Five Guys flying high in depressed market
- May 28, 2010
Despite the struggling economy, Americans still want to treat themselves by eating out. That inclination has benefited Five Guys Burgers and Fries. The Arlington-based company is the fastest-growing restaurant chain in the country, according to Technomic Inc., a leading food-service consultancy.
Restaurant sales nationwide dropped almost $2 billion last year to $230 billion. Five Guys, by contrast, saw sales rise by 50 percent to more than $450 million. The company‘s limited-service restaurants offer made-to-order burgers and fresh-cut fries.
“Consumers are really shifting their focus towards what we call better burger chains like Five Guys,” says Darren Tristano, executive vice president of Technomic. “People like their burgers and fries, but the food at Five Guys is, frankly, quite good. It’s much better quality than what’s found in fast-food restaurants, but it’s more convenient and priced better than you’ll find in full-service restaurants. And that is driving traffic to its stores.”
The company’s success also is prompting potential franchisees to open their checkbooks, a key factor in the company’s growth. Five Guys, which opened in 1986, began offering franchises in 2002. It now has more than 600 stores in 35 states.
A Five Guys franchise is particularly attractive because of its return on investment, Tristano says. The build-out cost for a Five Guys restaurant is $350,000 to $400,000, but the average unit has $1 million in annual revenue.
Tristano believes that demand for better burger restaurants is going to grow. “We’re going to see more competition in this segment, but ultimately over the next five years, we expect some of these larger chains, like Five Guys, that are already deeply entrenched, to win out the market,” he says. “They’re owning the space and that’s likely to continue.”