Article
Better burgers beef up sales
The fast casual burger segment opens wide as new concepts enter the field and existing ones look toward growth.
April 19, 2009 by Valerie Killifer — senior editor, NetWorld Alliance
When Tom Ryan came up with the idea for Denver-based Smashburger, the idea was to create a new type of burger concept that gave consumers a high-quality product and experience.
"We wanted another level of place that separated us from the QSR category and was attractive to people using Red Robin or Chili's," he said. "The outcome was the development of Smashburger."
Created in 2006, Smashburger had record sales in 2008 and 233 percent unit growth. Sales topped $5 million for the year, up from $1.8 million in 2007, and unit count increased from three to 10 over the same period. The chain's average unit volume in 2007 and 2008 also was recorded at $1.2 million.
"We went out of our way to focus our creative efforts around the heavy category of burger lovers," he said. "We have the broadest set of occasion relevance as a burger player than most other people out there."
Smashburger and concepts such as Five Guys Burgers & Fries and Farmer Boys are leading the limited-service restaurant burger charge.
Technomic in its 2008 Top 500 report estimated Five Guys to reach $309 million in sales in 2008, a 59 percent increase over 2007 sales projections. Additionally, their unit counts increased from 241 locations in 2007 to 360 units in 2008, while the chain's average unit volume remained relatively flat at $1 million.
Farmer Boys experienced a 10 percent sales increase in 2008, going from $85 million in 2007 to $94.5 million in 2008. Unit counts increased from 61 to 66 and average unit volume was estimated at $1.5 million.
"I think (the burger segment) is full of promise because everybody is looking for better quality burgers and these chains provide it," said Darren Tristano, Technomic's executive vice president. "It's very differentiated from the QSR burger segment that right now is focused on chicken, salads and wraps."
Of the 26 limited-service burger brands Technomic tracks, smaller chains such as Smashburger, Mooyah Burger & Fries, The Counter and Cheeseburger Bobby's recorded the most levels of growth.
"And it's been an underpenetrated area," Tristano said. "It's who gets there first and how they position themselves. Five Guys will be the leading fast casual burger chain this year. They'll surpass Fuddruckers, and it's likely they'll beat out In-N-Out burger in terms of sales."
But what's making the category resonate with consumers?
"I think it's simple," Tristano said. "It's a very clear theme that people get and it's an experience that people enjoy."
Opportunity knocks
Because the better burger category has so much room to grow, the door is open for smaller, regional chains to expand nationally, and for new chains to enter the category.
Alan Hixon, president of Dallas-based Mooyah Burgers & Fries, said the company plans to have 12 open locations by the end of May, up from the company's current eight.
"The next store that opens is going to look much different than the ones open today," he said. "So, things are moving along quickly and we're in a really good place right now."
Hixon's goal is to help build the brand as he did with Fresh Mex concept Freebirds. That means creating a strong organizational team and brand environment.
He said there have been a number of smaller burger brands throughout the category that have been around for quite a while; however, fast casuals have the chance to elevate the experience.
"It hasn't been done the way it is today and fast casuals are about taking things to a new level," he said. "I don't think it's the popularity of the burger being greater, it's always been great. It's just the opportunity to do it in a better way."
John Kunkel, founder of South Beach, Fla.-based Lime Fresh Mexican Grill, has plans to open Buns Burger Joint by the end of 2009 or in early 2010.
The concept's theme is centered around the pop culture trends of motorcycles and tattoos made popular by the television shows American Chopper and Miami Ink. Buns are going to be made on-site and the beef is all-natural Red Angus produced by Helmville, Mont.-based Meyer Company Ranch.
"I look at the wave of burger interest to be where Fresh Mex was six or seven years ago," Kunkel said. "For me, the burger's an interesting thing because you can dress it up or down as much as you want. Any food that's delivered consistently well will be received very well, especially in the fast casual market these days."
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