The rise and fall

Currently Playing: Why nobody goes to Five Guys anymore

This video is made in partnership with my company, Near — hire great talent in Latin America for 60–70% less than US salaries: https://links.girdley.com/near-jun8 Five Guys hit $1.3 billion in revenue, earned Zagat's number one burger ranking, and became a national story when President Obama ordered lunch there in 2009. Today sales are down more than 10% from their peak, stores are closing, and a $23 receipt went viral as a symbol of everything wrong with fast casual pricing. This is the full story of how Five Guys rose from a 460-square-foot Virginia strip mall to the top of the American burger market — and what trapped them there. Get the 2-minute cheat sheet for this video → https://girdley.com/youtube 👇 SUBSCRIBE for more business breakdowns https://www.youtube.com/@Michael-Girdley?sub_confirmation=1 ------------------------------------------------------------------ ► Get my weekly letter to business owners: essential insights to run, grow, and stay ahead in your business → https://links.girdley.com/newsletter-yt ► For sponsorships or inquiries please reach out to: Contact@girdley.com ► Do you have a hat I should wear in a video? Send it to us: Contact@girdley.com ► Free events on all things small business: https://links.girdley.com/lectures-yt ► Deep dives on businesses for sale: https://www.youtube.com/@AcquisitionsAnonymousPodcast ► Follow me on Twitter/X: https://x.com/girdley ------------------------------------------------------------------ Five Guys was founded in 1986 by Jerry Murrell, a financial planner who built the entire brand around one idea: make the absolute best burger possible and let word of mouth do the rest. The strategy worked. Fresh never-frozen beef, peanut oil, hand-cut fries, and deliberately overfilled bags created a cult following inside the Virginia Beltway. For 15 years they ran five stores, refused to franchise, and built one of the most loyal fast-casual fanbases in the country. The turning point came in 2003 when Murrell finally agreed to franchise. From five stores they grew to 300 in just a few years and over 1,500 by 2015, expanding into the UK and eventually 25 countries. But franchising introduced a structural tension the brand was not built to handle: the Murrell family wanted to protect quality while the multi-unit operators who bought franchise territories were optimized to maximize profit. Show me the incentives, and you already know the outcome. The quality trap is the concept that explains what happened next. Five Guys built their entire identity around premium ingredients — fresh beef, peanut oil, hand-formed patties. When costs exploded after COVID, with beef up 30 to 50 percent and rent in their high-income urban locations going ballistic, there was no formula to change, no portion to quietly shrink. The only lever was price. A combo meal that cost around $14 in 2010 climbed to $22 to $24 by 2024. That is nearly a 50 percent increase on an already-premium price point. The generational shift made it worse. Five Guys grew up on millennial tastes — the cohort that was 25 to 35 during the Obama boom was now in their mid-40s with kids, mortgages, and tighter budgets. Gen Z, the generation behind them, grew up feeling priced out of everything and invented the concept of shaming companies publicly. When a $23 receipt went viral in 2023, Five Guys became the internet's shorthand for out-of-touch pricing — a fate that word-of-mouth branding, the same force that built them, was now accelerating on TikTok and Instagram. What happened to Five Guys is a case study in the danger of competing in the middle. Shake Shack responded to the same pressures by going further upmarket — premium locations, premium experience, premium price point for customers who can afford it. In-N-Out stayed affordable by staying family-owned and resisting the franchise pressure to extract margin. Five Guys ended up squeezed between both. They could not beat In-N-Out on price and could not beat Shake Shack on experience. The quality trap had closed. The business lesson is not that Jerry Murrell did something wrong — building a great product and selling it at a fair price is genuinely honorable. The lesson is that a strategy built entirely around quality, with no flexibility in costs or format, leaves a company with nowhere to go when the economics of the world change around it.