The Weakening Better Burger Business
The better burger trend has peaked. For the latest evidence, look no further than Plano, Texas, where Mooyah Burgers & Fries ousted its CEO, Bill Spae, less than a year after luring him away from CiCi's.
According to Nations Restaurant News, the ouster came amid concerns from franchisees about improving operations. It also comes as the company looks to improve its menu and reduce its food and paper costs. We've been told that some of Mooyah's units have suffered from steep sales declines this year.
The better burger business emerged from the recession as a source of growth in the restaurant industry. For a time, rarely a month when by when we didn't hear about a new better burger concept. Burgers were the center-of-the-plate item on some of the fastest growing restaurant chains in the country.
But over the past year or so, a few signs have pointed to cracks in that business that suggest the burger boom has peaked. The most notable sign: a decline in average unit volumes at Five Guys, which had been the fastest growing restaurant chain in the country for three straight years, according to Technomic, before falling completely off the top 10. There are also reports of weakness at other chains in at least some markets, including Smashburger, which is currently looking for an equity investor, though its average unit volumes have been growing, according to its most recent FDD.
Some of the problem might be honeymoon related, the San Diego-based restaurant consultant John Gordon told me. New restaurants typically have a honeymoon period of oversized sales that fall in the second year, after which they should stabilize. But some better burger concepts have seen steep post-honeymoon declines of as much as 30 percent. That could be due to poor sites. Perhaps the restaurants have a "price/value" problem. Or maybe customers don't like them as much as they do other concepts.
The competition is probably a huge factor. The emergence of so many better burger chains eats into business at other better burger chains, because people only eat so many burgers—and burgers are so prevalent on restaurant menus right now. In Five Guys' case, for instance, chains like Shake Shack may well be eating into its business there. The company has also tried making inroads into California, where popular burger chains grow on trees: In N Out has a stranglehold there on the alleged better burger customer.
It's also important to remember that better burger concepts existed long before Five Guys and Smashburger and Mooyah appeared on the scene, and many thrived for a while before stumbling. There was Fuddruckers, which filed for bankruptcy protection in 2010. And then there was Back Yard Burgers, which filed in 2012.
It's also possible that some competition could be coming from fast-food restaurants, like Wendy's, that have tried stepping up their burger games recently with higher-end premium burgers. Or maybe not: McDonald's tried a premium burger, the third-pound Angus Burgers. They were popular for a while, but then customers moved on. Maybe that's what's happening here.