Where’s the beef?

June 11, 2013

So I just saw that several new burger brands have hit the stage of emerging franchise companies, and all of the them are claiming to be different than everyone else already in the marketplace. The list of variations on the classic burger covers every possible variation many times over. Despite this fact, and the reality that already some of the largest, most powerful restaurant companies in the world are burger based brands, there seems to be an endless list of new burger concepts wanting to bet that they have discovered the next great burger franchise. Certainly the American appetite for a great burger has spawned terrific opportunity for new emerging burger brands in the last few years. A close friend of mine has built one of the most successful, fastest growing burger concepts in the country and is continuing to grow rapidly. My guess is that brands like his, and other well established brands that have already staked out a national presence, have superior resources and marketing muscle, as well as deep expertise and buying power will also have the greatest staying power.

At the same time that everyone and his brother seems to be opening a burger based concept, the commodity prices of beef are rising rapidly and steadily with no relief in sight. This scenario  reminds me a lot of the dynamics that existed pre-housing collapse in 2008/2009. Remember when everyone you knew was buying, selling, building and investing in real estate, and making money in every deal with no end in sight. When the music finally stopped there were an awful lot of people left standing. Today, we look back on the bursting of that bubble with 20/20 hindsight and wonder what everyone was thinking. When I Google searched  “the number of emerging burger concepts” I received 89,300,000 results, which should give you some idea of where things are heading. I don’t pretend to know who the big winners and losers will be, and I don’t know what will trigger the big collapse, but I am quite confident it is coming. When it does finally come there will certainly be lots of cheap real estate coming back on the market, defunct businesses listed for a quick/highly discounted sale and people desperately  looking for jobs.

Many of the most successful restaurateurs and entrepreneurs I know follow a basic philosophy in life and business. They never buy at the peak, and they know that “Cash is Always King” at the end of the day. When things start to go south they will quietly pick up real estate, business opportunities and even entire companies from those that are desperate to get exit quickly. Certainly there will be some new winners left in the category, but they will be far fewer than most people imagine . I know I consider myself to be one of the fortunate ones who learned the important lessons years ago. Early on I invested my life savings only to see it dwindle down to less than nothing, never mind amassing huge debts. It took me and my family years to work and invest our way out of that morass. Years later I invested in yet another emerging restaurant company that also managed to lose millions, but this time I had planned and prepared for the worst.  While the loss of our investment was painful, this time it was not life threatening. We had the cash reserves to weather the storm and continue to pursue other opportunities. We had kept our fixed overhead low and we always lived well below our means. This philosophy of saving and investing for the long term, living well below our means and keeping large cash reserves is deeply ingrained in our lives.

My suggestion to anyone looking to get into business today, or expand their current portfolio of business investments, is to look at least 5 years down the road to project where things will be when the excitement of the day wears of and the dust settles. The hard questions should be asked now with a clear understanding of the  best, middle and worst case scenarios. At Hurricane Grill & Wings our mission statement is simple: “To Build Enduring Value For Our Franchise Partners”. That type of long term approach may have meant that we grew less quickly than we could have in the early years, although it was well in line with our strategic plan. Today, when other brands are coming and going on a daily basis, we are seeing annual enterprise growth remain consistent in the 35% + range, with a full development pipeline and a clear view into our 5 year strategic development plan. Our existing stores continue to grow their revenues year after year at industry leading levels which we believe to be a leading indicator of future success and sustainability. Our ownership group continues to invest heavily in bringing on the talent, resources and technologies to support our mission and goals . Because of all of these factors, we are able to attract great franchise partners from all around the country that have the resources, expertise and energy to help us build a great national brand.