By Lisa Fickenscher New York Post Business Section August 12, 2016
A new chapter in the burger wars is starting to sizzle — but don’t expect dollar meals at any of these joints.
The latest burger battle is being waged in the $3 billion better burger segment — where Five Guys, Shake Shack, Smashburger and at least 30 others serve up $8-plus burgers made with fresh beef and no preservatives.
The sector was red-hot a decade ago — and attracted lots of new entrants, many with a plan to blanket the country with stores.
But business began to fall several years ago — and with many chains still pursuing aggressive expansion plans, some are predicting a shakeout is coming.
For starters, Americans are eating less beef than they used to — about 1.2 fewer pounds per person per year since 2012, according government data.
Tastes are shifting to chicken, USDA data show.
The shift — and the crowded nature of the sector — was in full view on Wednesday when Wall Street darling Shake Shack reported same-store sales gains slowed more than analysts had forecast.
The Danny Meyer chain saw sales gains at its existing stores slow to 4.5 percent — compared with 12.9 percent a year ago and 9.9 percent just a quarter ago.
“It seems like the mid-scale burger market, for a $10 or $12 burger, is only so big and there have been too many stores that have popped up, outstripping demand,” said John Gordon, principal of Pacific Management Consulting Group.
Privately held Five Guys, with some 1,000 stores, is the largest player in the better burger field — and it’s hit some speed bumps, say industry experts who point to struggling franchisees the company bought to avoid closing the stores.
“Five Guys has dramatically slowed down,” said Bob Goldin, vice chairman of Technomic, which tracks the restaurant industry.
Five Guys did not return a call for comment.
Smashburger, with 372 stores, is the second-largest in the sector. It has also bought back some of its restaurants from franchisees, in Las Vegas, San Diego, New Jersey, Dallas and Phoenix.
The buybacks are not a sign of weakness for the 9-year-old privately held company, said co-founder Tom Ryan.
Smashburger, which serves Angus beef, salads and sides like veggie frites and about eight different chicken sandwiches, is opening 50 to 60 restaurants a year and has signed the franchise rights for 200 stores in 2016, Ryan said.
Enter North Palm Beach, Fla.-based BurgerFi, the fastest-growing of the better burger joints, with 89 eateries and another 11 set to open this year.
There are 175 in the pipeline, according to Chief Executive Corey Winograd.
With so-called $10 CEO Burgers, $7 VegeFi burgers and sales of $1.4 million per store on average, BurgerFi hopes to muscle its way through the crowded sector.
It hopes to go public, but is keeping all option open — including remaining private.
But unlike Shake Shack, which is targeting premium sites in major cities, BurgerFi has its sweet spot in bedroom communities like Silver Spring, Md., Winograd said.
BurgerFi is also making a big bet on a non-beef item.
It wants to take its veggie burger, made from quinoa and lentils, into retail stores.
“We think our VegeFi is a game changer,” Winograd said.