Better Burgers, Bigger Growth
So-called better burger chains have not been drawn to New
Jersey, as a friend recently suggested, under the belief that natives of the
state have appetites similar to those of our plus-size governor. There is no
doubt, however, that chains such as Cheeburger, Cheeburger, Elevation Burger,
Five Guys, Smashburger and Zinburger see big opportunities here and in other
places around the country as consumers seek out alternatives to the fast feeders
and higher-price casual dining establishments.
Molly Catalano, a spokesperson
for Five Guys, told The Star-Ledger, “Consumers
really want a restaurant that is relatively fast, but also high quality and
fresh. Our growth has been fueled by demand.” The company plans to open
five new locations in New Jersey in 2011, bringing its total here to 44 restaurants.
Smashburger
recently opened its sixth location in New Jersey inside Newark Airport. Five
more are planned to open before the year ends.
Scott Gillman, CEO of Mascott
Corp., owner and operator of New Jersey Smashburgers, told The Star-Ledger, “We
know there is a great demand for better burgers. We are trying to become the
dominant better burger concept in all of northern New Jersey.”
While not
announcing any plans to open a restaurant in New Jersey, the leading brand
of frozen burgers sold in grocery stores, Bubba Burger, is testing the waters
closer to its Jacksonville, FL home to see if its own better burger concept
may have growth potential.
The company said it is testing four Original Bubba
Burger Grills that will sell its complete line of burgers sold in food stores
along with a chicken sandwich and and mini hot dog platter.
Billy Morris, president
and CEO of Bubba Burger, said in a press release, “Our
Bubba fans have been asking us for years to open restaurants where they could
get their Bubbas on the go when they were away from home. Our
new Bubba burger Grill will feature the great taste, quality and personality
that our customers nationwide have come to expect from our famous Bubba burger.”
Bubba
Burger plans to eventually have grills operating in food courts, airports,
college campuses and sports arenas/stadiums in addition to traditional restaurant
locations.
Darren Tristano, executive vice president of Technomic, told The
Star-Ledger,
better burger chains now represent about three percent of the $65 billion in
burger sales nationally. Annual growth for the channel is currently running
around 25 percent.
Discussion Questions
Discussion Questions: Do you see big growth ahead for better burger restaurants? What segments of eateries have the most to worry about from these establishments?
Oh how I hope so! A good burger is a work of art. When life has you down, a good burger will lift you and set you on a high place. But the real secret is the bun though very few establishments understand that. Also the competition isn’t over size, it’s over distinction.
Bubba Burger at least has good name recognition, and a product known to be superior. But Burger King and McDonald’s, even though purveyors of poison (at least IMHO), still have the power and will likely react aggressively if they see these upstarts starting to eat their lunch. There’s no revolution here, but perhaps a few niche opportunities after some blood is spilled.
American love hamburgers whether they are fried or grilled. It is a love affair that has gone on for a long time and shows little chance of abating. The better burger establishments are capitalizing on this foundation.
There are a couple issues however, that may limit their growth. One is the better burger concept is not conducive to drive throughs. Cooking to order and to your preference takes time and time is the enemy of drive throughs. The other is price. Better ingredients and bigger burgers do cost more and command a higher retail. The article in The Star Ledger indicates they can provide a meal for under $12, but with three kids in the car that just got pricey. The combination of these two with a limited menu makes this a more adult venue than say a Red Robin. Great for the wife and I but Red Robin with its kid’s friendly atmosphere is where we will go with the grandkids.
Rule Number One: Food should taste good.
Rule Number Two: People who live on a steady diet of burgers have only a glancing acquaintance with health concerns.
Rule Number Three: New Jersey–while admittedly different in some many ways–is probably no different than other markets where the Five Bubbas or whomever have captured market share.
Who should be worried about lost share? How about those guys that make burgers that taste like cardboard?
If you’re from the northern part of New Jersey and love hot dogs, your mouth begins to water when you hear the name “Callahan.”
Can that same feeling be created for hamburgers? I don’t know.
I’m not familiar with the names mentioned in the article. I did hear about In N Out Burger for years before I had a chance to marvel at their taste and preparation process in the West.
Before investing in several locations for these new to New Jersey brands I’d do a deep dive into the strength of word of mouth for each.
At APT, we’re talking about a “burger bubble.” There are just too many better burger concepts chasing a limited space. As the trends move on–and they will move on–some will survive but many will fade away. (And by the way, expect it to happen with all these tangy yogurt shops at some point too!)
West Coasters, particularly the southern variety, will look to In-N-Out Burger as not just a chain but an institution that shows the growth potential of the better burger concept.
The 250-unit In-N-Out, a perennial survey winner, was the top US restaurant chain for customer satisfaction by Sandelman & Associates. It has only closed one store since its founding. Reasons for growth include:
1. Fresh ingredients and quality preparation. No store is more than a days’ drive from their distribution center.
2. Communities not only tolerating but actively supporting new store openings. This includes Fisherman’s Wharf, which opposed every other chain.
3. Operationally simple menu with myriad combinations (there are 4 menu items, but insiders order savory Animal Style, low carb Flying Dutchman, veggie Wish Burger, etc.)
4. Off the chart loyalty and visit frequency. The following is cult-like.
In its core markets, In-N-Out stands head and shoulders above similarly positioned chains such as Five Guys. Will a single winner claim New Jersey or will the result be a Balkan model?
What about new food types like Umami Burgers? Even a classic can be reworked and innovated.
I suspect in many instances “better burger” is a euphemism for “bigger burger”. The new chains are showing some ingenuity at avoiding the intense price competition that embroils (pun intended) the bigger chains and result in dollar menus and meal deals.
Upping the price point is a win for these upstart chains, but they are edging into the territory of fast-casual sit-down restaurants when a meal for two comes to $26 plus tax. For a boomer who can still remember enjoying 20-cent burgers from the Steer Inn, that’s a bit hard to swallow.
Extra prep time doesn’t seem to be a deal killer at the In N Out Burger and Five Guys shops here in Tucson, where motorists wait happily in queue for their $10 customized patties. Since the process creates a choke point in the delivery system, it presents a limitation on the number of orders that can be filled in a single lunch or dinner rush.
That’s normally a big no-no in the QSR world, where the goal is achieve fastest-possible throughput at the window. But when margins, mystique and mayo are combined, anything seems possible.
It seems the burger and coffee industries (and possibly other food and quick service segments) are following similar paths: customers are trading up. People are drinking better more expensive coffee and eating better, more expensive burgers. What does it mean? While it would be easy for any quick serve chain to offer a better burger, I think customers are tuned to spot smoke and mirrors. A better burger should be an all-around reinvention of the staple, better bread, better patty, better condiments. On the upside, a better burger commands higher margins which should make both merchants and customers happy.
This is one trend I really don’t get. It flies in the face of the idea of trying to eat healthier. The bun is non-nutritional, the ground beef has lots of fat and calories, and the fries have lots of everything (salt, fat, carbs, etc.). Now, let’s take that and serve you a HUGE portion.
The past many years we’ve heard doctors and the government tell us that eating smaller portions of everything and eating a greater proportion vegetables are the ways we can stay healthier and keep from becoming even more obese.
Oh, wait…now I get it…the government says….
It’s kind of like pizza, there is always room for a better one. A new one comes along and another bites the dust. Not so sure the market is growing. Just musical chairs with the existing players.
I agree the price difference can be significant as well as the quality but if you have kids, consumers will retreat to fast food favorites rather than burger niches.