Hamburger Franchises a Good Investment in Lean Times

Looking for a franchise sector with substance? Well, here’s one that you can really sink your teeth into: hamburgers. According to the recent Burger Consumer Trend Report by food industry research and consulting firm Technomic, 48 percent of today’s consumers report eating a burger at least once a week – that’s a 10 percent increase in only two years.

As hamburger consumption has increased, so has the number of franchise opportunities that are vying to satisfy America’s craving. “The sector continues to grow, primarily in the ‘premium’ category -- the higher-end concepts, e.g., Smashburger, Five Guys, The Counter, etc.,” says Danny Bendas, managing partner of Synergy Restaurant Consultants. “Additionally, reports have shown that the ‘super chains,’ e.g., McDonald’s, are continuing to do well for the most part, with McDonald’s showing strong earnings growth.”

Interested in getting in on the burger action? Here are some insider tips to help navigate the way.

The driving force behind burgers:

  • Comfort food: “The consumer has recognized, particularly in tough times, that they revert back to comfort foods,” says Technomic president and CEO, Ron Paul. “And there’s nothing more American than burgers. It also goes with another of America’s favorite foods: french fries.”
  • Relatively inexpensive: “Ground beef is not like eating prime rib, so pricewise it’s a very versatile product,” says Paul.
  • Convenience: “Another thing that burger chains typically have going for them is drive-thrus,” says Paul. “There are so many of them that it becomes very, very convenient.”

Noteworthy trends in the sector:

  • International influences: “I think more of the focus [will be] on offering a wider variety of toppings so that you can pick up flavors from other parts of the world,” says Paul. “More Mexican-style burgers; I read about someone trying an Asian-style burger. As the burger trend travels around the world, [it will be] customized to certain countries.”
  • Better for you: Especially appealing to today’s consumers are burgers that are good for you. Technomic reports that “health-halo” attributes such as all natural, hormone-free, steroid-free, and antibiotic-free have grown in importance since 2009. Additionally, according to Technomic’s 2011 Top 100 Fast-Casual Chain Restaurant Report, the fastest-growing menu category was “Better Burger,” which was up 16.1 percent.

Why it’s a good investment:

  • Long-lasting appeal: “The hamburger sector will always exist,” says Kenny Moore, who founded Andy’s Burgers, Shakes & Fries in 1991. “Generations have enjoyed this all-American classic and will continue to do so. I believe you will see people try to deliver it differently and improve it, but it’s not going anywhere.”
  • Adaptable: “Being in the hamburger business has helped us in these tough times because it is an affordable product that we can sell at a price that fits most everyone’s budget,” says J.R. Cottle, an Andy’s Burgers, Shakes & Fries franchisee.

Why invest in a franchise instead of starting from scratch:

According to Bendas, a franchise system offers a number of advantages including brand-name awareness among consumers, increased marketing power and presence in the marketplace, improved supply chain efficiencies that lead to better cost of goods margins, a strong infrastructure to provide operations support, and a steady pipeline of new menu innovations.

What you should know before investing:

  • It’s a very competitive and crowded field; therefore, look for winning points of differentiation: A franchise company should have a “clear differentiation from the competition, and the brand messaging to clearly get that message to the consumer in order to ‘sell’ them on the brand,” says Bendas. “With the intense competition, falling into the ‘sea of same’ will not get the job done, and would be a risky venture.”
  • Pay attention to the franchisor’s location strategy: “Making a location mistake is one of the most fatal things that can happen when people start a franchise,” says Paul.
  • Don’t rush into anything: Take the time to fully understand the franchise opportunity. Bendas says potential franchisees should carefully assess a franchise company’s financial performance and longevity; brand acceptance; brand differentiation from the competition; consumer perceptions and realities about the brand; market potential; level of marketing, operations, supply chain, and general support being offered and actually delivered; and the financial requirements of becoming a franchisee. He adds, “Most importantly, be sure there’s a solid partnership based on trust and mutual desires for all parties to succeed.”

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