Americans love biting into their juicy hamburgers. With new burger franchises popping up throughout the country competing with McDonald’s, Wendy’s and Burger King, you might wonder if the burger business is the right franchise opportunity for you. From A&W to Checkers & Rally’s, there are plenty of appealing alternatives that offer lower initial investments and delicious revenues for investors looking to break into the fast food market.
The burger industry continues to explode, according to recent IBIS World market research. In fact, the market size of the burger restaurants industry in the United States to date increased faster than the economy overall. The $122 billion industry accounts for 30% of the fast-food and fast-casual restaurant industry.
But, will burger franchises continue to be profitable, despite an increasingly more health-conscious clientele? Because millennials are asking for a twist on the popular hamburger (to include chicken burgers, turkey burgers, and plant-based burgers, for example), offering variations on traditional fare could prove lucrative for emerging burger franchises willing to cater to the tastes of a younger demographic. Consider these trends, provided by Food Business News:
The term “cheeseburger” on menus has decreased by 15% from 2012 to 2015, while such descriptors as “bacon burger” and “Southwest burger” have risen 85% and 34%, respectively, according to research from Chicago-based Mintel.
An unspecified “cheese” as a burger topping has fallen 11%, while mozzarella has increased 29%, and pepper jack has grown 13%.
Nearly half of consumers say they want more premium burger buns at restaurants, giving rise to such bread as pretzel (up 97% on menus between 2012 and 2015), Kaiser (93%) and brioche (59%).
Forty-six per cent of Mintel survey participants said they would like to see more chicken burgers on menus, while 42% expressed interest in more turkey burgers and 34% showed favor for more bison or buffalo options on menus.
Additionally, grass-fed beef burgers are gaining traction, with 79% of burger eaters agreeing grass-fed beef is higher quality than conventional beef.
The heavy hitters in the burger industry are already paying mind to changing tastes—including adding plant-based burgers to their menus. For example, Burger King recently piloted meatless Whoppers in the St. Louis market, dubbed the Impossible Whopper. According to a June 2018 Nielsen report, while only 6% of Americans said they follow a strictly vegetarian lifestyle and 3% a strictly vegan lifestyle, 39% of Americans said they were trying to eat more plant-based products.
While on this surface one might think this could spell trouble for burger franchises, changing tastes could actually pave the way for up and coming burger franchises looking to stay ahead of the curve.
According to QSR’s most recent 50 Burger Segment report, published in 2018, McDonald’s continues to take the biggest bite out of all of the burger franchises, enjoying more than $37 million in systemwide sales, far outpacing its nearest competitors, Burger King and Wendy’s.
However, with a franchise fee of $45,000, total initial investment costs of $1.2 million to $2.2 million, and royalties that top 4% of your gross sales, McDonald’s proves to be a costly franchise to enter. Although lower than McDonald’s, Burger King also asks franchisees for whopping upfront investment costs, including $15,000 to $50,000 in franchise fees, an initial investment from $300,000 up to $3.3 million, and 4.5% of gross sales.
Thankfully, investors interested in other choices can find burger franchises that not only provide tasty options for customers, but also require lower up-front fees and an opportunity to appeal to a growing market.
Before you make a final decision on which burger franchise might be the right fit for you, consider looking at some of these award-winning brands from our Top Food and Beverage Franchises list to weigh the benefits of each. Each award-winning brand on this list has been rated highly by current franchisees.
Wendy’s has been named a Top Food Franchise by Franchise Business Review and is QSR’s sixth-ranked burger franchise. Wendy’s produced $1.59 billion in 2018, making it also one of the most profitable fast food brands in the world. The average Wendy’s restaurant generates approximately $1.6M per year, according to 2018 franchise disclosure figures, making it a competitor to second-ranked Burger King. It does require higher upfront costs, including an initial investment of $2,018,500 to $3,669,000 if you purchase for cash; $570,500 to $1,131,000 if you finance; and $323,500 to $643,500 if you lease, according to its Franchise Disclosure Document (FDD). Of that amount, you may be required to pay up to $55,000 in franchise fees.
Strong brand recognition
Flexible in terms of operations/day-to-day responsibilities
High annual sales
Culver’s--home of the butter burger, among other Midwestern classics, has been cooking up mouth-watering fare since 1984 and franchising since 1990. With approximately $2.2 million in sales per unit in 2017, it’s easy to understand why Culver’s is an exciting option for those willing to dip their toe in the fast food franchising world with a brand that offers more of a hometown feel than some of its national competitors. Culver’s most often attracts franchisees who grew up loving the brand; said one franchisee, “Growing up with Culver’s gave me opportunities to advance my career, and become a franchisee with my own restaurant.” To open a Culver’s franchise, you can expect an initial investment of anywhere between $2,043,000 to $4,652,000, which includes a franchise fee that ranges from $30,000 to $55,000, according to its FDD.
Strong unit sales
Comprehensive training program
Additional support from opening and franchise teams
Checkers and Rally’s features a checkered flag design that reminds you of the racetrack, and has been serving up hot dogs, hamburgers, and milkshakes since 1986. Come for the food, stay for the affordability; with an initial investment between $96,000 to $1.5 million, the company’s start-up costs are on the lower end of the spectrum compared to its competitors. Yet, it offers a 62% return on investment, according to FDD report data.
Franchise incentives for military veterans
Low initial investment cost
High return on investment
Learn more about owning a Checkers & Rally’s franchise.
Recently named a Top Food Franchise by Franchise Business Review, A&W is back! You might associate A&W with its root beer floats, but this franchise is also responsible for inventing the bacon cheeseburger back in 1963. According to QSR Magazine, Allen and partner Frank Wright—hence the name A&W—began opening A&Ws throughout California and started franchising roadside restaurants in 1925. The chain is credited with creating the drive-in restaurant phenomenon of the 1950s and 60s. Today, there are about 1,000 restaurants around the world, with almost 600 in the U.S.
Average net sales of its reporting freestanding restaurants with drive-throughs are more than $950,777, according to its Financial Disclosure Document. Average comp sales are up 33% since 2011 and the company is focused on growing profitable same-store sales.
The total investment necessary to begin operation of an A&W franchise restaurant, not including rent or land, is between $269,000 and $1.2 million, depending on whether you choose to operate in a new, freestanding, inline or captive location, according to the FDD. Franchise fees range between $15,000 and $30,000.
Appeals to customer nostalgia
Low saturation compared to other brands
Reduced royalty fees for new owners (2% of net sales in year 1, 3% of net sales in year 2, and 4% of net sales in year 3; then 5% net sales for the remainder of the term.)
Before you decide to open a burger franchise location, make sure you fully understand the financial requirements, as well as the day-to-day responsibilities of running a fast-food restaurant. No franchising decision should be made lightly, and you should take care to consider all of the franchising opportunities available to you. From conducting market research to talking to current franchise owners, leave no burger unturned when evaluating your options so you can move forward with confidence.