Risk Score
Pending analysis
Investment Range
$256,200 - $591,250
Franchise Fee
$25,000
Min Cash Required
$3,000
Total US Locations
1,453
Business Summary
FIVE GUYS operates fast casual dining restaurants that specialize in selling fresh-made burgers and fries, along with other specified food items. The business follows a comprehensive and unique system for operations, including distinctive design, recipes, quality standards, and marketing programs.
Corporate History
The FIVE GUYS brand traces its origins to February 1986, when the first FIVE GUYS restaurant was opened in Northern Virginia by Five Guys, Inc. (FGI), a Virginia corporation formed in 1997. FGE, Five Guys Enterprises, LLC, a direct subsidiary of the current ultimate parent company, began offering FIVE GUYS restaurant franchises in December 2002. In June 2017, the corporate structure underwent a Securitization Transaction, restructuring the Parent Company and its affiliates. As part of this, Five Guys Franchisor, LLC was formed in April 2017 and became the current franchisor, acquiring all existing U.S. franchise agreements and trademarks. FGE now acts as the franchise sales agent and provides support services under a management agreement with the current franchisor. Five Guys Funding, LLC, and Five Guys Properties, LLC, along with Five Guys Bakery, LLC, were also formed as part of this securitization, managing funding, company-owned restaurants, and proprietary bread production respectively. Five Guys Holdings, Inc., formed in 2007, is the ultimate parent company.
Financial Overview
Investment Range
$256,200 - $591,250
Franchise Fee (Low)
$25,000
Franchise Fee (High)
$25,000
Minimum Cash Required
$3,000
Royalty %
6%
Marketing %
2%
Equipment Costs (Low)
$155,000
Equipment Costs (High)
$405,000
Working Capital
$22,500
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements for FIVE GUYS Holdings, Inc. show a significant negative stockholders' deficit, reaching over $880 million in 2023, and the company has incurred net losses for the past three fiscal years. A special risk disclosure highlights that FIVE GUYS' financial condition raises questions about its ability to provide services and support to franchisees. The company uses securitization financing to fund its operations and expansion, including recent refinancing activities in November 2023.
Financing Details
FIVE GUYS does not offer any direct or indirect financing arrangements to its franchisees, nor does it guarantee their notes, leases, or other obligations.
Performance Metrics
Total US Locations
1,453
Franchised Units
856
Corporate Units
597
Avg Square Footage
2,500
Franchising Since
2002
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
4
Litigation Summary
FIVE GUYS has faced several legal matters. In 2005, the Maryland Attorney General issued a Consent Order against FGE (a predecessor entity) for selling a franchise before its registration was effective; FGE complied, and the franchisee declined a rescission offer. In 2010, FIVE GUYS filed a federal complaint against a former franchisee, Michael Kim, for closing a FIVE GUYS restaurant and opening a competing one using their proprietary methods; this was resolved when Kim permanently left the system and FIVE GUYS acquired his stores for $3.8 million. In 2013, the Karl Family Trust filed a complaint against FGE and others regarding Canadian development rights, alleging false information, breach of franchise agreements, and negligent misrepresentation; FGE's motion to compel arbitration in Virginia was granted, and no arbitration claims have been filed by the plaintiffs to date. Most recently, a lawsuit filed on February 14, 2024, in Ohio (Ginroc Inc. v. Franchise Fastlane et al.) is pending, naming Sam Chamberlain, FIVE GUYS' Chief Operating Officer, as one of nine defendants in a dispute unrelated to FIVE GUYS, concerning another franchise system ("No-H2O") and alleging conversion, fraud, and breach of contract, among other claims.
Bankruptcy History
FIVE GUYS has no bankruptcy history to report for the franchisor, its affiliates, or key personnel.
Agreement Terms
Initial Term
10 years
Renewal Term
10 years
Renewal Conditions
To renew their franchise agreement, FIVE GUYS franchisees must provide written notice at least 7 months in advance but no more than 12 months before the term ends. They must repair and update the restaurant premises and equipment to current standards at their own cost, ensure they are not in breach of any agreements with FIVE GUYS, have the right to continue possessing the restaurant premises, and sign the then-current franchise agreement and a general release of claims. Franchisees also need to meet FIVE GUYS' current qualification and training requirements. While the new contract may have different terms, the fees, protected territory, and renewal rights will remain materially similar to the original agreement.
Training & Support Program
Franchisor Assistance
FIVE GUYS provides a range of support and assistance to its franchisees. Before opening, this includes written site selection guidelines, on-site evaluations for proposed locations (the first one being free), a preliminary design package for the restaurant, and access to confidential operations manuals and training videos. FIVE GUYS also provides a list of approved suppliers and conducts an initial training program for the Operating Principal, General Manager, and one assistant manager at no additional charge. For the first restaurant, FIVE GUYS also offers 5 days of on-site pre-opening and 5 days of post-opening management assistance. After opening, ongoing assistance includes periodic visits and evaluations to maintain quality standards, advice and written materials on managing the restaurant (including updates to the manuals), and making System-identified merchandise available for resale. FIVE GUYS also conducts mandatory training programs and seminars, and offers on-site remedial training upon request (which may incur a fee if requested by the franchisee). They also administer the Creative Fund and advertising cooperatives, and provide indemnification for the use of the Marks.
Initial Training Hours
240
Training Location
Corporate headquarters in Alexandria, Virginia
Ongoing Support
After opening, FIVE GUYS franchisees receive ongoing support through regular visits and evaluations of their restaurants to ensure quality, appearance, and service standards are maintained. They also get advice and written materials, including updates to the operations manuals, on management techniques, new equipment, and product developments. FIVE GUYS offers certain branded merchandise for resale and provides 5 days of on-site post-opening management assistance for the first restaurant, with additional assistance at its discretion. Franchisees and their key personnel, including the Operating Principal and General Manager, are required to attend additional training programs and seminars offered by FIVE GUYS. On-site remedial training is also available upon reasonable request from the franchisee or as deemed appropriate by FIVE GUYS (a fee may apply if requested by the franchisee). Additionally, FIVE GUYS administers a Creative Fund and advertising cooperatives to support national and regional marketing efforts, which company-owned units also contribute to.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Full-Time
Territory Type
Exclusive
Territory Size Requirements
The Primary Area of Responsibility for a FIVE GUYS restaurant is typically defined as the contiguous property controlled by the landlord where the restaurant is located, such as a shopping mall, strip mall, university campus, or hospital. In some cases, this area might be limited to just the specific physical space the restaurant occupies. For development agreements, the territory size can vary, potentially encompassing an Area of Dominant Influence (ADI), a single or multi-county area, a single state, or another designated geographic region.