It's a pretty brilliant business model, I think.
First, it takes people a while to figure out they only need one order for 2-3 people, so they still get a ton of those extra orders.
Customers mistakenly paying more than they needed to is not sustainable revenue for a business. It produces higher revenue in the beginning stages of the business location, but eventually that revenue needs to be replaced in later stages or else the business collapses.Take the self serve frozen yogurt stores for example. When they open up, people go in and fill up that HUGE cup with yogurt and toppings and then gasp when they have to pay $8 to $10 bucks for it. When all your customers are new, a lot of them do that, and it produces a TON of revenue for them in the first year. Yet now a good chunk of the stores in the industry are closing or are for sale because customers don't continue doing that. The customers now make $2, $3, and $4 cups instead, and the business as a result only has a fraction of the revenue and can't pay the rent and utilities anymore.
I don't think that is a brilliant business model at all. It's a temporary boost of revenue, and nothing more. I think a lot of Five Guys franchisees are going to be following the self serve frozen yogurt store business owners in the for sale/closings.
I agree to with some of those points.The part you are leaving out with 5G though, is that they are running with a ticket price of nearly $10/person if you come in alone. The best way to bring that down.....bring a bunch of people with you! Even then, they are going to $8 out of you, which is not bad at all for a place only selling burgers, dogs, and fries.
The fry thing either adds value to support a very healthy average customer ticket or just encourages you to not bring others with you. Win-win.
You are leaving out the other way to avoid the high cost... go somewhere else.When people prefer an In-n-out burger 18 to 1 over a five guys burger, there's no need to figure out a way to subsidize the costs of the "free" fries and "free" peanuts they are passing on to you in the price of the burger.
Again, that's a reason the added perceived value of a bag fries helps. People pay a lot and feel like they got their money's worth. That's what every place dreams of.Of course, competition will always be a factor. Every place has to battle against the competitors.
What's working for 5G, right now, is that there really isn't much. You want a burger that's better than McD's or Wendy's and want to spend s little more? The other options aren't overflowing. In many places, that means hunting down the last of a dying breed...good locally owned burger shops. If you don't want to sit down and tip, 5G is going to compare well there too.
I'd probably choose INO every time, but I don't see an INO coming here anytime soon. Likely not ever. And if INO were to come, 5G already has some great brand loyalty built up.
Cookout might be a threat, but there's room for a couple of players in the market.
Plus, Cookout burgers are a step down from 5G. It's more a cheap food with solid milkshakes type of market. Probably stealing more business from chain fast food than 5G.
The yogurt market is completely different. It's not going to have the staying power of the burger market (or the ticket price) and every tom, ****, and harry went running towards it. It had to settle out.
Those people are now trying to catch on the smoothie market, until people start to realize that paying $8 for ####### smoothie is really a dumb idea.