Fast-Casual Burger Joints Snag a Seat at the Table

While McDonald's, Burger King and Wendy's Focus on Broader Menus, Small Limited-Service Chains Drive Category Growth

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The hamburger category may be dominated by the big three -- McDonald's, Burger King and Wendy's -- but smaller chains such as Five Guys, and even smaller chains like Smashburger and The Counter, have bright-looking futures.

Most of the biggest burger chains have spent their recent efforts advertising items that broaden the menu and customer base. That lack of focus on burgers, as well as the boom in fast-casual restaurants, has left an opening for small and medium-size fast-casual chains with burger-focused menus to swoop in and take advantage.

"Because they don't serve breakfast and focus on burgers, they have a greater tendency to bring in the customer who is looking for a burger," said Darren Tristano, exec VP at Technomic.

U.S. sales for the top 75 limited-service burger chains rose 1.6% in 2010 to more than $65 billion, according to Technomic. Of those top 75, more than half are fast casual, but they only account for 2.6% of the sales. That's partly because of McDonald's, whose 2010 U.S. sales accounted for nearly half of that $65 billion. The top three burger chains account for nearly 75% of fast-food and fast-casual burger chains' U.S sales.

Still, fast-casual burger joints are a driver of growth in the mature burger category, growing sales by 16.4% in 2010, while the hamburger segment overall grew 1.6%.

Here we look at some of the top fast-casual burger restaurants who are starting to reinvent burger chains as we know them.

Five Guys burger
Five Guys burger

Five Guys
One of the fastest-growing burger chains and fast-casual chains, Five Guys ended 2010 with 737 locations and an estimated $625 million in sales. The locations themselves are no-frills and the menu is sparse: aside from greasy burgers, the chain only has hot dogs, mini burgers and grilled-cheese or veggie sandwiches. That's it, except for a range of free, more unusual toppings such as grilled mushrooms, green peppers and jalapenos.

Founded in 2007 in Denver, Smashburger is the No. 2 limited-service burger chain in terms of unit growth, according to Technomic. Last year, the chain grew to 93 units, a 116.3% increase from 2009, and brought in $69.2 million in sales. As of early September, it had expanded to 118 units in the U.S. and had just inked a deal to expand to the Middle East.

The chain was founded by Tom Ryan, former worldwide chief concept officer, U.S. CMO and senior VP-menu management at McDonald's. It offers customizable burgers and the choice of a unique burger for every local market highlighting the distinctive flavors of that region, like the Atlanta, whose toppings include peach BBQ sauce, grilled jalapenos and vidalia coleslaw.

Umami Burger
This chain is small -- it has about five locations in the Los Angeles area -- with an estimated $7 million in sales in 2010, according to Technomic. The chain grinds its own meat, processes its own cheese and pickles its own veggies. Umami, a Japanese term translated more or less to "savory," is generally thought of as the fifth basic taste after salty, sour, sweet and bitter, but it stems from the presence of glutamate, an amino acid found in tomatoes, asparagus, meat, cheese and soy sauce. Unusual burger toppings include shiitake mushrooms and truffle glaze.

Shake Shack
Shake Shack is the fastest-growing limited-service burger chain by units, according to Technomic. At the end of 2010 it had grown to $18 million in estimated revenue with seven locations, up from three in 2007. The chain in total now has 13 units, including one in Dubai and one in Kuwait. And while Shake Shack is now primarily known for burgers and, well, shakes, its roots are a bit different. Prior to its 2004 opening in Madison Square Park in New York, it operated for a few summers as a hotdog cart. Go figure.

The Counter
The Counter

The Counter
This is definitely a departure from your classic burger joint, from the ordering process down to the toppings. As the Counter's website says, it was "anti-established" in 2003, and when you walk in the door, you're presented with a clipboard with a list of ingredients, including grilled pineapple and dried cranberries, that allow customization. In theory, you can never get the same burger twice -- that is , unless you order 312,120 burgers, you won't have a repeat. The Counter boasts industrial decor, beer, wine, and cocktails. At the end of 2010, it had $49 million in sales, up almost 20% from the prior, and had grown 18.2% in units to 26 from 2009.

Founded in 1952 in Los Angeles by Lovie Yancey, Fatburger has grown to include more than 90 units after it began franchising in 1980. In 2010 alone its unit count was up nearly 14% and the chain brought in an estimated $70 million in sales. Noted franchisees include Montel Williams, hip-hop artist Pharrell Williams and Kanye West, who in 2008 brought Fatburger to his hometown of Chicago. He had rights to open 10 shops, but so far two have opened, although one has since closed. Fatburger also has locations in the Middle East and Indonesia.

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