Five Guys Franchise in 2024: Costs, Fee & FDD
Discover the financial insights behind the beloved Five Guys franchise, from investment costs to potential earnings. Explore key metrics, franchisee support, and the brand’s strong market presence to determine if this burger powerhouse is the right investment for you.
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Five Guys is an American fast-casual restaurant that has become a beloved brand known for its delicious burgers and hand-cut fries. Founded in 1986 by Jerry and Janie Murrell along with their five sons (hence the name!), Five Guys started as a family-run operation in Arlington, Virginia. What began as a small burger joint quickly gained a reputation for offering high-quality, fresh ingredients, setting it apart from typical fast-food chains. With its no-nonsense approach and commitment to simplicity, Five Guys has grown into a powerhouse in the quick-service restaurant industry.
The core of Five Guys’ menu is their customizable burgers, which are made to order with fresh, never-frozen beef patties and a wide variety of toppings. Their hand-cut fries, cooked in peanut oil, are another fan favorite, along with their hot dogs and milkshakes. While the menu is straightforward, it’s the quality that keeps customers coming back. The brand attracts a wide range of customers, from families to office workers, who appreciate a well-made, satisfying meal in a casual setting. Their emphasis on fresh, high-quality ingredients resonates with consumers who want something better than the usual fast-food fare.
Today, Five Guys operates over 1,500 locations in more than 20 countries, with a significant presence across the U.S., Canada, and the U.K. Their expansion strategy has focused on delivering the same level of quality and service, no matter where they open. On average, Five Guys serves millions of customers daily, solidifying its status as a go-to spot for burger enthusiasts around the world.
As a franchisee, you’ll benefit from a robust support system that includes extensive training, real estate assistance, and ongoing operational support. Five Guys ensures its franchisees are well-prepared through a comprehensive training program that covers everything from food preparation to customer service. The franchise team also offers marketing assistance and regularly updates its systems to help franchisees maintain consistency across all locations. This commitment to support and quality has contributed to Five Guys’ ongoing success and appeal as a franchise opportunity.
Five Guys Franchise Insights
- Since franchising in 2003, the brand has grown to more than 1,500 locations worldwide, with an additional 1,500 units currently in development.
- Five Guys goes through around 140 million pounds of potatoes annually to maintain its fresh, never-frozen fry policy, highlighting its dedication to quality.
- Five Guys has been consistently ranked among the top burger chains by customer satisfaction surveys, thanks to its emphasis on quality and customization.
- With 4% a 3-year failure rate, Five Guys has a stable brand compared to the rest of industry with an 11% 3-year failure rate
Five Guys Franchise Key indicators
Est Growth YOY (%)
4%
vs industry 1%
Total U.S. Franchised Units
1,400+
Est 3-Year Failure Rate
4%
vs industry 11%
Sales-to-Investment ratio
4.9:1
How much does it cost to open a Five Guys franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Five Guys franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Five Guys franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). You can see a breakdown of the costs to open a Five Guys below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Initial Franchise Fee | $25,000 | $25,000 |
| Leasehold Improvements | $100,000 | $300,000 |
| Lease Payments and other rental expenses | $7,500 | $20,000 |
| Equipment | $55,000 | $105,000 |
| Signage | $6,500 | $20,000 |
| Initial Inventory | $10,000 | $15,000 |
| Architectural/Engineering | $7,000 | $25,000 |
| Electronic Cash Register System with Modem | $15,000 | $25,000 |
| Facsimile Machine | $350 | $500 |
| Travel, lodging, and meals for initial training | $100 | $5,000 |
| Business Supplies | $4,000 | $8,500 |
| Business licenses, permits, utility deposits, etc. | $5,000 | $15,000 |
| Delivery and catering expenses | $0 | $1,000 |
| Insurance deposits and premiums | $750 | $1,250 |
| Additional Funds for first 3 months | $20,000 | $25,000 |
| Total Estimated Initial Investment | $256,200 | $591,250 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
To open a Five Guys franchise or a similar quick-service restaurant in the burger industry, you’ll need to meet certain financial requirements. These requirements ensure that potential franchisees have the necessary capital and financial stability to support both the initial investment and ongoing operations.
- Initial Investment The total initial investment to open a Five Guys franchise typically ranges from $256,000 to $591,000. This includes costs for build-out, equipment, signage, and initial inventory. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Liquid Assets Requirement Franchisees are generally required to have at least $150,000 to $250,000 in liquid assets. This ensures they have enough cash on hand to cover operating expenses and any unexpected costs that may arise during the start-up phase.
- Net Worth Requirement The required net worth to open a Five Guys or similar franchise is usually in the range of $500,000 to $1.5 million. This takes into account all assets minus liabilities and reflects the financial strength needed to sustain the business long-term.
How much does a Five Guys franchise owner make?
Calculating the salary of a Five Guys franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Five Guys franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Five Guys Revenue & Gross Sales
Based on most recent analysis, Five Guys franchises have a median gross sales of $1,683,333. This solid revenue performance reflects the brand’s enduring popularity and strong market presence, making it an appealing investment opportunity for potential franchisees.
Which key factors impact the average revenue performance of Five Guys franchisees?
The strong performance of U.S. franchisee median gross sales for Five Guys can likely be attributed to several key factors. First, the brand’s unwavering commitment to quality ingredients and made-to-order meals resonates with consumers who prioritize freshness and customization. Additionally, Five Guys’ simple yet effective menu appeals to a broad demographic, making it a go-to choice for both families and individuals looking for a satisfying meal. The brand’s consistent focus on customer experience, coupled with strategic marketing and location selection, also plays a significant role in driving foot traffic. Furthermore, the strong support system for franchisees helps maintain operational efficiency, ensuring each location runs smoothly and profitably.
Five Guys Franchise Operational Costs
When considering opening a Five Guys franchise, it’s crucial to be aware of the key ongoing operational costs that will impact your bottom line. These expenses are essential for keeping your restaurant running smoothly and ensuring a high-quality customer experience.
- Labor Costs Paying competitive wages and benefits to attract and retain staff, including managers, cooks, and front-line employees, is a significant ongoing expense.
- Food and Beverage Costs Maintaining the high-quality ingredients Five Guys is known for, such as fresh beef and potatoes, contributes to a substantial portion of your operational costs.
- Utilities and Maintenance Costs for electricity, gas, water, and maintaining equipment like fryers, grills, and refrigeration units are ongoing expenses that can fluctuate based on location and usage.
- Rent or Lease The cost of your restaurant’s physical space, whether you own or lease the property, is a major recurring cost that varies by market and location.
- Insurance Ensuring your business is protected with proper insurance coverage, including liability, property, and worker’s compensation insurance, is an essential ongoing cost.
These operational costs are integral to running a successful Five Guys franchise and should be carefully planned for in your financial projections.
Five Guys Franchise Fees
When investing in a Five Guys franchise, it’s important to understand the various fees you’ll encounter as part of your ongoing financial obligations. These fees are critical to maintaining the support, marketing, and resources necessary for your franchise’s success.
- Royalty Fee You’ll be required to pay a royalty fee of 6% of gross sales, which helps fund the overall operations, support, and continuous development of the Five Guys brand. If your restaurant is located in Alaska, Hawaii, or Puerto Rico, this fee increases to 8%, reflecting the additional logistical costs associated with these locations.
- Creative Fund Franchisees contribute up to 2% of their gross sales to the Creative Fund, which currently stands at 2%. This fee goes towards national and regional marketing efforts that promote the brand and help drive customers to your restaurant.
- Additional Fees There are additional fees for training programs, technology, and other items provided by Five Guys that may be applied
Understanding these fees will help you better plan your financial strategy and ensure you’re prepared for the ongoing costs associated with running a successful Five Guys franchise.
Five Guys Franchise Earnings
The earnings of a Five Guys franchise owner can vary depending on factors like location, operational efficiency, and cost management. However, for those taking an active, hands-on approach as owner-operators, the potential for profitability is substantial. Based on recent data, with median gross sales of $1,683,333, the estimated earnings for a Five Guys owner-operator are approximately $252,000, reflecting a 15% operating profit margin.
This level of earnings underscores the financial opportunity that comes with a well-managed Five Guys franchise. Owner-operators who are involved in the day-to-day operations can significantly enhance profitability by optimizing costs and maintaining high standards of service. These figures demonstrate the potential for strong returns in a Five Guys franchise, making it an appealing investment for those committed to running the business efficiently and effectively.
How to Open a Five Guys Franchise
Becoming a Five Guys franchisee involves a series of well-defined steps designed to ensure both the franchisor and franchisee are well-prepared for success. The process starts with an initial inquiry and continues through training and opening your new restaurant.
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Preliminary Approval If your initial application is successful, you’ll be contacted by a franchise representative to discuss your qualifications and expectations. This may include a series of interviews and additional paperwork.
- Discovery Day Attend a Discovery Day at Five Guys headquarters, where you’ll meet the corporate team, learn more about the business model, and tour existing locations. This is your opportunity to ask questions and ensure it’s the right fit.
- Site Selection and Approval Once you’ve been approved, you’ll work with Five Guys’ real estate team to find and secure an ideal location. The site must meet Five Guys’ criteria and receive approval from the corporate team.
- Training Program Participate in the comprehensive training program, which includes both classroom instruction and hands-on experience in a functioning Five Guys restaurant. Training covers everything from food preparation to customer service and management.
- Build-Out and Setup Once your site is approved, you’ll work with contractors to build out the restaurant according to Five Guys’ specifications. This includes purchasing equipment, signage, and initial inventory.
- Grand Opening After final inspections and setup are complete, you’re ready to open your doors! Five Guys provides ongoing support to help you with the grand opening and initial operations.
Starting a Five Guys franchise is a thorough process, but the support and resources provided ensure you’re set up for success from day one.
Pros & Cons
Pros
Strong Brand Recognition: Five Guys is a well-established and beloved brand with a loyal customer base, which can drive consistent traffic to your location.
High-Quality Product: The franchise’s commitment to fresh, high-quality ingredients ensures a product that stands out in the competitive fast-casual market, contributing to customer satisfaction and repeat business.
Proven Business Model: With over 1,500 locations worldwide, Five Guys has a proven business model that has demonstrated consistent success across various markets.
Comprehensive Support: The franchise offers extensive training and ongoing support, helping you manage everything from operations to marketing, ensuring you’re never alone in running your business.
Strong Revenue Potential: With impressive median gross sales and solid profit margins, the financial outlook for Five Guys franchisees can be very attractive, especially for hands-on owner-operators.
Cons
Intense Competition: The burger and fast-casual market is highly competitive, with many players vying for consumer attention, which can make it challenging to stand out in certain areas.
Strict Operational Standards: Five Guys maintains rigorous operational standards, which can be demanding and may require a high level of commitment and attention to detail from franchisees.
Limited Menu Flexibility: While the focused menu is a strength, it also limits your ability to diversify offerings, which may be a drawback in markets where customers seek more variety.
Location Sensitivity: Success can be highly dependent on securing a prime location, and site selection is critical. Poor location choices can negatively impact profitability.
