The only thing better than 5Guys in my area is BGR.
http://www.bgrtheburgerjoint.com. Pricey but great

I haven't looked at smashburger very much. I def prefer the tight focus that is the core of 5G, but if i'm not mistaken your AUVs run pretty close despite the smashburger system being much smaller.

I also think many chain build-outs are over-designed. Smashburger is indeed a decent example of this and that runs all the way out to the packaging. Chipotle, on the other hand, is not. (no affiliation with Chipotle btw, i just think they got it figured it out)

We are literally talking about putting a name on a bag here, OP. The most product oriented companies in the world put their names on bags & boxes for a reason.

How much more do you think switching to a one color imprint bag would cost? Same stock, just 5 Guys in black or red.

I think they are around 900k AUV-and yeah only 240 or so units

Chipotle is a example of the right way-I agree that they seem to be hitting on all cylinders. (although I don't really like their product-just a personal preference, I believe it is good quality and well prepared-just not my cup of tea)

OK-we can put a name on the bag-as long as I don't have to spend extra for it ( I have no idea the cost for this-.02 a bag would end up as a lot though)

thanks-

I don't want to derail too much with Chipotle, but the numbers & comparison is worth making.

2009 AUV (Average Unit Volume in Millions)
5 Guys 1.1
Chipotle 1.7

2014 AUV
5 Guys 1.1 (as reported by OP)
Chipotle 2.4

This post is not meant to disparage 5G or OP. OP is one of the most knowledgeable F&B posters on this forum & likely a pretty sharp operator, but as a franchisee you are charged with executing the franchisor's plan. We are looking at 5 years of flat volume here (on avg) from operators who are audited weekly. Something has to give.

Actually I think they are around 2.1 AUV-not 2.4-but this is still a fantastic number-I don't know anyone in this business that wouldn't be thrilled with Chipotle's success-they are the darling of the industry.

It is important to remember that the FG system basically doubled in size during that period with some markets being fairly deeply penetrated in a few short years. This being done without the support of the traditional advertising support that you so desperately seem to want FG to undertake. In my opinion this did cause erosion of transactions as stores cannibalized each others sales until more people became aware of the products. However, we have seen strong recovery of those transactions and I feel the momentum is building. I can only speak to our market, but I feel like we can grow to around 1.3-4 million and 12-13% nets by staying the course-I do question where the ceiling is-and it would be disingenuous to say that the franchisee group isn't pushing to find ways to grow the AUV closer to 1.5m and beyond.

As a consumer, I must say the lack of branding on the packaging does look strange. If I saw the photo without context, I would think it was someone's brown bag lunch and two lunches from fast food places.

Chipotle numbers are accurate per public filings. 2.4m AUV in last reported quarter. Chipotle also went from 956 to 1,724 units in those same five years.

I don't think it is just advertising,OP. I know it seems like I am pushing some kind of massive ad campaign with discounting etc...etc.. I'm not. I am really asking these questions to better understand company leadership. Yes, put your name on the bag. I do stand by that.

I get the philosophy of focus on the burger.... but what about the risk of lack of menu diversification. When I see fg not only is the menu singularly focused there seems zero ability to tweak the menu should some exogenous force start to erode burger sales. Pink slime being an example but even fad diets, mad cow, beef price shock (it would have to be huge to effect ground beef) etc. Seems like most other shops have chicken, desserts, or McDonald's with coffee etc to refocus. I'm not assuming burger sales go to zero but even a 10-20% decline is national sales would have to hurt disproportionately I assume. Any thoughts on that?

Great & interesting question. To add to the discussion, would significant decreased societal demand for beef / burger products have a corresponding price decrease in overall beef supply costs? Thus better profit margins on the final product?

I think the laser focus allows us to produce a premium product, efficiently. Menu diversification would change this significantly.

The outside forces you mention are a concern (mad cow is scary-no doubt) but some serve to emphasize our quality (we never have and never will use fillers like "pink slime"). We have seen beef prices rise dramatically for the last 15 months-ground beef has increased by 50% this year alone (our prices have gone up with them-and yes, price increases always make you nervous).

This being said, I really do prefer that our menu remain as it is.

But if the franchisor says change, you would change, right? That is why I think a franchise is not really your own company and you're not your own boss despite what Entrepreneur and similar magazines say.

Doc-I understand this thought process-and in some ways you are correct, we do not control all aspects of the business-

I had some things come up last night-and so I wasn't able to post about this question. I hope to be able to speak to this subject on a larger scale-but it is a very involved post-I will try to give my thoughts on this tonight-as today is quite full.

Take your time. Despite not owning this site and thus not controlling our fates, I don't think we're going anyplace anytime soon.

I have more to say but I will refrain until you have had a chance to respond to my initial two comments.

For Five Guys I would imagine that the peaking of the burger trend + copycats+ cannibalization is what has stalled the growth.

Fancy burgers went from basically not existing to being ubiquitous in a really short time period. 5G, Shake Shack, Smashburger, BurgerFi and who knows what else all moved into my area in less than 5 years.

Our newspaper has a weekly publication and they just had a food issue with about sixty-three new restaurants in the area. One of which was BurgerFi. The photo of the burger and onion rings made it look quite enticing.

sorry in advance for the derail.

this is not exactly a novel insight. owning a franchise is basically buying yourself a job and i would be surprised if OP would argue that.

with that said, i think there is way too much emphasis on "truly being independent" and "not having a boss." first, i don't think most people realize how hard that is. if it was that easy, everyone would just do their own thing and not have to answer to anyone else, ever.

there are also a lot of other benefits you do get from being a part of a big, successful company. in general in business i think it's smart to trade some upside for somewhat safer "guarantees" (word used loosely) of success.

speaking specifically to the franchise example, you don't have to hit a home run to be successful. these business by definition are scalable. if OP figures out how to repeatedly get a good return on his franchises, 5-10+ years from now the financial results could be an actual home run.

i know nothing about the business of running a 5g and am not saying it will or won't continue to be successful. just speaking in general terms because i often hear people knocking "not being your own boss" too freely.

i've appreciated reading your posts in this thread. i think it's led to some good discussion.

seems like 5g's really benefitted from the "upscale burger craze" of the past five years (which to be fair, they helped create). there's a ton more competition now than ever before and anecdotally i feel the whole movement has lost some steam. my social circle at least doesn't eat at these burger places as much as we did a couple of years ago.

i wonder if 5g's was able to grow so rapidly even doing some sub-optimal things in large part because they were out ahead of a huge trend? if that's the case, in time you would think that some of their unusual practices will come into line with industry standards, which kind of seems like what you've been hinting at maybe should happen with some of your posts.

As OP has said this will be a topic under discussion, your post isn't a derail. Now if you tried to bring pizza into it.

I'm scratching my head as to if you are on OP's side on this matter or my side though.

yeah sorry, my post was a bit disjointed. i'm saying i disagree with the negative stance you take towards owning a franchise. i don't think it's wise to have overarching negative views towards any type of business arrangement. different things work for different people / situations, there are different risk profiles, etc.

the main reason i made the post was that i often hear people talking negatively about "having a boss" or "working for someone else" etc. and they seem to describe the perfect job for everyone as being 100% in business for yourself and in control of every detail (obviously not possible when you own a franchise). i strongly disagree with this line of thinking.

There is definitely an argument to be made for a franchise being akin to buying yourself a job.

I am still confused, sorry.

Your first paragraph clearly indicates you disagree with what you perceive my stance to be but your second paragraph seems to indicate you agree with my perceived stance.

Pretty much this & we can call it running hot because they have in some ways.

The real issue here is the PR is burning off & it is going to be difficult to get people's attention again with respect to 5G. I mean, what is left to say? We need management (the founders) to figure it out. If we combine 5 years of flat sales volume with this:



Price increases to keep up with supply costs, the AUVs could actually be sliding.

What are you buying when you purchase a franchised business?

In short you are buying a brand-The franchisor has a product or service that you believe to be a value to people. The brand has proven to you the concept has staying power and is worthy of your time and money. The franchisor has a system of operation that assists you in achieving the brand standards and to reproduce said product faithfully and consistently. (keep in mind this can be anything from muffler stores to car dealerships to subway shops-these are all franchised businesses). You have come to an agreement with the franchisor that you are capable and willing to faithfully recreate the brands components, the franchisor will provide you with the rights to use the brand and system to achieve the brand standards. Depending on your agreements you will own 1 or 100 or anything in-between (or perhaps even more) units of said brands business locations. In return for this brand you have agreed to pay franchisor "X%" of the top line of your revenues.


What do franchised business owners give up?

Most importantly, independence. You have decided to invest in an existing brand and as such you have a responsibility not only to the franchisor, but also to the other people who like you have invested in the brand. That responsibility includes making your best efforts to faithfully recreate the brands experience: All Cadillac dealers need to offer the CTS model for example-and the experience should be the same everywhere. Every Midas muffler shop, the same experience. Every FG the same as well. As such, the key components of your offering are not in your control-this is the brands purview. You will be told where and for what you are going to purchase your products for resale. The design components and look of your business is also the purview of the brand-

What are the benefits of owning a franchised business?

Lets not discuss the relative benefits of the different brands-that is enough for an entire thread-
As a whole you will benefit from the advantages of being part of a large organization from the perspective of purchasing and the discounts offered a system of the size your brand represents. This will mean everything from your primary product to any ancillary products like credit card services, security services, pest control and perhaps even financing for building your locations. You will have the benefit of the experience of the builders of the brand and your fellow operators to draw upon.

Also, you will have a ready made system to implement that will allow you to scale your business quickly and effectively.

If you are good at running said business-you get to KEEP ALL OF THE PROFITS


What are the risks of owning a franchised business?

Something out of your control in another market can damage the brand and as such your business (someone scams customers at the Midas' in Philly-everyone in the country is now a scammer if you own the local Midas shops).

Management of the brand could lose focus and no longer offer the same quality and the brand will falter(the Pontiac Aztek would be a good example of this).

If your not good at running said business-you can lose everything you own (never had a job where that was at risk)


Are you just buying yourself a job when you buy a franchised business?

In simple terms: Its possible I suppose for that to be a perception, but not if your doing it right. Especially because of the added liability and risk that comes with making this type of investment.

I suspect that most in this forum would agree that Rick Hendrick (owner of Hendrick Motorsports, and owner of one of the largest car dealer groups in the world)doesn't have just 'a job' or that he is an employee of any of the brands his company has dealerships for.

Or former NBA player Junior Bridgeman who owns 120+ Wendy's-did he buy a job, or build a business? Is he an employee of Wendy's or the CEO of his own company?

So the question becomes-when is it a business and when is it just a job? (does the owner of Joes Diner, Joe have a job or a business?)

there is an argument to be made that FG actually caused the entire segment to boom with the other brands coming about or deciding to franchise in response to the success of the FG brand. This means to truly find the AUV's for this system, the entire segment will need to go through the inevitable shakeout that will come from over penetration. I believe that FG has the product and system to be the eventual winner in the segment, and long term solid growth. That being said, I agree that the system would benefit from traditional marketing support beyond what is currently used which is really a 4 walls focus within the stores.