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Burger Bonanza: Rare or well-done?

Like many of you, I just got back from RECon, and I’m still processing what I saw and heard. One thing that was interesting to me was the fact that it seemed like burger concepts were on everybody’s site plans, from In-N-Out Burger to Smashburger and Five Guys. If you like a good burger -- and, who doesn’t -- this is great news. If you are a developer or landlord though, I think you should proceed with some caution. While the burger binge shows no immediate signs of slowing down (I heard Smashburger plans to open 85 new restaurants in 2011 and has a franchisee pipeline of 463 locations; and, Five Guys just announced the largest annual sales growth of all major U.S. restaurant chains in 2010 with an increase of 38%), I’m not sure this kind of growth is sustainable.

You have to ask yourself: Are burger joints here to stay or is this just the latest themed restaurant concept that will overextend itself and fall off the map in a few years like so many other “hot” concepts we’ve seen? Something nobody is really discussing is how many of these we really need. In my own neighborhood in Phoenix, Arizona, for example, there are eight burger concepts within a two-mile radius of my house: Two upscale independents, a Five Guys, a Smashburger, a Culver’s, two McDonalds and a Burger King! It doesn’t seem sustainable. On a side note, I think this whole phenomenon has actually been a blessing in disguise for McDonalds. They’ve been forced to diversify their product line with things like coffee and smoothies to “beef up” their sales and it seems to be working for them.

I think that in order to determine the staying power of the burger guys, we have to look at why burgers have enjoyed such a counterintuitive renaissance at a time when it seems like people are trying to be healthier. Everywhere you turn, restaurants are adding low-fat and low-carb alternatives to their menus. Some might say it’s the economy; consumers are still cautious with their spending, especially when eating on the run. I think it might actually be less economical and more psychological, though. Most of the independents generally offer what people think of as higher quality ingredients. There’s a big push toward organic and locally grown products. Some even offer Ahi tuna burgers and the ever-popular veggie and turkey burgers. That seems better for you, right? So, maybe it does play into the whole “healthier” idea.

I’m still not convinced. My message to real estate professionals is simple: Just because it’s a hot concept now, it doesn’t necessarily mean that it will stay that way. Be careful! A competitive marketplace can quickly become saturated, and today’s hot concept might be tomorrow’s raw deal.

That’s my “food for thought” (a side of fries -- wait, make that sweet potato fries -- is extra!). What do you think? Email me at jgreen@jeffgreenpartners.com.

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.

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