Emerging Concepts | November 2012 | By Judy Kneiszel

Freddy’s Frozen Custard & Steakburgers

Old-school diner chain uses frozen treats and premium burgers to spur award-winning growth.

Freddy's iconic steakburgers and frozen custard treats win loyal fans.
Freddy’s Frozen Custard and Steakburgers
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Freddy’s Frozen Custard & Steakburgers has the look and feel of a mid-20th century hamburger joint, despite having recently celebrated its 10th anniversary.

“We tried to give Freddy’s a ’40s and ’50s type of look and feel and convey the values of that time period,” says Freddy’s CEO Bill Simon.

Simon and his brother, Randy Simon, who serves as the company’s CFO, often visited the Ozarks as kids and came to love the frozen custard in Missouri. Partner Scott Redler, Freddy’s COO, grew up in St. Louis, where he frequented Ted Drewes Frozen Custard, a landmark in the city since 1930. “We all thought frozen custard was superior to ice cream, and we missed it,” Redler says.

Frozen custard contains more egg yolks than traditional ice cream and is made in small batches with equipment that forces air out of the product, minimizing ice crystals and preventing it from melting as quickly as ice cream.

Freddy's Frozen Custard & Steakburgers

President/CEO: Bill Simon

HQ: Wichita, Kansas

Year Started: 2002

Annual Sales: $95 million

Total Units:80

Franchise units: 71

www.freddysusa.com

Freddy’s offers vanilla and chocolate frozen custard every day, with more than 20 optional toppings and mix-ins. The sweet treat makes up about 25 percent of sales, and Redler says it helps Freddy’s capture sales during dayparts beyond lunch and dinner.

“You can drive past a Freddy’s at 3 or 4 o’clock in the afternoon and see a huge afterschool crowd,” he says. “After a movie or a ballgame, people come in for a custard treat.”

The other part of the menu represented in the chain’s name comes from the Simon brothers’ father, Freddy Simon, who grew up on his family’s farm eating steakburgers, not hamburgers.

Freddy isn’t involved in the day-to-day operations of his namesake, but the 87-year-old World War II veteran serves as the company spokesman, attending new store openings, cutting ribbons, and shaking hands.

“He characterizes the values of a time when things were done right and for the right reasons,” Redler says. “Things are so hectic today that people like to be in that era mentally.”

The concept promotes its menu offerings as having “the taste that takes you back,” and the steakburger harkens back to the Great Depression, when Freddy’s parents would do their own butchering and pound the steaks very thin. They’d make the steakburgers larger in diameter than the bun so meat was the first taste. Today, steakburgers at Freddy’s are still larger than the lightly toasted and buttered buns they’re served on.

Redler says a steakburger’s thinness makes it quick to cook, so while made fresh to order, it doesn’t take much more time than thicker burgers served by competitors. He says the Original Double is popular because, “when all that surface of two patties caramelizes on the outside, you get more great grill flavor.”

In addition to single, double, and triple steakburgers, the Freddy’s menu includes hot dogs, chicken tenders, a grilled chicken sandwich, chili, fries, and onion rings. An average ticket is about $7, and the No. 1 combo, the Freddy’s Original—which includes an Original Double steakburger with cheese, fries, and a regular-size drink—is the bestseller on the menu.

Freddy’s fries have visible flecks of a proprietary seasoning sold online and in the restaurants. “We think the seasoning blend is something that really separates us from others,” Bill Simon says.

The hot dogs, while outsold by steakburgers, are certainly not an afterthought. Freddy’s serves only Vienna Beef hot dogs from Chicago—a product chosen for its quality, Redler says.

“We know how we’d like to be treated as a franchisee, so we don’t make any back-end dollars on purchasing,” he says. “We don’t try to skimp on anything. The steakburgers are 85 percent lean. We use the best fries available. We do it like they would have in the ’40s. Our profits are made taking the best care of guests we can.”

Simon says a friendly management attitude from the C-suite and franchisees makes working at Freddy’s fun for the staff.

“We get top-notch applicants, and ‘A’ players want to work with ‘A’ players,” Simon says. “The result is a turnover less than half of the industry average. It’s a lot more fun to operate that way.”

In addition to being one of this year’s QSR “10 Best Franchise Deals,” Freddy’s has been ranked on Inc.’s 500/5000 list of America’s fastest-growing privately held companies, Entrepreneur magazine’s Franchise 500, and Business Insider’s “8 Better Burger Chains Poised to Conquer America.”

“None of this was planned,” Simon says. “We’re very complimented by all of these recognitions, but it just happened as we’ve continued to acquiesce to requests for franchises.”

Redler says the brand has experienced 50 percent growth in unit count in 2012. “We’re selling franchises and expect 30–35 percent growth in number of stores next year, but that number will be dictated by the quality of franchisees,” he says. “When we have a quality franchisee, we’re good to go in any market. We want to have the right franchisee who can protect the brand operating the restaurant.”