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Old 11-06-2014, 02:48 PM   #1
IAMthepokerhack
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AMA Five Guys Burgers and Fries

I have been asked to start an ask me anything thread about Five Guys Burgers and Fries Franchises, so here we go:

Background:

My partners and I own several (more than 2 and less than 10) Five Guys in a midwestern market. Our first location has been open around 5 years, and we will be adding a few more locations in the coming years.

Our stores are performing well, with AUV's at about the system average of 21k weekly. We have experienced 2 years of solid growth in both transaction counts and total volume, bringing our units up to the system average.

Rather than kick this off with a wall of text, Ill just open the forum to questions:

What do you want to know about our experience owning and operating a FG?
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Old 11-06-2014, 02:54 PM   #2
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Re: AMA Five Guys Burgers and Fries

Are all the FG territories sold out in the US?
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Old 11-06-2014, 03:08 PM   #3
IAMthepokerhack
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Re: AMA Five Guys Burgers and Fries

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Are all the FG territories sold out in the US?
Yes, and the UK is also sold out
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Old 11-06-2014, 03:40 PM   #4
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Re: AMA Five Guys Burgers and Fries

What is the marketing plan for a new store opening? How are you creating trial besides unlocking the doors? Where would you set the line for over/under purposes re: questions about how much $$$ to open a 5 Guys despite there being no franchises available?
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Old 11-06-2014, 03:44 PM   #5
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Re: AMA Five Guys Burgers and Fries

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What is the marketing plan for a new store opening? How are you creating trial besides unlocking the doors? Where would you set the line for over/under purposes re: questions about how much $$$ to open a 5 Guys despite there being no franchises available?
There is no marketing in the traditional sense for FG period. You have never seen and I hope you never will see advertising for FG. All we do is open the doors, and count on word of mouth to get new business.

12
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Old 11-06-2014, 03:51 PM   #6
Dr McGriddle
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Re: AMA Five Guys Burgers and Fries

how are the avg unit volume trends for FG nationally?

Burger craze seems to have run its course so curious how things look given the rapid national buildout of FGs + Shake Shacks + copycats etc.
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Old 11-06-2014, 04:01 PM   #7
apocalypse_fives
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Re: AMA Five Guys Burgers and Fries

I have seen print, but only once & nothing else. What non-traditional marketing are you using? What is the $ cost of the audits?
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Old 11-06-2014, 04:11 PM   #8
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Re: AMA Five Guys Burgers and Fries

What % of sales do you have to send to corporate each month?

Why are you vague about # of stores you own?
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Old 11-06-2014, 04:28 PM   #9
Doc T River
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Re: AMA Five Guys Burgers and Fries

To what do you attribute your success to given the burgers and fries aren't that different from others in the market segment?

I am saying this as someone who has eaten at a Five Guys as well as competitors. You do give a LOT of fries for the price, though.
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Old 11-06-2014, 05:15 PM   #10
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Re: AMA Five Guys Burgers and Fries

Thanks for making this thread.

Who handles hiring? Any insights re what you have learned in that area over the last 5 years?
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Old 11-06-2014, 07:43 PM   #11
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by Dr McGriddle View Post
how are the avg unit volume trends for FG nationally?

Burger craze seems to have run its course so curious how things look given the rapid national buildout of FGs + Shake Shacks + copycats etc.
The AUVs for FG are pretty steady-not what they were before the big buildout-but I think you will see this number grow from the current 21K

I think you are right about the big push for premium burgers has slowed significantly. We believe the product is the key, as well as rock solid operations: i.e.: perfect food, clean well maintained stores served by nice, well trained, people.
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Old 11-06-2014, 07:46 PM   #12
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by apocalypse_fives View Post
I have seen print, but only once & nothing else. What non-traditional marketing are you using? What is the $ cost of the audits?
Our only form of outside the store marketing would be considered cause marketing: We are very active with local charities and donate free food in the form of gift cards to many organizations to use for fundraising. We do some sports sponsorships with trade and use that for in stadium signage and tickets for our crews to the events

Audits?
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Old 11-06-2014, 07:53 PM   #13
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by BOHICA View Post
What % of sales do you have to send to corporate each month?

Why are you vague about # of stores you own?
6% Royalty and 2% for a Marketing fund(which is used to fund our Secret Shopper bonus program-a weekly crew level bonus)

In the interest of privacy I have been vague on this number-I have not asked my partners(or FG corporate for that matter) for their opinion about sharing information about our company, so its best that this information stay private. Is it important? I have narrowed it down to the fact that we are not giant operators, but we are not insignificant either-I probably can answer most questions is the point really
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Old 11-06-2014, 07:58 PM   #14
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Re: AMA Five Guys Burgers and Fries

Was this your first franchise? I'm assuming you/your partners had a restaurant background? Also how do you as a franchise get over giving basically every right to your business to the franchisor?

I looked very closely at a fg copycat (did basically everything but the signature) and couldn't make the leap of faith to trust the franchisor. It just struck me that the balance of power given it is my money was not justified.
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Old 11-06-2014, 08:13 PM   #15
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by Doc T River View Post
To what do you attribute your success to given the burgers and fries aren't that different from others in the market segment?

I am saying this as someone who has eaten at a Five Guys as well as competitors. You do give a LOT of fries for the price, though.
I believe strongly that our product is the best, if your going to be in this business you need to be passionate about what your selling. I'm not saying that other products are not good burgers because there are other quality products out there. The Murrells commitment to high quality operations from all franchisees is a huge part of the success of the brand-we are all held to a standard of cleanliness and food safety that is second to none in the industry.
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Old 11-06-2014, 08:16 PM   #16
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by sfcard View Post
Thanks for making this thread.

Who handles hiring? Any insights re what you have learned in that area over the last 5 years?
We do all of our own hiring. At the store level the GM's are in charge of hiring for their individual locations.

the restaurant business is hard

Last edited by IAMthepokerhack; 11-06-2014 at 08:29 PM.
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Old 11-06-2014, 08:17 PM   #17
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by maxtower View Post
Are all the FG territories sold out in the US?
Oh-and Canada is sold also forgot about the canucks
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Old 11-06-2014, 08:25 PM   #18
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by cxy123 View Post
Was this your first franchise? I'm assuming you/your partners had a restaurant background? Also how do you as a franchise get over giving basically every right to your business to the franchisor?

I looked very closely at a fg copycat (did basically everything but the signature) and couldn't make the leap of faith to trust the franchisor. It just struck me that the balance of power given it is my money was not justified.
Yes.

Actually no- most recently before this I was a midstakes player in Vegas-

Its tough-although with FG we have control of the really important things.....pricing and payroll.
The way we see it, the fact that the Murrells hold us to a very high standard protects our investment because that means that they are holding everyone (and themselves, they own 400 of the 1200 or so stores) to the standard

Then you made the right decision-if you don't believe in the franchisor, RUN.

Last edited by IAMthepokerhack; 11-06-2014 at 08:30 PM.
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Old 11-06-2014, 08:40 PM   #19
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Re: AMA Five Guys Burgers and Fries

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Yes.

Actually no- most recently before this I was a midstakes player in Vegas-

Its tough-although with FG we have control of the really important things.....pricing and payroll.
The way we see it, the fact that the Murrells hold us to a very high standard protects our investment because that means that they are holding everyone (and themselves, they own 400 of the 1200 or so stores) to the standard

Then you made the right decision-if you don't believe in the franchisor, RUN.
Yeah when I told the franchisor that he cared about the top line and I only cared about the bottom line ... he couldn't seem to bring himself to agree and said 'our interests are aligned' which really annoyed me. Nice guys and I think they are trying to do right by their franchises.....more something in me. Probably would have made the leap for a fg though.

Best of luck.
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Old 11-06-2014, 09:07 PM   #20
IAMthepokerhack
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Re: AMA Five Guys Burgers and Fries

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Yeah when I told the franchisor that he cared about the top line and I only cared about the bottom line ... he couldn't seem to bring himself to agree and said 'our interests are aligned' which really annoyed me. Nice guys and I think they are trying to do right by their franchises.....more something in me. Probably would have made the leap for a fg though.

Best of luck.
Your right of course-that really is the big number for them-franchisors will always talk a big game about caring about your profitability, but truly when push comes to shove they will tell you "your profitability is not our concern" it's important to know that they really don't care about anything but making sure you make your payment and hold the standard

thanks-its always good to be lucky
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Old 11-06-2014, 09:14 PM   #21
themistocles khan
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Re: AMA Five Guys Burgers and Fries

What is the average earnings (percentage-wise) per $100,000 in sales before franchise and marketing fees?

Does Five Guys meet the 33% test when it comes to the cost of the ingredients compared to the retail price of the product?
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Old 11-06-2014, 09:18 PM   #22
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Re: AMA Five Guys Burgers and Fries

Interesting thread. How much time would you say you spend doing actual in-restaurant work, say assisting the GM or whatever else needs to be done. Separately how much time do you spend doing partner related work?

How do you and the other partners go about paying yourselves, is it just a straight profit split based on ownership or do certain partners work harder and receive a salary based payout in addition to profits?

Finally, do you think you would be earning more by having built your own high quality burger joint(s)? If so why or why not? I feel like this should be a well researched decision that very clearly swings to the side of either franchise or establish your own.
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Old 11-06-2014, 10:26 PM   #23
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by themistocles khan View Post
What is the average earnings (percentage-wise) per $100,000 in sales before franchise and marketing fees?

Does Five Guys meet the 33% test when it comes to the cost of the ingredients compared to the retail price of the product?
That number is very dependent. For example the break-even on these stores is around 14-15k weekly so under that nothing...a store at the average AUV for the system should net between 7-10% nets start to climb pretty sharply after this as its now a question of COGS and Labor-most everything else is static

if you are asking about our food costs yes-but it is really more important to evaluate total cost of goods sold COGS (which will include food, paper, and perhaps cleaning supplies) It is important to note that in the FG model, the franchisee is in control of pricing-so if you do not hit your cost targets relative to retail you are operationally deficient
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Old 11-06-2014, 10:42 PM   #24
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Re: AMA Five Guys Burgers and Fries

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Originally Posted by DickFuld View Post
Interesting thread. How much time would you say you spend doing actual in-restaurant work, say assisting the GM or whatever else needs to be done. Separately how much time do you spend doing partner related work?

How do you and the other partners go about paying yourselves, is it just a straight profit split based on ownership or do certain partners work harder and receive a salary based payout in addition to profits?

Finally, do you think you would be earning more by having built your own high quality burger joint(s)? If so why or why not? I feel like this should be a well researched decision that very clearly swings to the side of either franchise or establish your own.
When we started 2 of the partners worked full time in the stores as GM's. I haven't really analyzed the breakdown of the time i or the other operating partner spends on each side (operations vs partner work) but we both work long hours-the day starts around 7AM and ends at 11PM-and thats if the alarm system doesn't do off at 2am when the security company opens the door the kid who closed the store forgot to lock.

Operational partners draw a salary before the split of profits.

That is a very complicated question and probably deserves a thread of its own. Something to consider: it is much easier to attract investors in, and in the end sell, a business like this that has a strong brand attached to it-this usually but not always means a national brand. We clearly felt that the opportunity for scale is much better in the short term buying a brand rather than trying to build one. Its highly unlikely that we would have multiple locations in this short a period of a time starting from scratch.

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Old 11-06-2014, 10:54 PM   #25
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Re: AMA Five Guys Burgers and Fries

Quote:
Originally Posted by themistocles khan View Post
What is the average earnings (percentage-wise) per $100,000 in sales before franchise and marketing fees?

Does Five Guys meet the 33% test when it comes to the cost of the ingredients compared to the retail price of the product?
keep in mind the numbers I quoted are nets-not before the fees-the number before fees is irrelevant, as they are part of the cost structure. In fact they are just another line item in my costs, so i don't even analyze anything "pre" fees.
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