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Forbes.com traces the beginning of Five Guys Burgers and Fries, now one of America’s fastest growing restaurant chain.  Jerry Murrell wanted a restaurant offering quality burgers in 1986 to keep his family nearby.  He, his wife and five sons live within 20 minutes of each other.  The family’s initial investment in Arlington, Va. was $70,000.  All family members worked in the business.  Today, their stake is about $375 million. The Murrells own 75% of the company, each own equal shares.  Miller Investments own 20% and friends own the remaining 5%.  There are over 1,000 stores in the country and Canada, and another 1,500 in the drawing board.  All its franchise rights in North America are sold out.  It is set to open stores in Great Britain next year.

As they expanded Murrell was adamant about one thing: The menu had to stay the same. Just burgers and fries, and good ones. “My fear was that we’d add something new and not be good at it, then some reviewer would write about how bad our coffee was and not how good our burgers and fries are,” says ­Murrell. A hot dog, a veggie sandwich and a grilled cheese sandwich eventually did make it onto the menu.

From the beginning the seven Murrells have made business decisions by a unanimous vote. To this day the entire family meets every Tuesday at 1 p.m. at the Lorton headquarters to talk business.

Their biggest decision came in 2002. By then there were five restaurants, all in northern Virginia. There appeared to be an appetite for more, and franchising seemed like the way to do it. The family all voted in favor of the move.

Within three days of the decision, Murrell says, the franchising rights to Virginia were sold out.

Potential franchisees came knocking. Murrell says he looks for a franchisee to have a net worth of at least $1.5 million and liquidity of $500,000. Franchisees pay an upfront fee of $20,000, then an additional $75,000 per store. The typical franchisee has 10 to 15 restaurants, which cost $350,000 to $500,000 to open and average $1.2 million in annual revenues. Five Guys collects 6% of gross revenues, which it pockets. ­Another 1.5% is collected but given to the employees for what Murrell calls his “audits,” in which stores are monitored by ­independent examiners for quality of service, safety and cleanliness. Crews that score well collect $1,000, awarded weekly.

Though the U.S. and Canada are sold out, Murrell keeps buying back franchises whenever he can so he can run them. Murrell is even expanding overseas. He has an agreement with ­Freston Road Investments, a British firm run by Charles Dunstone, the founder of British mobile phone retailer the Carphone Warehouse, to open 200 to 300 stores in Great Britain starting next year. …

Photo by midmichigandining