Fast-growing Five Guys burger chain sticks to basic, fresh food

June 7, 2009, 9:36 PM

— -- In 2002, Jerry Murrell was a small-business owner looking for experts to help expand his burger joints.

Seven years later, the leader of the free world is comparing Murrell's burgers with the pyramids of Egypt.

"Five Guys was good," President Obama said on his recent trip to Giza, Egypt. "This is better."

It's been a dizzying few weeks of national publicity for Murrell, founder and CEO of one of the fastest-growing restaurant chains in the country: Five Guys Burgers and Fries of Lorton, Va.

In April, first lady Michelle Obama dropped by a Five Guys location in the Dupont Circle neighborhood of Washington, D.C., with her staff for lunch, followed soon by another visit. In late May, while taping an NBC news special, President Obama urged anchorman Brian Williams to join him on a Washington burger run. They went to a Five Guys, where the president ordered a cheeseburger with lettuce, tomato, jalapeño peppers and mustard. The footage was shown nationally on NBC. "I get tears in my eyes thinking about it, that they made such a big deal about Five Guys," Murrell, 65, says of the Obamas.

Other customers have been good to Murrell, too. With emphasis on menu simplicity and fresh ingredients, Five Guys has drawn a cult-like following among burger lovers, who compare it to another chain with a similar concept, In-N-Out Burger on the West Coast.

From its origins as an Arlington, Va., neighborhood takeout joint, Five Guys has grown to 436 locations in 32 states after it began franchising in 2002. Its restaurants are on track to generate more than $500 million in revenue this year. More than 1,700 stores have been sold for future development. Its first international location, in Calgary, will open in July.

Each store, which costs franchisees about $350,000 to $500,000 to build, generates about $1 million a year in sales. Each franchisee must have a net worth of $1 million and agree to open at least five stores, requirements that have been ratcheted up in recent years because of high demand. "I'm the luckiest guy in the world," Murrell says. "We're too humble to ever think we can compete with Wendy's and McDonald's."

An alternative to college

Murrell's motives for launching Five Guys would sound familiar to many a family business owner. He and his wife, Janie, were looking for ways to keep their college-age sons occupied and keep the family in the D.C. area. "They weren't scholars," Murrell jokes of his two eldest sons. "I always liked having my kids around me, so I thought that was a good way to do it."

With the money saved for their sons' college tuition, the Murrells opened a small takeout-only burger restaurant in Arlington, Va., in 1986. They named it for their five sons.

Why burgers? Murrell says he fondly remembered his visits to a local burger stand — Push 'Em up, Tony — growing up in Michigan. "And my parents used to say, 'When times are bad, (if) you run a good beauty parlor or serve a good hamburger, you can do well.' "

His two eldest boys — Jim, 42, and Matt, 40 — cooked and took orders, while Janie handled the administrative duties. Jerry, a financial planner with a business degree from the University of Michigan, was the "guiding light," Janie says. The three younger sons — Chad, 38; Ben, 26; and Tyler, 22 — joined the business later. (Jim, Matt and Chad are from Jerry's previous marriage.) "They (all) put their heart and soul into it," Jerry says.

The Murrells quickly learned that to survive in the fiercely competitive burger business, they needed to focus on food. "We were going to use our food to market our products," Jerry says. He still doesn't advertise.

The restaurant concentrated on the items it knew best — burgers using 80% fat-free patties made from a blend of sirloin and chuck, hot dogs and fresh-cut fries cooked in peanut oil. The family hired a local bakery to supply their own buns. No detail was too fine for the Murrells, with the brothers arguing over the choice of ingredients and the proper order of toppings: The pickles go under the tomatoes. And 13 different toppings can be customized for each order, including sautéed mushrooms, jalapeño peppers and grilled onions.

Before long, customers were lining up, which forced the brothers to distribute free, unshelled peanuts to placate waiting customers. The peanuts have become a Five Guys trademark. Food critics wrote rave reviews. "We made money right from the start," Jerry says.

Sticking to basics

More than 20 years after the first restaurant, the menu remains virtually unchanged despite pressure from some franchisees to add items, such as milkshakes. "We're the only burger chain that doesn't have milkshakes. But we couldn't possibly have a milkshake that comes of out of the machine," Jerry says.

In keeping with its minimalist style, Five Guys decor is a cross between a military canteen and a 1950s diner. The restaurants don't have freezers.

Five Guys' simple and folksy culture trickles from the top. Rick Miles, an Idaho supplier of all the potatoes (1.3 million pounds a week), says Jerry Murrell made a favorable impression when he showed up to their initial meeting with then-teenage son Tyler. "We had burgers and fries. He was very frank."

All family members remain actively involved, though the company has vastly expanded. Jerry credits Janie for maintaining the company's operational discipline. "They're all afraid of her. Every single check that gets written, she signs them."

Jim is the company's historian, having been in the kitchen from Day 1, company COO Sam Chamberlain says. Matt is "the most fanatical" about details. Chad is the "most culinary focused," while Ben is "the more MBA type." Tyler focuses on the company's bakeries.

"This thing can run without me being around. They let me think I am the CEO," Jerry says.

Still, Jerry is the one out front when sitting down with bankers and other Wall Street types. And the company has had many of these meetings recently, with inquiries for investment and initial public offerings. Five Guys once turned down an offer from the Carlyle Group, a private-equity firm, to buy a controlling stake, which is currently owned by the family. "I could have taken a lot of money off the table," Jerry says. "(But) they wanted to bring someone powerful in the fast-food industry to run it. (Once you lose control), people would start wanting to cut corners. That's one of the reasons why we'll probably never go public."

But with its growth, analysts are starting to question the retention of its homemade soul. "Will he be able to keep the tight controls?" asks Sherri Daye Scott, editor of QSR magazine, a trade publication.

To ensure quality control, Five Guys sends secret shoppers twice a week to all locations. The brothers also are on the road constantly visiting the restaurants.

For now, Jerry and Janie have no plans to retire and will continue to serve up burgers tasty enough for a U.S. president. "I think I'll vote Democratic next time," Murrell says, chuckling.

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