Just Hamburgers, Hot Dogs and French Fries

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“Five Guys Burgers & Fries” first opened their doors in Arlington County, Virginia in 1986. Originally composed of Jerry and Janie Murell, in addition to their five sons (the “Five Guys” for which the restaurant is named), Five Guys quickly expanded to several locations in the greater Washington D.C. metropolitan area. In 2002, after several years of regional success, Five Guys began creating franchise opportunities, which were soon engulfed in a rapid rise in demand. At present, Five Guys Burgers & Fries has nearly 1,000 stores in the U.S. and Canada, with 200 or so set to open in the United Kingdom next year and nearly 1,500 total stores in development, in addition to more than $1 billion dollars in sales.

While Five Guys’ meteoric rise in the fast-food industry is certainly surprising, the myriad factors that have contributed to its success are all tried and true methods of corporate expansion that have served companies well in the past. One such factor is Five Guys insistence on quality over quantity. The core menu at Five Guys has remained much the same ever since its inception in 1986: Just Hamburgers, Hotdogs and French Fries. With some minor additions and subtractions over the years, ranging from a self-described “disastrous” attempt at adding coffee (Burke, Monte, 2012, p.2) to the successful implementation of Grilled Cheese Sandwiches, the corporate culture at Five Guys Burgers & Fries is to regard the menu as sacred. The effect of external markets on the menu and success of Five Guys has been generally positive, as the recent recession made it especially prudent for Five Guys to keep its core menu intact, without adding too many bells and whistles. As menus become more complex, the procurement of suppliers and the additional costs of preparation and kitchen equipment to accommodate the new items can be costly to a restaurant chain, particularly if the menu items in question don’t sell as well as expected.

Another factor that is prevalent not only in the success of “better burger” establishments like Five Guys but businesses everywhere is the implementation of performance-based incentives for employees. Every Five Guys establishment is monitored by anonymous independent examiners (mystery shoppers) for quality of service, safety, and cleanliness. An entire 1.5% of revenues from every store are collected for the sole purpose of awarding employees and crews who perform well in these inspections. The top 200 stores in the system are awarded on a weekly basis, with the entire incentives program structured as weekly, monthly and quarterly rewards programs. Crews that perform well can expect to collect between $900 to $1,300 dollars per store (Knudson, Julie, 2011) on a weekly basis. The effect of external markets on Five Guys offerings of performance-based incentives has been generally positive, as there are many companies employing hourly workers that do not provide incentives programs at all. The effects of a marketplace that lags behind a particular corporate entity like Five Guys in the incentives department can include higher manager and employee retention, in addition to increased performance.

A third factor involved in the sustained success of Five Guys Burgers & Fries is the exclusivity of their franchisee decisions. Founder and Chief Executive Officer Jerry Murell states that he looks for franchisees with a net worth of at least $1.5 million dollars and liquid assets of at least $500,000 dollars. The down payment for a franchise is in the vicinity of $20,000, while the cost per restaurant, while dependent upon the region in which the franchise is located, is generally about $75,000. As a result, your average Five Guys franchisee owns anywhere from 10 to 15 stores, which comes to a grand total of about 100 individuals who are currently franchise owners for Five Guys Enterprises, LLC. The careful decisions being made about whom to franchise their restaurants to, in addition to the stringent guidelines to be followed by every franchisee (again, the menu is sacred), has given Five Guys not only unprecedented control over their non-corporate stores, but has allowed them to forge a substantial and successful business relationship with each and every one of their individual franchisee’s. The high economic standards of acquiring a franchise under Five Guys ensure that the number of unsuccessful franchises remains minimal. The effect of external markets on the expansion of Five Guys franchises has been negative, as the recent recession could be a large contributor to the stringent economic standards potential franchisees are held to; if a franchise owner does not have enough liquidity to support the store in hard times, Five Guys will be more susceptible to the folding of franchises when sales numbers are at their lowest.

Sound business ethics and social practices have been a part of Five Guys corporate culture since its inception. The use of only fresh ground beef that is shipped to every store on a weekly basis and the transparency of the company regarding the supply and acquisition of its products, speak to a greater sense of responsibility to the customer and the environment. Every Five Guys store, regardless of whether it is franchised or corporately owned, has a chalkboard right next to the menu on the wall that states the name and location of the farm where the potatoes that your French fries have been made from were harvested, in addition to the name(s) of the farmer(s) who cultivated the plants (Peckenpaugh, Douglas J., 2012). Five Guys use of local farms, the lack of preservatives and chemicals involved in the preparation of their food items and its insistence on corporate transparency add up to a corporate culture that continues to lead the way for other corners of the culinary and fast-food industry to begin adopting these practices as well.

With $1.3 million dollars of yearly revenue per store (Kulikowski, Laurie, 2011), Five Guys Burgers & Fries leads restaurants in the fast-casual “better-burger” category in size and total sales, specifically because of its adherence to sound business practices, including a pledge to advance socially and ethically responsible policies, providing quality services through well-compensated employment opportunities, and a singular desire to keep their menu as simple as possible: Just Hamburgers, Hot Dogs and French Fries.

References

Burke, M. (2012, July 18). Five Guys Burgers: America's Fastest Growing Restaurant Chain. Forbes. Retrieved from http://www.forbes.com/sites/monteburke/2012/07/18/five-guys-burgers-americas-fastest-growing-restaurant-chain/

Knudson, J. (n.d.). How to Incentivize Your Crew. Restaurant Employee Incentive Programs Encourage Store Success. Retrieved October from http://www.qsrmagazine.com/human-resources/how-incentivize-your-crew

Kulikowski, L. (2011, May 10). How Five Guys Got Us Eating Its Burgers. - MainStreet. Retrieved from http://www.mainstreet.com/article/small-business/marketing/how-five-guys-got-us-eating-its-burgers

Peckenpaugh, D. J. (2012, May 18). Burger Wars, Part 2: Ethical & Transparent. Burger Wars, Part 2: Ethical & Transparent. Retrieved from http://www.foodproductdesign.com/articles/2012/05/burger-wars-part-2-ethical-and-transparent.aspx