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Burger joints build on taste for quality

Published: Wednesday, June 20, 2012

Updated: Wednesday, June 20, 2012 09:06


 

CHICAGO - The humble burger still reigns as an iconic American food, but a growing number of foodies are searching for something a little more special: Sandwiches made with fresh Angus beef, a better-quality roll and such toppings as aged cheddar or homemade pickles.

The "better-burger" segment has become one of the restaurant industry's best performers in recent years, due in part to unprecedented growth by Five Guys Burgers and Fries, known for its hand-formed burgers, fresh-cut fries and unlimited free toppings.

More recently, a number of upstarts have elbowed in at the table, adding turkey or veggie patties and myriad toppings such as tzatziki (a yogurt-cucumber sauce), dill pickle chips, goat cheese or brie. Some also offer salads and beer.

The better-burger segment remains a tiny portion of the restaurant industry, with estimated sales of $2.2 billion in 2011, but it grew 21 percent from the prior year, according to a recent report by Technomic, a Chicago-based research firm. That compares with sales growth in 2011 of 3.2 percent for all fast-food and fast-casual restaurants that focus on burgers.

Technomic defines better-burger restaurants as establishments that use fresh meat and make sandwiches to order. That means consumers will have to wait up to 10 minutes or more for a better burger. They also can expect to pay more, as much as $10 for a meal.

But the idea appears to have broad appeal.

On a Friday afternoon, the Smashburger in Elmhurst, Ill., was bustling, with groups of co-workers, families, friends and couples out for celebration lunches, quick bites and family meals.

Heather Hoy and her husband, Blair, were enjoying a lunch with their three children and nephew in celebration of the last day of school.

She was tackling a Spicy Baja chicken sandwich with pepper jack cheese, guacamole, chipotle mayo and jalapenos. Sweet potato fries and haystack onions were also hits with her family, she said.

"It's obviously higher quality than some of the fast-food places," she said.

McDonald's continues to dominate the fast-food burger business, posting nine straight years of worldwide same-store sales gains. In recent years, the chain has expanded its menu and kept sales growing.

Salads, smoothies and coffee drinks have helped win back women, but Darren Tristano, executive vice president of Technomic, said serious burger lovers got bored along the way.

"That's when the opportunity opened, and that's when the chains jumped in," he said.

McDonald's declined to comment for this report. But the chain has chased the better-burger trend, adding Angus burgers with a better-quality bun and upgraded toppings like mushrooms and Swiss cheese.

Tristano said the economy also has been a factor in better-burger growth. "Consumers were looking for familiar products that could be a little better but didn't break the bank," he said.

Today, a number of "second-generation" chains can be found, with offerings beyond the ostensibly higher-quality burger and fries.

Newcomers include Smashburger, Freddy's Frozen Custard and Steakburgers, The Counter and The Habit Burger Grill, all of which grew their restaurant bases by more than 20 percent during 2011. Smashburger grew sales 71.5 percent to $118.7 million as locations expanded to 143 last year.

Smashburger founder Tom Ryan said he began thinking about better burgers a decade ago while conducting research for McDonald's as the company's worldwide chief concept officer.

"Although there was an increasing number of burger purveyors, no one was really hitting the ball out of the park around great burgers," he said. "Even the best iconic ones, the Big Mac, Quarter-Pounder, Whopper, weren't knocking burger lovers over anymore."

Denver-based Smashburger also has wooed some McDonald's franchisees away from the Golden Arches. Irwin Kruger, a 42-year McDonald's operator, sold his business in 2010 to work with Ryan.

"I knew that Tom had never shot from the hip," Kruger said, adding that anything Ryan ever proposed "was based in fact and science and a very keen eye on where consumers were going."

Kruger said he was drawn in by the chain's business model: smaller restaurants with high volume, and the ability to own an entire territory. With one restaurant in the Long Island area and two opening next month, Kruger is contracted to open 20 by the end of 2018.

Ed Rensi, former CEO of McDonald's USA, said the idea that McDonald's has lost its way with burgers is "nonsense."

"You don't grow to an $89 billion company by neglecting your core product," he said. The success of better burger chains, he said, is more a matter of the burger's ability to sell for a wide range of prices.

"There's a niche in any industry that you can fill and have a very nice business," Rensi said, adding that baby boomers, who grew up eating burgers and have disposable income, are some of the best customers.

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