Tuesday, March 24, 2009
We still have one last permit to take care of, but we are feeling really good. Staff is almost totally hired, training schedule is set, we have our Certificate of Occupancy from the town, and tomorrow morning our first (semi-real) food order goes in. The register system is almost totally installed and we've even entered pricing into the system.
The store's phone number is (508) 281-4855 if you want more information. Ask for Rich, Doug or Matt.
See you next week!
Friday, March 20, 2009
How to Improve on the Best Business Ever Seen
Anders Bylund (TMF Zahrim)
February 24, 2009
Last summer, my fellow Fool Tim Beyers told you all about the best company he'd ever seen. Californian quick-serve king In-N-Out Burger impressed him mightily with four core qualities:
- In-N-Out is family-owned. Since 1948, In-N-Out has grown under the watchful eye of the Snyder family. There are "no plans to take the company public," says the company website. Compare and contrast to fellow burger flipper McDonald's (NYSE: MCD), where institutional investors own 77% of the company and insiders don't even register as a blip on the radar – less than 1% inside ownership.
- Its customers are "insanely loyal." Tim himself would go to the extreme of fisticuffs if his In-N-Out shirt was in any danger. Short of Apple (Nasdaq: AAPL), you won't find a more dedicated fan base anywhere in Southern California. Hold that thought.
- It's different. "Quality you can taste" sells burgers, and Tim can appreciate the fact that his son's allergies to proteins and preservatives never get triggered by In-N-Out's handmade fries. Fresh ingredients and generous employee training programs ensure the quality factor.
- There's a disciplined growth strategy. Just as In-N-Out isn't planning to go public, management also doesn't want to sell franchises. "Expansion beyond southwest Utah would require freezing and, from management's view, damage the brand," said Tim. And that, my friend, is where I start to think that I've seen a better company.
In-N-Out Burger sounds like a fine business, and I'd love to sample those patties. But I have two big problems with this company. For one, management sounds pretty dead-set on staying private. More power to them, but it disappoints the investor in me. And for another, I might never get a chance to try the burgers. The closest location to my Tampa home base is in Tucson, Ariz. -- a mere 2,000-mile drive away. Because the company insists on sourcing its own beef and shipping unfrozen patties to the stores, it would have to build another meat processing plant in order to grow any further east.
Filling some large shoes
East Coast dwellers like me may never have seen an In-N-Out location. But wherever you live, I bet you've heard of Five Guys. The Murrell family ripped entire chapters out of In-N-Out's playbook, and then spiced it up with a few plays of their own. Five Guys started out as a single burger joint in 1986, serving up tasty sandwiches made from never-frozen beef on freshly baked buns. On my first visit in 2001, there were no more than five locations, all in the Fool's own backyard around Alexandria, Va.
It was already a local legend. Some people showed up for the Zagat-rated burgers, and others filled up on generous helpings of handmade fries. It's not exactly fast food, because the cooks start from scratch and form the patties right there on the grill. But that's OK, because while you're waiting, you can nibble away on the free, unshelled peanuts.
The similarities to In-N-Out should be obvious by now. But then, Five Guys took a turn for the better.
Five Guys is still family-owned, but the Murrells started franchising the concept in 2003. By 2006, there were 87 stores, mostly along the eastern seaboard. Today, there are more than 300 from coast to coast, including three locations that are each less than a 30-minute drive from my house. I'm a burger fan of epic proportions, but the McDonald's five minutes away gets zero business from me these days. The Wendy's (NYSE: WEN) Baconator is pretty good, but it ain't the real thing. And Burger King (NYSE: BKC) can keep its Angry Whoppers chained up and muzzled for all I care. I'd open a Five Guys in my kitchen if I could. And I'm not alone.
There's nothing wrong with a properly conceived franchising plan, if you ask me. Buffalo Wild Wings (Nasdaq: BWLD) is living proof that franchisees can keep the spirit of a powerful brand alive -- as long as the franchisor stays involved with training and support. Five Guys doesn't have to hand-pick each head of cattle for its burgers, so it can grow wherever you'd find suppliers, like a Sysco (NYSE: SYY) distribution center. There are more than 1,500 Five Guys units in development.
And here's the kicker: Five Guys may not stay private forever. "We do not currently have plans to go public," the company says, but they don't suggest that they've closed the door to Wall Street entirely. The franchising step alone is a sign of the Murrells' ambition to grow bigger and more profitable; an IPO would be a logical next step.
The Foolish conclusion
So Tim, I think I've found a better company than your best. This one marries the same recipe of quality product and highly involved management to a thoroughly modern growth concept. Five Guys was said to be worth $1 billion three years ago, at one-third its current network size. If and when this baby goes public, I'll be standing in line.
Monday, March 16, 2009
The short answer: it's looking more and more like early April, and we are working really hard to get it as early as possible.
The longer answer: we still have a few things left to do before we can open the doors. They fall into a couple of categories.
First is finishing construction, especially completing the grease trap installation. Grease traps are usually tricky items because they are very expensive, subject to many town regulations (for good reason, obviously), bulky and difficult to handle, and can require ripping up the parking lot. Once this is done, and the final touches are put on the place, we can get our "certificate of occupancy", or CO, from the town, which basically is their seal of approval on our buildout. We have done everything we can to position ourselves well here, but there's no such thing as a sure thing. Even once we have the CO, we have to put on the finishing touches like hanging the signs and building the chairs and tables. Yes, we have to put those together ourselves.
Second is hiring and training the staff. We are currently hiring for all spots, or rather, our management team of General Manager Rich Lanza, and two AM's, Doug Oelbaum and Matt Eidelman, are working on that. We have received at least 50 applications over the web and even more in the store. But we need to hire a lot of people and even in this economy, that takes time. Training is a multi-step process that involves the managers visiting Five Guys' training program at headquarters in Lorton, VA, and then completing at least 2 weeks working in a nearby store. This part is basically done.
Then once the staff is hired, Five Guys send corporate trainers to train the newly-hired staff, and help run the store once it opens. This part is left to do. Five Guys takes this part very seriously as they not only want to help us be successful, but really want to protect their brand. Because they don't do any advertising, word-of-mouth on the brand is crucial so they take no chances here.
Finally, there are a few systems left to install as well, most notably the "Point-of-Sale" system, or POS. The POS is the brains of the operation and can't be installed until the CO is done. Once it's installed, we have to enter all of the employees and further customize it, which also takes time. We also are putting in a camera security system which will enable us to watch the store via the Internet.
So that's the deal. When we have an official date, we'll let people know, but for now, we're still on target to hit sometime in early April.