Five Guys Franchise Costs $256K – $591K (+ 2024 Profits)

Five Guys is a notable franchise in the fast-food industry, celebrated for its unique approach to serving high-quality burgers and fries. Founded in 1986 by Jerry Murrell and his family, the business began as a modest carry-out burger joint in Arlington, Virginia. 

The franchise took a significant turn in 2002, when Five Guys began offering franchise opportunities, rapidly expanding its footprint. Headquartered in Alexandria, Virginia, after relocating from Lorton, Virginia, Five Guys maintains a distinctive corporate culture that reflects its brand identity. 

The menu, focused on hamburgers offered with a variety of toppings, kosher-style hot dogs, sandwiches, and milkshakes, allows for customization, further enhancing its appeal. Unique to their brand, Five Guys uses no freezers in their locations, only coolers, ensuring all products are fresh.

Type of Expenditure	Amount
Initial Franchise Fee	$25,000
Leasehold Improvements	$100,000 – $300,000
Lease Payments and other rental expenses	$7,500 – $20,000
Equipment	$55,000 – $105,000
Signage	$6,500 – $20,000
Initial Inventory	$10,000 – $15,000
Architectural/ Engineering	$7,000 – $25,000
Electronic Cash Register System with Modem	$15,000 – $25,000
Facsimile Machine	$350 – $500
Travel, lodging and meals for initial training	$100 – $5,000
Business Supplies	$4,000 – $8,500
Business licenses, permits, utility deposits, etc.	$5,000 – $15,000
Delivery and catering expenses	$0 – $1,000
Insurance deposits and premiums	$750 – $1,250
Additional Funds for first 3 months	$20,000 – $25,000
Total	$256,200 – $591,250

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Initial Franchise Fee

The initial franchise fee is $25,000, paid in a lump sum upon signing the Franchise Agreement. This fee is fully earned and non-refundable.

Royalty Fee

The royalty fee is 6% of Gross Sales. In locations like Alaska, Hawaii, or Puerto Rico, the royalty fee increases to 8% of Gross Sales. This fee is due weekly.

Creative Fund Contribution

Franchisees must contribute up to 2% of Gross Sales to the Creative Fund, with the current rate being 2%. This fee is due weekly.

Local Advertising Requirement

Franchisees are required to spend not less than 2% of Gross Sales on local advertising annually.

Cooperative Advertising Contribution

If applicable, franchisees may need to contribute up to 1.5% of Gross Sales to a Cooperative Advertising Fund, which counts towards the local advertising requirement.

Franchise Pros and Cons

There are some benefits and challenges associated with a Five Guys franchise.

Pros

• Comprehensive training and support: Five Guys provides a comprehensive training package to its franchisees. This is in the form of on-site pre-opening and opening training, supervision, and management assistance. In addition, the franchisor gives detailed on-site remedial training to restaurant personnel to help franchisees grow and succeed.
• Absentee ownership is permitted: If you’re looking for a passive investment, the Five Guys franchise is a good option. It is a semi-absentee franchise and allows for passive ownership. As the owner, you can operate the franchise as you pursue your job and other interests.
• Territory protection: The Five Guys franchise may offer new franchisees territory protection. It grants franchisees the right to operate a restaurant at a single location selected by the franchisees and approved by the franchisor as their primary area of responsibility.
• Quality menu: The Five Guys franchise strives to offer quality food in all its restaurants. They only use ground beef for their made-to-order burgers. In addition, they don’t freeze their ingredients and only use peanut oil for their cooking, so their foods are trans-fat-free. Customers are assured of product excellence and quality.
• Fastest-growing brand: Though still new in the quick-serve industry, Five Guys has experienced very steady growth, becoming one of the hottest franchises in the US. As a new franchisee, you’ll get a brand that is well-recognized in the QSR sector and compete against well-known giants such as Burger King, Taco Bell, and Subway.

Cons

• Strict franchising requirements: One of the drawbacks of the Five Guys franchise is its restrictions and obligations. For instance, they require franchisees to look for a building with outdoor patio seating. This can be a limiting factor in location choice and is also costly.
• No franchise financing: The franchisor does not offer direct or indirect financing for new franchisees. This leaves would-be franchises with no option other than third-party financing, like applying for SBA loans.
• Competition: Although the Five Guys franchise has grown very fast and has great growth potential, it faces a lot of competition from industry giants like Burger King, Wendy’s, Taco Bell, and Subway. This means new franchisees may record low sales and profitability, resulting in costly product promotions.

How to apply

Opening a Five Guys franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a Five Guys franchise.

1. Research and Understand the Brand

• Familiarize yourself with Five Guys’ history, brand values, and menu offerings.
• Visit several Five Guys locations to experience their customer service and product quality firsthand.
• Read up on the franchise’s growth, including its international expansion and customer base.

2. Assess Your Financial Capability

• Ensure access to a minimum of $5 million in capital, as this is a requirement set by Five Guys for potential franchisees.
• Evaluate your financial resources to ensure you can meet the initial investment and ongoing operational costs.

3. Review Available Markets

• Investigate the markets where Five Guys is looking to expand, keeping in mind that as of now, opportunities within the United States and Canada might be limited.
• Consider your familiarity and accessibility to the international markets that are open for development.

4. Submit an Inquiry and Application

• Fill out the initial inquiry form on the Five Guys franchise website to express your interest.
• Provide detailed information about your financial capacity, business experience, and the specific market you are interested in.

5. Undergo the Selection Process

• Participate in the selection process, which may involve interviews, financial verifications, and a review of your business background.
• Demonstrate your passion for the food industry and serving high-quality products, as well as your ability to secure prime commercial real estate locations.

6. Attend Training and Prepare for Opening

• Complete the training program provided by Five Guys to understand their operational standards, food preparation processes, and customer service expectations.
• Work closely with the Five Guys team to set up your restaurant, including site selection, design, and staffing.

Disclaimer

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