Burger, fries and drink - Five guys rules "better burgers"

The “better burger” category — consisting of brands that offer premium burgers and such for around $8 — is getting more and more crowded as people are always looking for “better.” You’re probably very familiar with some of the names that fall into this category, including Smashburger, In-N-Out Burger, Fuddruckers, Shake Shack, and BurgerFi, among others; not to mention any number of smaller regional franchises that might be next to explode in popularity. But one brand is dominating the “better burger” field and has been since it burst onto the franchising scene in 2002: Five Guys Burgers and Fries.

A Family Affair

Five Guys is truly a family affair. The “five guys” are the five sons of founders Jerry and Janie Murrell. Back when there were just four sons, Jerry Murrell gave the boys a choice to either go to college or use the money they would have spent on that to open a restaurant. The sons chose the restaurant, and in 1986, Five Guys Burgers and Fries began (ran by Jerry and the four sons). When the fifth son was born, they kept the name, but now it refers to all five sons instead of four sons and their father.

Theirs is a true American success story. Jerry’s original goal was to create and serve only the best hamburgers and fries, and over the years the "guys" have tried other menu items like coffee, chicken, and grilled cheese, but have always come back to their core foundation. Their menu is simple, but their quest for quality and their consistency in producing the best product possible for their customers is legendary.

From Humble Beginnings to Sensational Success

When the family started franchising in 2002, there were five restaurant locations throughout Virginia. Jerry knew he had a good concept and would be able to replicate their success within a franchise structure, so he picked up a copy of Franchising for Dummies and the rest became history. Between 2006 and 2012, the brand’s growth exploded by 800 percent, making Five Guys the fastest-growing restaurant chain in 2012 (since 2008, it had actually doubled in size).

There are more than 850 locations in the U.S. now, with another 1,500 in some phase of development. Five Guys locations are typically found in shopping centers and urban areas. Odd or unique locations — ones that fall outside of the brand’s norm — are considered on a case-by-case basis. Locations are ideally 2,500 square feet, but can range from 2,000 to 3,000 square feet. According to Five Guys, “Buildings must offer unique or progressive architectural character.”

Five Guys insists on tight control over their brand. The Murrell family focuses on consistency throughout all their locations when it comes to the products, the quality, the service, and cleanliness. As an incentive for excellence, they offer robust employee bonus programs at the store level. Franchisees are generally rewarded by strong profits (individual store revenues average $1.2 million per year) and consistent customer traffic.

Becoming Part of the Brand

Speaking of the franchisee, you may now be wondering what requirements you need to meet in order to become a Five Guys franchise owner. Any potential franchisees must have a net worth of $1.5 million and $500,000 liquidity. There is a $25,000 franchise fee and a $75,000 fee per store, with the average franchisee owning 10 to 15 locations. Build-out fees per store can run anywhere from $350,000 to $500,000. Franchisees must fork over a 6 percent royalty fee and a 2 percent marketing fee, plus an additional 1.5 percent fee that goes to the employees for audits, "in which stores are monitored by independent examiners for quality of service, safety, and cleanliness. Crews that score well collect $1,000, awarded weekly.” The franchise agreement term is 20 years. Training is at a minimum two weeks, but can extend for up to six weeks. Five Guys maintains the first right of refusal on locations.

Becoming a Five Guys Franchisee: The Basic Requirements

  • Must have a net worth of $1.5 million and $500,000 liquidity
  • A $25,000 franchise fee and a $75,000 fee per owned store are required
  • Build-out fees per store run from $350,000 to $500,000
  • A royalty fee (6 percent), a marketing fee (2 percent), and an auditing fee (1.5 percent) must be paid monthly
  • Franchise agreement lasts 20 years

A Continual Cult-Like Following

With such rapid growth within a brand, there are bound to be some headaches, and for Five Guys, the main one is that locations within 10.5 miles of one another often fight for the same customers. Franchisees are constantly trying to get new items on the menu (with milkshakes being one of the most popular requests), but the Murrell family persistently holds firm, as their focus on perfecting their core menu is what's continuing to drive the cult-like following of Five Guys. Franchise rights in the U.S. and Canada are currently sold out, and that’s any franchisor’s dream!

To stay up to date on the latest franchise news, to learn more about franchising or a particular franchising opportunity, and to gain access to our complimentary collection of Franchise Disclosure Documents, sign up for your free membership to Birkhoff Research Group»
 

image: Mike Mozart (Creative Commons BY)
Share This
s2Member®
+ +
Is Franchising Right for You? ebook

Is Franchising Right for You?

Take this 10-Question Quiz to find out if franchising is right for you. Download this free ebook by signing up to our mailing list.

You have Successfully Subscribed!