(Funny thing from my perspective is the longtime city manager of Poway began lobbying for an In-N-Out in 1981. It's finally opening next month. Close on its heels will be a Five Guys. Topping it off, Norman is now on a healthy-eating diet so we won't be hanging out at either one.!)
http://www.latimes.com/business/la-fi-f ... full.story
Will Five Guys overtake In-N-Out?
East Coast burger chain Five Guys is moving aggressively into Southern California. Some say that despite intense customer loyalty, In-N-Out should worry.
By Sharon Bernstein, Los Angeles Times
April 8, 2011
Jessica Gueghlein never used to give it a second thought when she wanted a good hamburger — she headed to In-N-Out, that drive-through icon of Southern California car culture.
But her affections have strayed. Lately she's been hitting an East Coast upstart aggressively expanding in California — Five Guys Burgers and Fries.
"We chose this over In-N-Out," said Gueghlein, chowing down with family members at the Five Guys in Valencia that opened in January. She liked the fresh, flavorful burgers and hand-cut fries at Five Guys — as well as the novelty of trying something new. "It's the fourth time we've been here since they opened."
Five Guys executives insist they're not out to complete with In-N-Out, which started in Baldwin Park in 1948.
"We're not hurting them," said Five Guys spokeswoman Molly Catalano, "but we're glad that people are open to having another option."
But the two chains are clearly going after some of the same customers.
"They will definitely be a competitor to In-N-Out," said Steve West, restaurant industry analyst for Stifel, Nicolaus & Co. in St. Louis. "The prices are comparable and the product is comparable."
Like In-N-Out, Five Guys' menu is focused on single and double hamburgers and cheeseburgers, along with hand-cut fries. And like In-N-Out, Five Guys restaurants are red and white, with perky employees in red-and-white uniforms.
And Five Guys is coming on strong.
The privately held chain, which has 770 locations in the U.S. and Canada, began moving into California two years ago with a handful of shops in Orange County and the Inland Empire.
Now there are 27 locations in the state, but Five Guys has sold the rights to open 200 more in Southern California alone — nearly double the number operated here by In-N-Out. Next up is a Culver City location, set to open in mid-April.
But to really make inroads here, Five Guys will have to get past a major hurdle: the intense loyalty of In-N-Out customers.
"They're going to probably take market share from In-N-Out," West said. "Will they supplant In-N-Out? I don't think so.… In-N-Out is so cultish in Southern California, it's going to be hard to break that habit."
Rafael Bernardino, 50, an attorney who was lunching at a San Fernando Valley In-N-Out on a recent afternoon, has been eating In-N-Out burgers nearly all his life.
"We're very loyal to In-N-Out," said Bernardino, who had ordered a Double-Double, fries and a Coke. "My mom loves it. My dad loves it."
Five Guys, based in Lorton, Va., outside Washington, was founded in 1986 in nearby Arlington by five brothers in the Murrell family. They opened five of the restaurants and then started franchising, according to company spokeswoman Molly Catalano. Last year the privately held chain had sales of $721 million, she said.
In-N-Out, now based in Irvine, was founded in 1948 by Harry and Esther Snyder and has about 250 locations. The privately held chain does not give out sales figures, but trade publication Restaurants and Institutions estimated that in 2008 it took in about $466 million.
In-N-Out Executive Vice President Carl Van Fleet said the company was not planning to make changes to meet the Five Guys expansion.
"We've been focusing on the same thing for 62 years," Van Fleet said. "Freshness, quality and cleanliness in our restaurants. We're just going to continue doing what we do."
There are key differences between the two chains. In-N-Out's menu items are generally less expensive — the chain is most popular with young men ages 18 to 24 with an income of less than $70,000 a year, according to NPD. By contrast, Five Guys patrons are generally 25 to 50 years old, with an income of more than $100,000.
In-N-Out locations are famous for their busy drive-through lines, with uniformed attendants sometimes going from car to car to take orders. Five Guys restaurants do not have drive-throughs, and most of the locations are in shopping malls.
In Southern California, Five Guys could settle into a niche between In-N-Out and more expensive, smaller burger chains such as the Counter, Umami Burger and Habit Burger Grill, said Bonnie Riggs, restaurant industry analyst for NPD Group.
"In-N-Out is a step above other fast-food hamburger places," Riggs said. "Now with Five Guys entering the market, that becomes a competitive step over In-N-Out."
Both chains are growing, but In-N-Out is expanding much more conservatively. With 200 locations in California and about 50 more in other Western states, In-N-Out plans to open eight new restaurants in the Dallas-Fort Worth area by the end of this year.
By pricing its product higher and offering bigger burgers and a larger dining room than chains like In-N-Out, Five Guys is trying to capitalize on an important recent trend in the restaurant business — the growth of mid-level eateries that are more expensive than fast food but cheaper than fancy restaurants.
These so-called fast casual chains — whose ranks include Chipotle and Panera Bread — grew even as other restaurants suffered during the economic downturn. Experts in the field ascribe this to customers seeking high-quality food at moderate prices.
With touches such as a bulletin board posted with the names of farms that provided the day's potatoes, and options like spicy Cajun fries, hot dogs and small grilled cheese sandwiches meant for children, Five Guys is hoping to capitalize on that trend, spokeswoman Catalano said.
Atlanta businessman Kevin Nelson is making a huge bet on Five Guys. His company, Monument Restaurant Group, has bought the rights to open 300 of the restaurants across the country, 140 of them in the Los Angeles area.
"We really believe in the concept," said Nelson, who owns the already opened Valencia store along with locations in Thousand Oaks and Huntington Beach. He said he's not concerned about over-saturating the market by opening so many, because the rollout will be gradual.
"We are looking to have approximately 10 more open this year in California, and about 12 to 13 next year as well," he said. A store in the Westfield Culver City (formerly Fox Hills) mall is set to open this month, he said.
At dinner on a recent weeknight in Valencia, Dave and Terry Kasparian sampled their first Five Guys burgers. Terry had a single hamburger with mushrooms, lettuce and other fixings, while Dave tried the double. They shared the chain's signature (huge) order of fries, served boardwalk-style in a big paper cup.
"In-N-Out's got competition now," Dave Kasparian said. "The only thing missing is the drive-through."