Five Guys Found Simple Recipe For Success: Do It Right

When his two oldest sons told him they didn't want to go to college, Five Guys CEO Jerry Murrell suggested they open a hamburger business.

"My mom always said if you can give a good haircut, make a good drink and make a good hamburger, you'll be all right in life," says Murrell, 68. "I just thought that was a good idea. I didn't think we could make a good hamburger, but I thought, well, a lot of people do it, so maybe we could figure it out." Then, about a year before opening Five Guys, Murrell was in a Pittsburgh hotel when he came across a book by J. Willard Marriott Sr., who got his start in the hospitality business with an A&W franchise. He had an epiphany.

"He said anybody can be successful in the restaurant business if you serve a good product, (have a) friendly and clean atmosphere and reasonable price," recalls Murrell. "I said, 'Heck, if that's all there is to it, let's do it.' " So the Murrell family � Murrell, his wife and five sons � set out to open a burger business. The banks refused to give them funding for their burger venture, so they scraped together enough money to build their own equipment and get a small place nobody else wanted to rent. They sought out the best ingredients � paying top price for meat, getting a renowned local bakery to bake their rolls, buying the most expensive bacon � and decided they would cook only in peanut oil, which cost five times as much as the oil other burger restaurants were using.

"We did everything we weren't supposed to do," Murrell says.

Fine ingredients cost more In 1986, Five Guys opened as a small carry-out in Arlington, Va., serving only burgers and fries. The place was hard to get to, and there was no parking.

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Customers initially gawked at the $2.19 price ($4.59 today, adjusted for inflation), but once they tasted the burgers they eventually came around.

"Some people said, 'I'm not paying that much for a hamburger.' And then we'll say, 'OK, don't pay for it, just take it then.' And you know, in the 25 years we've done that, every single customer's come back and paid it plus a big tip. And they became customers of ours," Murrell says. "I think people will pay a little extra for food if it's worth it." The public thought Five Guys was worth it, and the company broke even its first day in business. And within a year the press was writing about "the place to get a fresh juicy burger." A couple of years later, they opened a store with seating. It was a hit, and now all the stores have seating.

Today Five Guys has more than 1,000 stores nationwide. The Murrells run about 200 of them, and the rest are franchises. All of the territory in the U.S. and Canada has been sold, and the company is getting ready to open a store in Great Britain next year. Systemwide revenue in 2011 was $976 million, up from $720 million in 2010.

Murrell was right to listen to his mother. Five Guys is right in line with industry growth trends. In 2012, sales for the restaurant industry will reach a record high of $632 billion, 3.5% over 2011, says Hudson Riehle, senior vice president of research for the National Restaurant Association. The quick service segment or fast-casual operators like Five Guys is expected to post sales growth above the traditional sit-down restaurant category.

"The fast-casual segment is definitely one of the areas in the restaurant industry which is experiencing an above-average growth rate," says Riehle. "It definitely has a bright future." One of the hallmarks of some fast-casual operators is the ability to offer a freshly prepared product in an environment with somewhat upscale d�cor and slightly elevated price points, says Riehle. But as the industry has expanded, certain operators have set themselves apart from the competition by focusing on a specific menu item and executing it exceptionally well, he says.

Doing one thing, getting it right That's certainly the case with Five Guys. Jeff Haden, a columnist for Inc.com, says Five Guys is so successful because though it only sells burgers, it does that extremely well. "They don't try to be all things to all people," Haden says. "They sell to people who want a great burger. They've identified a market big enough that they can do that." But even more important than what's offered is the patron's experience, Riehle says. It has to meet expectations in terms of the price paid for the value they received. "The research is quite clear that in terms of consumer expectations regarding a restaurant experience, food quality is No. 1," says Riehle. "So the ability to deliver a consistent taste and flavor sensation or very tailored taste and sensation is critical to the long-term success." That's why Five Guys doesn't comparison shop, says Murrell, to ensure the quality of their products is top-notch. They have many of the same vendors they did in 1986. Their fresh, made-to-order burgers and fries have been the recipe to their success. They don't plan on changing a formula that's worked for more than two decades, even if they could find products cheaper. For example, the company seeks quality, albeit more expensive products � their bacon comes from Patrick Cudahy, a Wisconsin smokehouse that smokes with natural apple-wood chips.

Treating workers well Murrell admits that they do things a little differently than most companies. For one, no advertising. They'd rather give workers bonuses. "All of our employees at our stores, we pay them good money. I think that's important," he says. "Hire well-paid people, and they'll stay with you." Though the pay for Five Guys' employees varies by state and whether the the store is corporate or a franchise, almost all of the crew-level employees make above minimum wage, says spokeswoman Molly Catalano. Most franchisees and the corporate office offer health insurance, as well. In addition, all employees have access to the company's Secret Shopper Bonus program, in addition to any store-level bonuses, Catalano says. Five Guys uses a company to send secret shoppers to its stores to make sure they are up to the Five Guys' standard of service. There are weekly, monthly and quarterly programs that award crew members based on the shoppers' reports.

And though technology has changed the way the company does business � they can see what their stores are doing at any time of the day � it hasn't changed the product.

Murrell says that it was his wife, Janie, 62, president of Five Guys, and their five sons who actually built the company. The five guys all found a way to work within their passions. For example, Jim, 45, the oldest son, came up with the idea to franchise the privately owned company. Matt, 43, is over marketing and operations. Chad, 40, leads training and Ben, 29, heads the company's IT department. The youngest son, Tyler, 25, loves to cook and oversees the company's bakeries. And now, three grandchildren have joined the family business.

Murrell says his innovative approach is simple: Treat your employees and customers right. "Find something you love to do and just do it. Make sure your heart's in it," he says. "You can't be everything to everybody. You got to be what you are. That's all you can do."

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