| August 2011 | By Jordan Melnick

The Runaway Hit

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Five Guys has used a consistent business strategy to grow quickly.
image used with permission.

“It was always a struggle for us because it was always hard to get money,” Murrell says. “We were competing with McDonald’s and Wendy’s. We couldn’t bank loans. Franchising gave us the opportunity to finance our growth.”

Early on, Five Guys teamed up with Fransmart to get its franchise business off the ground. The partnership helped the company “create the story,” Tristano says, on the way to selling out its U.S. franchise markets.

“It’s definitely not a typical story,” he says.

But that doesn’t mean other restaurants aren’t trying to build their chains in a similar way. Tristano says Denver-based Smashburger, which was founded in 2007 and already has more than 100 units, has taken a page out of the Five Guys playbook by catering to America’s enduring love of the burger, albeit with a more elaborate menu that includes chicken sandwiches, salads, and, yes, milkshakes.

With Smashburger set to open hundreds of new locations in the coming 12 months, you might think the Better Burger niche is getting crowded. But Tristano says there are still lots of burgers to grill before the market reaches a saturation point.

“It’s a nice niche—not bigger than $2 billion at the moment, with the major chains accounting for most of it—but it’s a niche that’s going to have some growth potential because the $65 billion in annual sales for burger chains is very much broken up by beverage, chicken, and other things,” he says.

Which is to say chains like Five Guys that focus almost exclusively on the burger have a chance to grab even more of the burger market than they already have.

“It’s far from saturation,” Tristano says. “If you’re looking where this market share is going to come from, it’s going to come from burger chains like Burger King, who have not performed as well as others, like McDonald’s. They are exposed and will likely lose share.

“It’s going to come from full service, chains like Applebee’s and Chili’s, which traditionally sell burgers,” he says. “It’s going to come from bars and taverns that all have burgers on their menus.”

According to Tristano, those lost sales will shift to the Better Burger segment and represent a lot of the growth opportunity. “We know Americans are going out to eat less often and spending less money,” Tristano says. “So it’s going to be more a shift of share.”

He explains that if history repeats itself, the so-called Better Burger segment will shake out so that there are three companies atop the market, much as McDonald’s, Burger King, and Wendy’s have dominated fast food for decades now. Five Guys and Smashburger have likely already secured their position in the triumvirate.

“History tells us that generally the ones that are first to market are likely to be the most successful,” Tristano says.

As for Five Guys, Tristano says, “they’re going to have a lot of capital to evaluate, improve, and become, ideally, a global brand that is up there with Starbucks, Subway, McDonald’s.”

It’s amazing that a company that had only six stores less than a decade ago, and has fewer than 1,000 now, appears destined to join the ranks of those iconic brands, which tally their units in the tens of thousands. More amazing still, Tristano expects Five Guys to get there soon, even factoring the Murrell clan’s customary heel dragging.

“I think it could be a couple of years away, though I suspect this company will take a slower approach to global expansion,” he says.

Indeed, Murrell describes interest in Five Guys from overseas as “being pulled heavily into the international market,” as if the prospect of success on a global scale were somehow painful. As in 2002, when he resisted the franchising model altogether, Murrell is now grappling with how to maintain the Five Guys brand—its meat and potatoes and loyalty culture—in places as far away from Virginia as Tokyo.

And international expansion isn’t the only enviable “problem” on Murrell’s plate. He seems even more worried about something else people won’t stop bothering him about: taking the private company public.

“I don’t see how we can control it,” he says. “I worry about people wanting to come in and cut corners, cut costs, increase the bottom line.

“You know, there’s a lot of ways we can increase our bottom line really quickly,” says Murrell, before explaining (again) why Five Guys opts for slow-growing, relatively expensive Idaho potatoes over their speedier, cheaper southern cousins in Florida and California.

“Those are the kinds of things that might happen if we went public,” he says. “We’d have stockholders trying to push us to cut costs and push us into advertising. We worry about those kinds of things.”

Worries aside, Murrell says he and his family are not writing off the possibility of going public.

“Money is tempting to everybody,” he says. “I imagine one day, if someone comes along that can show us how we can keep control, we’ll probably definitely consider it.”

“Probably definitely” —the use of the inherently contradictory phrase says a lot about a man who, after growing a burger joint from six stores to 750 in less than a decade, says his only good decision along the way was sticking to his guns.

Whether he truly believes that, or whether being modest is part of Murrell’s “secret marketing” strategy, one thing is for sure: Should a Five Guys open in Moscow in the next few years, it won’t deliver burgers to the Kremlin.



I've yet to try myself but I've heard in-n-out is a strong contender for top of the charts in the better burger segment.

Took my grand kids to Five Guys in Orange County, CA. We had to navigate stacks of huge bags of peanuts to get in line, and practically yell our orders because the music was so loud (and no, I'm not a fuddyduddy; I like rock/pop). The burgers were good, but not memorable, and we enjoyed the peanuts (no charge for them), but couldn't really talk because of the loud music. My 8-year-old granddaughter asked to leave, and we all finished our food quickly and left. Glad for Five Guys they're a big success, but I won't be going back.

who uses fuddyduddy?? A fuddyduddy that's who! LOL

I've been to all three..In&Out, 5 Guys, and Culver's...while Culver's menu is a bit more expansive...and has great Frozen Custard:) I'll take a Bacon ButterBurger Deluxe all-day every day over the other two. I love them all, but if I had to drive 10 more miles for a Culver's I'd do it!

We decided to try 5 guys to see what it's all about. It is just very average at the most and the fresh fries filled our brown bag with grease, we could'nt keep eating them for long. We have never been back. There is too much competition out there for them to compete in our opinion.

I have been to Five Guys three times in the past year. Each time not very busy but over a fifteen min wait. employees yelling t eachother, just not a very happy place. I will stick to the Butterburger at Culver's, it's hard to beat.

Just another grease burger nothing more nothing less

Five Guys has nothing on Smashburger. Smash has the best menu and I've never had anything less than perfect there.

I've been to Five guys about 10 times, the burgers are good but the fries are too limp and greasy. That being said, I don't see what everyone's fascination is. Every store looks identical to tne next, very cookie cutter. I have also seen a few stores that seem to be under-performing, pretty sure they will close their doors at some point. I "liked" them on FB but all they use it for is to anounce new store openings, just shows their arrogance and the fact they they are out of touch with their customers.I predict they will collapse under their own wieght at this rate.

Had five guys many times and I always feel guilty after eating. Its just too greasy (not juicy). I agree the fries are too limp.I feel as if they are a perfect fit for construction workers. No wonder they open next to Home Depot!

Nice article, well written. It answered my curiosity.

Great story. I have visited the Five Guys in Franklin, Tn twice. The food was good, a little over-priced for a burger, but the place was busy. It is in a high-rent area, so I guess the food prices are due to the rent. If you are looking for a great burger go, if you are looking for a casual family restaurant, go somewhere else. This is a great place for young adults and professionals to hang-out and get good food. Good Luck and stay focused on the high quality ingredients.

We need five guys email. Is there a company email that we can send any inquires, please?

You people have no idea what a good burger is.....5 Guys rocks..!

Yes, stick to his guns. But remember that Steve Jobs had the same negativity in letting third party developers develop for the iPhone. He had the same argument "I dont thing we can transfer the culture". He was wrong, period.

What I love most about Five Guys is they offer many kinds of vegetables and of course they are free. The vegetables are fresher than what I can buy in a grocery store. I order all the vegetables with my burgers and I ask for extra vegetables, all easily done on the internet, then all ready for me when I get to the restaurant. No other hamburger place comes close to Five Guys quality.


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