underneath the mixture and prevent further mixing. This problem can be mitigated by (1) adding more liquid, (2) having the right container for the blender.

The Blendtec WildSide jar is really good at this. It's so good that Vitamix copied it so exactly they lost a lawsuit in 2012 to the tune of $24 million dollars. That said, I've seen the new Vitamix containers in Costco recently and it looks like they once again have a similarly good container, but with enough changes to avoid infringing on Blentec's patent. :)

A good jar helps keep feeding the contents down into the blades. You want a nice vortex going, with the blades going as fast as you can get them without forming an air bubble.

I've found the WideSide jar is best for large quantities, and that the Vitamix jar (at least the one from a few years ago) can actually produce slightly creamier results, but it's more prone to air bubbles. They have somewhat different approaches to blending, with the Vitamix using sharp blades that cut and the Blentec using blunt blades that sort of... smash.

In short, getting a really good blender and it's easy to make flawless, thick, creamy blended drinks. Note that i'll spoil you. The ones you make at home will be better than you can get at most bars/restaurants.

I'm not a huge fan of mixes, but they should be ok for what you want to do. It sounds like you are just adding too much ice to your margarita mix. Try halving the ice and see how you do. You may be over-blending it a bit as well, but my money's on too much ice.

New blender. I had the same problem with that blender. No matter how many ways you try it. It leaves the ice grainy not smooth. I'm looking to save up for the Blendtec.

THE answer: An ice cream machine that both freezes and mixes. My Whynter machine's capacity is only about 1 1/2 liters, but ANYTHING that it mixes will be silky smooth. The person who commented that adding ice to a mixture and then processing it is correct; you'll have a much better result freezing the mixure itself and, preferably, while it is continually mixing. Of course, if the alcohol proportion is too high (say, above 10% of the total volume) the mixture will be looser than you probably prefer. The quality, horsepower, etc., of a blender or other machine that doesn't continually freeze and blend really doesn't matter - you'll still have crunch, uneven texture.

Check out Dave Arnold and his thoughts on Frozen Margaritas. When it comes to blended drinks you need to use the correct proportions to get the right flavor.

http://www.cookindineout.com/2015/05/frozen-margaritas.html

Dave Arnold usually makes his recipes from scratch, but maybe you can take his ideas and transfer them to your mixes.

If the ice isn't getting broken well, like others said, maybe the blender's no good.

I've found that adding frozen fruits (i.e. peaches, mangoes or strawberries) with the ice and liquid ready mix works beautifully!