I was browsing a few blogs and surprised at how many “we just make simple great burgers, fries and shakes” restaurant and franchises were popping up.  Some are going all-organic, most aren’t.  McDonald’s new higher-priced Angus beef burger is considered a response to the better burger trend.

Most everyone likes a good burger and are willing to pay up to $5 regularly for good one.  I think the new wave of better burger joints will have some staying power compared to other pure trends like tart frozen yogurt, salad or pita/wrap specialty franchises.

From what I’ve seen already from clients, these aren’t wildly profitable until you reach $1 million or more in sales per location assuming your rent is under 7% of gross sales, and that’s very difficult to do.Let’s look at one city.  

Opening in Austin in the past year were:

• Mooyah Burger & Fries
  • 
• Five Guys
  • 
• Elevation Burger
  • 
• Flip Burger
  • 
• TerraBurger
  • 
• Mighty Fine
  • 

Philadelphia Weekly put together this chart to compare the food, atmosphere, and wait times of various burger places.

This article details the legal disputes and subsequent law suit between franchisor Quaker Steak & Lube and a franchisee in Pennsylvania.  The franchisee claimed:

• [franchisor] lied to him about the restaurant’s prospects for profitability;
• approved too large a restaurant for the State College market;
• forced him to use a select list of food vendors and menu choices that hurt his chances for profitability; and
• did not provide adequate training, startup marketing or operational support.

The franchisee claims a projected $100,000 weekly gross sales ($5.2 million annually) was given to him by the franchisor, when actual revenues were $80,000 a week in 2006, $61,000 a week in 2007 and $45,000 a week in 2008.  The judge agreed with the franchisor that the projections were simply that – projections and not historical fact or earnings claims.All other claims were also denied by the judge.  That’s how these law suits usually end unless there is real “smoking gun” evidence of a breach of the franchise agreement or fraud.

Back in August 2007, I gave a NexCen Brands an “I wouldn’t buy it” rating after they grossly overpaid for the Pretzel Time and Pretzelmaker acquisition by paying 5x revenue.  At the time the stock price was around $7…fast forward 2 years and yesterday it closed at 36 cents and has been as low 5 cents in 2009.Your welcome!