Who owns Five Guys? The company’s rapid expansion explained

Five Guys doesn’t do advertising like the brands it shares a market space with, nor does it have a mascot. It has a simple menu consisting of fries, burgers, and hotdogs. Yet, it’s the favorite burger outlet for the many Americans visiting its over 1,500 stores. Five Guys’ founder Jerry Murrell talked to Inc.Africa about the company’s advertising strategy:

“We figure our best salesman is our customer. Treat that person right, he’ll walk out the door and sell for you. From the beginning, I wanted people to know that we put all our money into the food.”

Jerry Murrell, the company’s CEO, started Five Guys after two of his oldest sons refused to join college

Jerry Murrell studied economics at the University of Michigan, where he ran a fraternity house’s kitchen. The enterprise posted profits because of the food quality on offer. 

Murrell married his first wife and welcomed three sons: Matt, Jim, and Chad. He then married Janie and welcomed his fourth child, Ben. Unwilling to follow their father’s path into higher education, Matt and Jim refused to go to college. 

Jerry supported them by pooling their college fund and using it to open the first Five Guys. Murrell told Inc.Africa:

“‘You need a name.’ I had four sons – Matt, Jim, Chad are from my first marriage, and Ben from my second to Janie, who has run our books from Day One. So I said, ‘How about Five Guys?’ Then we had Tyler, our youngest son, so I’m out!”

Jerry and Janie let Matt and Jim handle the original store’s day-to-day operations. The first outlet opened in Arlington’s Westmont Shopping Center, with buns sourced from the nearby Brenner’s Bakery. The family moved locations to Alexandria, Virginia, at the intersection of King and North Beauregard Streets. 

“They were going to let us sink or swim, and that forced us to learn a lot right off the bat,” Chad told Family Business. “They’ve never been the do-what-I-say-when-I-say-it types. They’ve given us autonomy and the chance to find our ways.”

Tyler and Ben developed a passion for Five Guys growing up inside the store. “For Ben and Tyler, Five Guys is all they’ve ever known,” Janie says. “This is our mutual passion, and we all share credit with the others.”

Jerry oversaw operations at Five Guys while Janie handled accounts. By 2001, Five Guys had five locations in Alexandria, Old Town Alexandria, and Springfield. 

Franchising sparked Five Guys’ rapid expansion across the United States

The Murrell family wanted to expand Five Guys, but the cost of opening stores was too expensive, and they couldn’t convince financiers to foot the bill. Franchising was the best option, but Jerry resisted. “I was dead set against franchising,” he said. “I didn’t think we could control the quality.”

Jerry read Franchising for Dummies, a book co-written by Dave Thomas, founder of Wendy’s, but he still had reservations about the idea. “Five Guys was something so personal to us, and we were going to let strangers have it,” Jerry said. 

Following intense discussions, Jerry gave in to the proposal. The family met with former Washington Redskin’s (now Commanders) kicker Mark Moseley, who owned a burger store and was interested in franchising. 

Moseley and the Murrells met with Fransmart, a franchise-development company that guided Five Guys through the initial franchising phases. After Five Guys ended its relationship with Fransmart, Mark Moseley became the company’s director of franchise development. Jerry told Family Business:

“Since the boys were operators themselves, they had experience training people and were confident we could train franchisees in our ways and install the necessary accountability. We worked through the challenge as a group, and that [decision to franchise] has led us to where we are today.”

Despite restrictive franchising agreements, franchisees scrambled to carry the Five Guys brand. “I don’t know if I would ever sign it [the franchise agreement],” Jerry said. “We can get out of the deal a million ways, but they are stuck.”

Each Murrell has a role in the company. Jim handles food; Matt runs operations; Chad heads the training department; Ben is the IT guy; Tyler oversees the bakeries; Janie is the secretary, treasurer, and president of Five Guys Inc.; Jerry is the CEO. 

“Really, I’m just the janitor,” Jerry told Family Business. “They let me pretend I’m running things. If the old man had to run this business himself, it’d be in trouble.”

The Murrell family owns a 75% stake in the private company, with no plans to go public

The seven members of the Murrell family own 75% of the company, with the ownership stake spread equally among them, giving each member equal say in the running of Five Guys. 

However, they earn different salaries based on one’s responsibilities. “This type of transparency minimizes dissension,” Chad told Family Business. “Nobody is being forced to work or take on extra burdens. If you want to take on more, you’ll earn more.”

The Murrells form part of the corporate board alongside the company’s largest private investor, initial investors in Five Guys, and company principals. The family discusses issues beforehand to avoid unsavory disagreements during board meetings. 

“Passion can be strong and emotional, so sometimes it’s best to vent to each other before bringing that emotion into the boardroom,” Janie told Family Business. Disputes often arise, but the family’s bond prevents them from boiling over. 

The group’s simple solution to disputes is hugs. “The family comes first here,” Tyler said. The Murrells vacation together twice a year and meet weekly at the company headquarters in Lorton, Virginia. 

Like with the franchising decision, everybody has to agree on company decisions. It takes time but ensures that every aspect of the choice is considered. 

“Though that process can lead to delays, we universally know it’s the right move to keep the family together,” Tyler said. 

When Jerry eventually steps down as CEO, the company may consider going public, investors hope

Jerry downplays his role in Five Guys’ success, but his family appreciates his significance to the company. He serves as the family and business leader and occasionally steps in to resolve disputes. 

“He nips any jealousies in the bud and has very clearly said that no one has to be here, which keeps all of us honest,” Chad said.

Jerry is nearing 75 and hasn’t announced plans to retire. He’ll inevitably step aside, and it’s unclear whether the Murrell family has a succession plan. They’ve hired advisors to help run the business but haven’t sought advice on a potential transition. 

The family conceded that succession might prove challenging, but they are willing to face the obstacle together. “We’re a family, and we have honest conversations,” Janie said. “We’re not thinking this is a situation we won’t be able to resolve.”

Jerry’s grandchildren have joined the business, so there’s added incentive on the original seven to keep Five Guys running profitably. Nevertheless, Jerry’s expected stepping down will affect the company and perhaps, investors hope, signal a transition into public ownership. 

Five Guys is an attractive prospect for investors, with The Motley Fool calling the company ‘the true IPO prize in the fast-casual market.’ Currently, Five Guys’ owners are comfortable running the company privately. They’ve overseen the challenges of rapid expansion through franchising without going public. 

Janie believes that even without Jerry, the Murrells’ ‘long-established prioritization’ of family will keep Five Guys within the group. She told Family Business:

“We’re lucky we have Five Guys, and it’s provided a wonderful life for the Murrells, but keeping that very real sense of family alive has always been our foremost goal.”

Wary of losing its customer base, Five Guys has stuck with its original offerings

Steady leadership and customer satisfaction: the keys to Five Guys’ success. The best way to keep the clientele happy is to provide quality food, which has prompted Five Guys to stick with its original offerings. 

Five Guys has resisted numerous calls to expand their burgers, hot dogs, and fries menu to include milkshakes, chicken, chili, or coffee. The company has experimented, but each addition fails to meet its high standards. Jerry told Inc.Africa:

“When we first started, people asked for coffee. We thought, Why not? This was our first lesson in humility. We served coffee, but the problem was that the young kids working for us don’t know anything about coffee. It was terrible! So we stopped serving coffee. We tried a chicken sandwich once, but that did not work, either.”

Five Guys has stuck to its original offering of hand-cut fries and fresh beef burgers prepared with peanut oil. Company employees are trained on the proper mix of starch, water, and temperature required to produce the perfect french fry. 

The Murrells tasted 16 types of mayonnaise to select the right one for their burgers. A manager suggested using frozen burger products, but a blind test convinced the family that fresh beef tasted better. 

Five Guys uses fresh hamburger buns, which are pricey but are a crucial component of the company’s burger. The restaurants are simple, too, with white tiles checkered with five rows of vertical red tiles representing the five sons. 

Potato sacks dot the dining areas, which feature only a few tables and chairs. Customers waiting for their orders can see the burger-making process via the open chicken and snack on free roast-shell peanuts while listening to rock music from the 60s and 70s. Jerry told Inc.Africa:

“We have never solicited reviews. That’s a policy. Yet we have hundreds of them. If we put one frozen thing in our restaurant, we’d be done. That’s why we won’t do milk shakes. For years, people have been asking for them! But we’d have to do real ice cream and real milk.”

Five Guys UK has increased offerings with greater success than in the US

US companies often use the UK as a springboard to expand overseas, and Five Guys was no different. Five Guys UK opened its first restaurant in July 2013, with the first customer showing up at 4 a.m and a line forming around the block shortly afterward.

Rapid expansion created a £3.9 loss, but operating profit rose to 5.8 million pounds. John Eckbert, CEO of Five Guys UK CEO, told Big Hospitality:

“If you see same store sales failing, maybe you’ve grown too fast. Right now, we’re seeing meaningful like for like sales in our restaurants. Our oldest sites are growing quite robustly. To me that is a real indication of the health of the brand and encouraging that we’re doing the right thing.”

Five Guys UK follows the same principles as the US branch: fresh beef and hand-cut fries. “The idea you can have a burger made exactly the way you want it is very American, but it’s becoming more important in the UK, particularly to millennials,” John Eckbert said.

Eckbert feels that Five Guys being privately owned has fostered its survival and success in the volatile UK market. “If you’re owned by private equity you have a specific window to build, grow and sell, but we’re not constrained by that,” he said. 

Unlike US stores, UK outlets have experimented successfully with expanded menus. The outlet’s partnership with delivery company Deliveroo led to the introduction of a breakfast menu targeting the student population in Bristol. 

The range included coffee, burger buns, orange juice, bacon, cheese, and eggs. Eckbert added:

“It is a narrower offer so I don’t think we’ve completely nailed the breakfast menu that Five Guys could do, but interestingly we end up selling a surprising number of burgers in the morning. We have some great locations where we could definitely pull some breakfast customers into the store.”

Success in the UK sparked Five Guys’ expansion into Europe, the Middle East, Asia, and Australia. 

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