Smashburger boasts the fastest quick-service start in U.S. history

January 30, 2013

06a.smashburger2 280Smashburger will open its 200th restaurant in early February, just six years after it cut the ribbon on its first location — making it the fastest-starting quick-service restaurant chain in American history.

The Denver-based chain is taking advantage of several factors, including a consumer migration away from traditional burger restaurants to “better burger” stores that’s been one of the most significant trends in fast food for 10 years.

But it’s also achieved its record by following the growth model that CEO David Prokupek laid out from the start: Go big quickly to get the jump on other newcomers looking to become a national player.

“Getting to a couple hundred restaurants in about five years was basically the big goal,” Prokupek said recently while munching on lunch in the chain’s newest Denver-area location at 6305 E. Hampden Ave. “It was a very aggressive strategy. But I wanted to get us as national as soon as possible so we would deter others from doing the same.”

Smashburger was the brainchild of former investment manager Prokupek, chief concept officer Tom Ryan, and Rick and Richard Schaden, the father/son team that invented and grew Quiznos before selling the sub chain.

They saw a fast-food burger market dominated by behemoth chains that had started to lose fans, and they decided to capitalize on it. They’re now in 30 states and five countries, including Costa Rica, Kuwait and Saudi Arabia.

The growth strategy has been two-pronged. Smashburger owns its restaurants in Denver and in the country’s 10 largest metro areas — including Miami, Chicago and Los Angeles — but operates in the next 50 largest metro areas through franchisees, a model it went to about three years ago.

That allows the corporate office to handle marketing in areas where it could set up 20 to 40 restaurants, and lets local operators take charge of communities where there may be a maximum of 10 Smashburgers, Prokupek said.

There’s a backlog of about 400 stores that franchisees have agreed to open in the coming years, plus the company plans to open 20 to 30 corporate-owned stores a year, Prokupek said. He expects that Smashburger can grow to several thousand units, he said.

While there are a lot of regional better-burger chains, Smashburger has one primary national competitor — Five Guys, based in Lorton, Va., which began franchising in 2003 and now has more than 1,000 locations open and roughly 1,500 in development.

Darren Tristano, vice president of Technomic Inc., a restaurant industry research and consulting firm in Chicago, said Smashburger has the potential to be competitive with Five Guys in terms of revenue and locations because it has a broader menu and an interior design that’s more likely to attract people to stay for dessert and drinks.

“They were very smart because they got into the right segment at the right time,” Tristano said of Smashburger leaders. “This was made to be a growth chain.”

Smashburger is beginning to redesign all of its corporate-owned stores — changes that franchisees will be encouraged to make around the time their stores hit their fifth birthdays, Prokupek said.

Using consumer feedback, which it seeks, Smashburger has expanded the waiting area for people who come in to order burgers to go — a larger segment of the customer base than was expected, Prokupek said.

It’s also putting up digital menu boards that make the variety of sandwich and salad options easier to read, and story boards explaining its smash-cooking method, which many people ask about.

Smashburger also is testing new menu items that Prokupek said are meant to give more variety, to help attract customers who want something other than a burger. He notes his two daughters both are vegetarians, yet they’ve become regular customers of the black-bean burgers and salads.

The chain continues to attract a lot of attention from potential franchisees, and the company remains very profitable despite the large capital outlay required, Prokupek said. The average store costs less than $500,000 to build and open, but average annual revenue is more than $1 million per location.

It’s understandable that Prokupek doesn’t know which store will become No. 200. The stores are opening so quickly — 60 units in 2012 and another 60 to 70 planned for 2013 — that he couldn’t identify, during a Jan. 11 interview, whether there were 194 or 195 operating Smashburgers. (The chain has closed six stores so far — primarily due to location, he said.)

“The key to retail is staying fresh,” he said. “I think we’re doing to burgers what Starbucks did to coffee. We’ve taken a very familiar product, and we’ve romanced it.”