Restaurant chains spring up touting bigger, fresher, quality concoctions
Detroit News staff and wire services
With a drive-through seemingly on every corner, you might think the market for burgers long ago reached saturation. But the fastest-growing restaurant chain in America last year was Five Guys, which specializes in double-pattied behemoths the size of a softball and has seven locations in Metro Detroit.
And that's just the tip of the arugula. "Better burger" joints are one of the fastest-growing parts of the restaurant industry. Celebrity chef Bobby Flay launched Bobby's Burger Palace in the Northeast. Elevation Burger is expanding into Kuwait. Mooyah Burgers & Fries, Meatheads and the Shake Shack are looking to expand.
Higher-grade beef, fresher or more creative toppings and better buns are bringing customers in the door.
It's a market that has room to grow. Such chains represent about 2 percent of the $65 billion burger market, said Darren Tristano, executive vice president of Chicago-based restaurant consultant Technomic.
"The traditional players -- McDonald's, Burger King and Wendy's -- have really shifted their focus away from burgers to breakfast, chicken and beverages," said Tristano.
He predicts better burger chains will continue to have double-digit sales growth for the next few years.
Farmington Hills retail analyst Ken Dalto agreed. Nostalgia and a tough economy are helping drive the trend, he said.
Americans' love for good, old-fashioned hamburgers was quashed in the 1990s when eating meat became politically incorrect and new fad diets continually were introduced, he said.
But now that baby boomers, who grew up on burgers, are older and less concerned about their weight and being fashionable, their craving for burgers is back with a vengeance, he said.
Hamburgers are considered a comfort food for many consumers, Dalto noted. When faced with economic and personal difficulties, consumers tend to eat foods they ate in their childhood. Plus, many families can't afford to go to an upscale restaurant anymore, but they can afford a fancy hamburger, he said.
"Upscale restaurants have a much harder time staying in business," Dalto said. "They are closing or changing their menus" to include more affordable food.
The founder of Denver-based Smashburger, fast-food industry veteran Tom Ryan, was keenly aware that Americans were hungry for higher quality fast-food burgers. The company did extensive research with fast-food customers who reported that the burgers they ate were mostly a matter of convenience. Smashburger has expanded to 70 stores in 15 states in just three years.
Customers are willing to pay to ease their craving for better burgers. A Five Guys burger runs anywhere from $4 to $6, and others charge more.
Still, even gourmet burgers are more economical than most other high-end foods, said Andy Deloney, spokesman for the Michigan Restaurant Association. Consumers are looking for value-focused menu items that are also convenient and taste good, he said.
The restaurant association isn't aware of much growth in chain gourmet burger joints in Michigan. A Five Guys outlet is scheduled to open in Livonia. But Deloney said there has been a boom in independent burger restaurants here.
"People have an ongoing love affair with burgers, and there's no sign of it going away," Deloney said.
Five Guys, like others, sells the fact that its burgers are never frozen -- the stores don't even have freezers, only coolers. Elevation Burger uses organic grass-fed beef and sells fries cooked in olive oil. BGR uses a mix of dry-aged beef.
Despite recent success of better burgers, one of the oldest names in the business has fallen on hard times. Fuddrucker's, which had locations in Detroit, Royal Oak, Bloomfield Township and Sterling Heights, filed for bankruptcy protection in April. Tristano said he thinks Fuddrucker's problems resulted from large restaurants with high real estate costs.
By contrast, most of the successful better-burger operators locate in low-cost strip malls. It can cost less than $500,000 to open most better-burger franchises, a third of a McDonald's or Burger King.
Mark Bucher, the founder and vice chairman of BGR The Burger Joint, said he sees room to expand slowly. He plans to keep BGR in the mid-Atlantic region for now. Bucher said he's been through this before, as a major player in the bagel boom of the '90s, which eventually lost steam.
"The gourmet burger industry will be survival of the fittest," Bucher said. "Those companies that are getting into the business now are five years too late."
Five Guys' sizzling expansion had a long prep time.
"It isn't anything we wanted to do. We just kind of got pulled that way" after would-be franchisees continually pitched the concept, founder Jerry Murrell said. He opened his first store in 1986 and, through 2001, the company expanded to just five locations -- one for each of Murrell's five sons.
Murrell didn't think Five Guys' cooking lent itself to easy replication. The potatoes were flown in fresh but often had slightly different starch contents that required tweaks in cooking times. Burger patties are always hand-formed.
After expanding regionally for a few years, the company began a national expansion two years ago. In 2009, sales jumped 50 percent to $453 million, making it the fastest-growing restaurant with sales over $200 million, according to Technomic.
Murrell relishes the competition.
"If I were to choose between opening in a town with 100 burger places and one with none, I'd go to the place with 100 burger places. People eat burgers in that town," Murrell said. "I like being next to McDonald's."
From The Detroit News: http://detnews.com/article/20100720/BIZ/7200334/#ixzz0vGFWSIKF