How Much Does It Cost to Open a Five Guys Franchise?

Five Guys is one of the nation’s most beloved fast-casual restaurants. A hotspot for hamburgers, French fries, and milkshakes with more than 1,500 locations worldwide, it’s a go-to for burger lovers and a great franchise opportunity for entrepreneurs.

A Five Guys can be a lucrative project for aspiring small business owners, but it’s essential to understand the costs to open a Five Guys franchise. From the initial investment to ongoing operating costs, the cost to open a franchise can be significant. You’ll need to understand the financing available, the profitability of your Five Guys, and how to maximize its potential. If you’ve ever wondered how to own a Five Guys franchise, this guide is for you.

In this article:

• The cost to open a Five Guys franchise.
• A step-by-step of how to open a Five Guys franchise.
• Advantages and disadvantages of franchise ownership.

The history of Five Guys

The Five Guys fast-food restaurant chain has become a household name in the United States and beyond. The brand dates back to 1986, when it was founded by Jerry Murrell and his four sons in Arlington, Virginia. Today, the brand has expanded to over 1,500 locations in the US, Canada, Europe, and Asia.

From its humble beginnings, Five Guys Burgers and Fries gained popularity for its delicious menu of burgers, fresh-cut fries, hot dogs, and unlimited toppings. The restaurant’s unique approach to fast food was a breath of fresh air for customers tired of the standard fare offered by larger chains. The company grew committed to using only the freshest ingredients in its products, and all burgers are cooked to order, ensuring that every meal is made with the highest quality standards. The restaurant’s burgers were made from 80% lean ground beef, with no fillers or additives. The french fries were hand-cut, and the peanut oil used for frying was of the highest quality.

Despite its early success, the Five Guys chain remained a regional chain for several years. It wasn’t until 2003 that the brand began expanding outside of Virginia. The company opened its first franchise in Maryland, which was followed by locations in Washington D.C., New York City, and beyond.

How much does it cost to open a Five Guys franchise?

The total cost to open a Five Guys franchise depends on several factors, including location, size, and construction costs. All in, the total investment may range from $306,200 to $716,250 or more.

The basic Five Guys franchising details include:

• Franchise fee: $25,000
• Initial investment: $306,200 - $716,250
• Minimum net worth: $500,000
• Minimum liquidity: $250,000
• Royalty fee: 6-8%
• Ad fee: 2%

The total upfront investment varies so widely due to a range of factors. These may include:

• Real estate: Five Guys locations typically require a minimum of 1,500 square feet, with some locations requiring up to 3,000 square feet. The cost of leasing or purchasing this amount of space can vary significantly, depending on the location and the current real estate market.
• Construction costs: The cost of building out a Five Guys location can vary depending on the size, location, and level of customization required.
• Equipment costs: Franchisees will need to purchase a variety of equipment, such as grills, freezers, fryers, refrigeration, and prep tables, which can also be costly.
• Leasehold improvements: The leasehold improvements for a Five Guys franchise typically range from $100,000 to $200,000 but can be more or less depending on the specific location.
• Inventory: You’ll need a continuous stream of food ingredients to whip up delicious fast meals for customers, which is a significant ongoing expense.
• Staffing: Labor is one of the largest operating costs of most businesses, and Five Guys prides itself on quality service. That means a large enough staff to meet customer demands and consistent training.
• Royalties: As a franchisee, you must pay royalties and marketing fees to Five Guys corporate headquarters in exchange for the use of the company’s brand and ongoing support. The royalty fee is usually 6% of gross sales and is paid on a weekly basis. It’s 8% in Hawaii, Puerto Rico, and Alaska.
• Marketing: In addition to the royalty fee, franchisees are required to pay a marketing fee of 2% of gross sales. This fee is used to support national and local marketing campaigns to promote the Five Guys brand and drive customer traffic to your location. The marketing fee is also used to fund the development of new marketing materials, such as menus, signage, and promotional materials.
• Development fee: Finally, Five Guys requires a one-time development fee of $10,000 per location. This development fee is paid to the company when the franchisee signs the development agreement, which gives them the right to open a certain number of locations in a specific area. While the fee may seem like a significant upfront cost, it provides franchisees with the exclusive right to develop and operate multiple locations in a specific area, giving them the potential to generate more revenue and expand their business.

It will cost a lot to open a Five Guys franchise, but the company provides significant support and growth potential to franchisees. Small business financing is available if you’re eager to realize a Five Guys franchising dream.

Pros and cons of Five Guys franchising

The pros and cons of franchise ownership may be slightly different between franchise businesses. Regardless, there are several key benefits and drawbacks that you should know before pursuing the franchise industry.

Pros

• National brand recognition: Five Guys has a strong brand that is recognized and respected by customers and industry professionals alike. The company has won numerous awards for its food and its customer service and has been recognized as one of the fastest-growing restaurant chains in the world. As a franchise owner, you will benefit from the strong brand recognition and customer loyalty that Five Guys has built over the years.
• Established business model: The company has a unique business model that sets it apart from other fast-food restaurants, which can offer several advantages to franchise owners.
• High-quality ingredients: One of the key factors that sets Five Guys apart from other fast-food chains is the quality of its ingredients. The company uses only fresh, high-quality beef for its burgers and hand-cuts its fries daily. This commitment to quality sets Five Guys apart from other fast-food chains and can help franchise owners to attract customers who are looking for a higher-quality dining experience.
• Low overhead costs: Unlike many other fast-food chains, Five Guys does not require franchisees to purchase expensive equipment or to maintain a large inventory of food items. This can help franchise owners to keep their operating costs low, which can improve profitability.
• Multiple revenue streams: In addition to the traditional in-store dining experience, Five Guys also offers catering and delivery services, which can provide additional revenue streams for franchise owners. The company has partnerships with popular third-party delivery services like Uber Eats and Grubhub, which can help franchisees to expand their customer base and generate more revenue.
• Strong training program and support: Five Guys provides comprehensive training and support to franchisees, which can help new owners to launch their businesses successfully and to manage their operations effectively. The company provides training in areas such as operations, marketing, and customer service, and provides ongoing support to franchisees as they grow their businesses.

Cons

While owning a Five Guys franchise can offer several advantages, there are also some disadvantages to consider before making the investment.

• Low Average Unit Volume (AUV): If you’re wondering how much does a Five Guys franchise makes, it’s hard to say. It comes down to a range of factors, including your startup and operational costs, as it does with other burger franchises. According to a 2020 report by QSR Magazine (the most recent data available), the average Five Guys restaurant in the United States generates about $1.2 million in annual sales. This ranks only ahead of Sonic Drive-In on the list of 29 comparable major fast-food chains that QSR analyzed; lower than competitors like McDonald’s, Wendy’s, and Chick-fil-A.
• High startup costs: As we’ve mentioned, the cost to open a Five Guys franchise can be as high as $716,250, and franchisees must have a net worth of at least $500,000. This hefty initial investment may be a significant barrier to entry for entrepreneurs who are just starting out or who have limited resources.
• Limited flexibility: While Five Guys is known for its high-quality hamburgers and French fries, the menu is relatively limited compared to other fast-food chains. Moreover, Five Guys has a strict set of operating procedures and guidelines that franchisees must follow. These restrictions can limit the flexibility and autonomy of franchise owners, who may not have the ability to make significant changes to their menu, store layout, or operations.
• Competition: The fast-food industry is highly competitive. Franchise owners will need to compete with other fast-food chains and burger joints in their local market such as McDonald’s, Shake Shack, or Burger King which can be challenging and require a significant investment in marketing and advertising.

How to open a Five Guys franchise

Before thinking about franchising a Five Guys, there are certain requirements that a potential franchisee must meet. Prospective franchisees must have a minimum net worth of $500,000 and liquid assets of at least $250,000. Additionally, Five Guys looks for franchisees with experience in restaurant management or other related industries.

Provided you meet these requirements, the step-by-step process to open a Five Guys franchise looks like this:

1. Review the company’s franchise disclosure document (FDD): The FDD provides information about the costs associated with starting a franchise, the training and support provided by the company, and the financial performance of existing franchise locations.
2. Research: Explore the competition and evaluate the demand for a Five Guys in your preferred location.
3. Apply: Fill out a franchisee application and provide financial information to determine your eligibility.
4. Meet the leadership: If your application is approved, you will be invited to attend a Discovery Day at Five Guys headquarters. There, you can meet with the company’s leadership team, learn more about the company culture, and discuss the details of the franchise agreement.
5. Sign a franchise agreement: If you decide to move forward with opening a Five Guys franchise, you will be required to sign a franchise agreement. This agreement outlines the terms and conditions of the franchise, including the initial franchise fee, ongoing royalty and marketing fees, and other operational requirements.
6. Complete training: Before opening your Five Guys franchise location, you will be required to complete a comprehensive initial training program that covers all aspects of running a Five Guys restaurant. This includes product preparation, customer service, financial management, and other operational aspects.
7. Start building: Once you have completed training, you will need to select a location for your Five Guys franchise and begin the construction process. Five Guys provides support and guidance in site selection, lease negotiations, and restaurant design.
8. Open: After the construction of your franchise location is complete, it’s time to introduce your restaurant to the community. Five Guys will provide ongoing support and resources to help you operate and grow your franchise location.

The initial term of the franchise agreement for a Five Guys franchisee is typically ten years. However, the length of the term may vary depending on the specific franchise agreement.

Final thoughts

Becoming a franchisee can be a very lucrative venture. If you want to open a Five Guys franchise, it will require a significant investment and careful consideration and planning. You may need to secure financing to help meet the initial investment and the ongoing operating costs.

Being a Five Guys franchise owner carries a lot of responsibility. It’s not all serving up made-to-order hamburgers and milkshakes!

Remember to carefully review the franchise disclosure documents, conduct research, and seek professional advice to ensure you fully understand the costs and requirements associated with opening a Five Guys franchise. Ultimately, the cost can be a worthwhile investment for individuals who are passionate about the brand and willing to put in the effort to operate a successful franchise.

FAQs about how to open a Five Guys franchise

How much does it cost to open a Five Guys franchise?

The initial opening costs for a Five Guys depend on a number of factors, but the total investment may range from $306,200 to $716,250 or more.

When was Five Guys founded?

The first Five Guys opened in 1986 in Arlington, VA. Today, it has more than 1,500 stores in the US, Canada, Europe and Asia.

What are the franchisee requirements for a Five Guys?

Five Guys requires potential franchisees to have a minimum net worth of $500,000 and liquid assets of at least $250,000. The initial franchise fee is $25,000.

How to open a 5 guys franchise?

The process to open a Five Guys franchise includes applying to be a franchisee, meeting the leadership team, signing a franchise agreement, completing an initial training program, building a restaurant, and opening to the public.

Frequent searches leading to this page