Big Burgers, Big Profits? © GROW Foodservice Profit

The hamburger business in the US has been the subject of a significant amount of negative commentary in recent months, in part because of the debate over obesity but also because of lack luster results – even allowing for McDonald’s recent resurgence.

The decrease in volume which many of the fast food players have suffered obscures one of the more interesting trends in the foodservice sector and that is the continuing development of the “gourmet burger” sector.

A number of chains in this market have positioned themselves as providers of exceptional burgers and are growing foodservice profit in a pretty impressive manner.

One of the leaders in this category is Red Robin Inc. which prides itself on being the “World’s Greatest Gourmet Burger Maker”. The 200 unit chain justifies this lofty positioning on the back of a menu which features 22 different burger options “that dare to be different”. Their menu includes the Banzai Burger with grilled pineapple rings, a Pot Roast Burger, “just like Grandma used to make” as well as what they like to call American classics such as the Red Robin Gourmet Cheeseburger or the Sautéed Mushroom Burger.

Are the burgers any better than what you might expect in any half decent restaurant? Probably not, but because they have positioned the chain as a great burger concept, they are able to charge a premium over regular burger joints and thus grow foodservice  profit. This is reflected in their restaurant profitability which at 19% store margin is one of the highest in the industry. Red Robin has also indicated to Wall Street that it believes it can grow to 1,000 units in the future. There may be some hyperbole involved in the statement but as a publicly quoted company, all of its financial statements and projections must have a sound basis.

Another chain that makes a major play on hamburgers is Fuddruckers which in another modest statement lays claim to being the home of “The World’s Greatest Hamburgers”.

Fuddruckers menu is not dissimilar to that of Red Robin. Patrons can choose from burgers ranging in size from 1/3lb up to 1lb. Their specialty burgers include: The Works Burger featuring bacon, mushrooms and American cheese: Triple Cheeseburger which features three different types of cheese. Wow! Isn’t that inventive.

The interesting point with this chain as with Red Robin is that their positioning again offers them the opportunity to differentiate the restaurant from an ordinary burger joint and consequently charge a premium for a ground beef patty. Thus ensuring they grow foodservice profit.

While the chain does not put too much emphasis on the name, there is no doubt some new patrons visit because of the quirky name. Some Fuddruckers units are also taking advantage of one of the newer dynamics in the US Foodservice industry – take-out. The drive thru menu has long been a staple with fast food chains but as I referenced in a previous article, this segment is now becoming a major volume driver for the casual dining sector. One Fuddruckers in Detroit Michigan generates 30-35% of its business via take-out. The unit has set up a separate take-out room with its own entrance which restaurant manager Saber Ammori says makes things “faster and simpler for the lunch crowd”. QSR magazine voted Fuddruckers hamburgers as being the best in such diverse cities as Baltimore, Houston, Miami and Richmond Virginia.

A fast food chain which is going in a direction similar to Red Robin and Fuddruckers is the Hardee’s restaurant group. This chain has gone through some pretty traumatic times in recent year with very poor same store sales results. But in a major menu makeover, the chain has now introduced the Hardee’s Thickburger.  It is converting more than 2,000 restaurants to an entirely new menu focused on 1/3^rd, ½ pound and 2/3^rd pound beef burgers. CEO Andrew Puzder says “we are distinguishing ourselves from the competition as the premium burger specialist among quick-serve restaurants”. Indeed to make this menu change happen, Hardee’s are donating one million burger patties to charity. The donation is a result of Hardee’s phasing out its previous thin burger. The decision to move the complete menu to the Thickburger concept is one of the most daring menu changes by any foodservice group here. To date, the results of a program launched in January 2003 are mixed, partly due to the deletion of up to 40 menu items to make the Thickburger concept work. It will take time for Hardee’s to convert their current customer base and also encourage new customers try the product. Hardee’s concept is different to Red Robin and Fuddruckers, but it mirrors the fact that some consumers do want better quality burgers. It will be interesting to see if the fast food industry is ready for these quality burgers and whether it will help grow foodservice profit.

 You can check this chain out at www.redrobin.com,

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 Conor Cunneen is President GROW Foodservice Profit. He is an acclaimed and award winning motivation speaker, strategy speaker, leadership speaker and marketing speaker. He is the 2003 Chicago Toastmasters Humorous Speaker of the Year.

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