Doubters Downed

REVIEW SUMMARY
Business. Five Guys Famous Burgers and Fries, Sarasota and Bradenton
Industry. Restaurants, hospitality
Key. John and Tricia Baylis, Five Guys franchisees, plan to double the number of stores they own in 2010.

John and Tricia Baylis were admittedly unprepared in many ways to run their own burger joint, running straight into a wave of negativity that dogged the couple in the early days.

Call it the doubters parade: A stream of people — colleagues and neighbors, friends and relatives — repeatedly told the couple, face-to-face in many cases, they were doomed to fail. And that was before the Baylises had even flipped their first burger.

That was in December 2007, when the Baylises were mere days into the biggest financial risk they had ever taken. They spent their life savings, about $1 million, to buy franchise development rights and open stores in five Gulf Coast counties for Five Guys Famous Burgers and Fries, a quirky Lorton, Va.-based franchise chain.

In addition to the sheer financial risk, there was also a lifestyle gamble at play. Both John and Tricia Baylis had been accustomed to regular paychecks — John Baylis, for example, held a lucrative sales position with a national software firm for 25 years.

But the Baylises gave up that life for burgers, even though they had never run a restaurant before. And they moved from suburban Washington D.C. to Sarasota, even though they knew no one who lived in Florida.

“When you're just starting out,” Tricia Baylis says of the doubts, “it can be unnerving.”

For instance, there was the Sarasota landlord who wondered aloud if the couple was joking when John Baylis approached him about opening a Five Guys burger outlet near Main Street in downtown Sarasota. There was even the man, a random stranger off the street, who poked his head into an interview session John Baylis was holding with a potential employee in early 2008 to scream this gem: “You are crazy for an opening a restaurant now.”

Yet the Baylises have succeeded so far in their burger venture.

The couple's first Five Guys store did good enough in 2008 and 2009 revenues to be ranked in the top 5% of the entire 450-store chain. That store, in a busy Manatee County shopping center on University Parkway, just west of Interstate 75, did 50% better in its first year than the Baylises had projected. That pushed out some of the doubts and fears.

The couple opened a second store in early 2009 in West Bradenton, a few miles away from the barrier islands and beaches. That store has been slower to develop than the University store, John Baylis says, but it has done well enough to make the top 20% of the chain.

John Baylis says each store had between $1 million and $2 million in revenues last year, although he declined to release specific figures.

The Baylises plan to open at least two new stores in 2010, both in Sarasota County. The couple's franchise development deal with Five Guys provides the rights to open 10 Five Guys stores in Charlotte, Sarasota, Manatee, Hardee and DeSoto counties — recession or no.

“We have flourished,” says Tricia Baylis. “Somehow, we started this at the right time.”

Good pay
That's not to say the doubters that surrounded the Baylises didn't have a point. Indeed, there were a few significant hurdles the couple faced right from the start.

“We didn't know how much we didn't know,” says John Baylis. Some entrepreneurs consider that a blessing, because they might never have taken the leap if they did know.

Baylis didn't know, for instance, that finding a bank would be so complicated. The Baylises worked with commercial lender CIT to open the first store. But CIT, after a year of financial troubles, filed for Chapter 11 bankruptcy late last year.

The Baylises settled on a new lender, BB&T Bank, after several failed courtships with a few other local banks. In addition to financing for new stores, the couple now uses BB&T for several tasks, including payroll and insurance.

Another unforeseen challenge for the Baylises was site selection for stores. To be sure, the commercial real estate slump provided a bevy of opportunities — almost too many.

That's why John Baylis says one mistake he made after he found the site for the first store was that he stopped looking around for more sites. He wrongly thought he had some time to wait it out and let deals come to him. Now he treats commercial real estate like a 12-month gig, constantly talking to landlords and brokers.

But the Baylises, through decades of working for big and small employers, did bring knowledge in other areas to Five Guys. For one, the couple put a premium on paying high, or at least higher, salaries. “We take care of people,” says John Baylis. “We pay people better than other people would for the same job.”

John Baylis reasoned that the loss in payroll is more than made up for in a better and more productive employee base. And Tricia Baylis says the employee base is one of the main reasons the first store was so successful, so quickly.

Of course, another reason for the Baylises early success is timing. The menu price point is recession friendly, with most burgers less than $5.

Tasty cravings
Another facet that has alleviated some of the Baylises early challenges: Five Guys is one of the biggest hits in the quick-casual segment of the restaurant franchise industry. The chain, founded by five brothers and their parents in 1986, has never done any advertising, yet it has garnered dozens of “best of” awards from local and regional publications.

The family behind Five Guys opened the first franchise store in 2002.

It has grown the chain to its current 450-store count by making details and the training process a top priority. That goes for training franchisees down to how many pickles go on a burger and where the pickles are placed. The franchisees then train the staff on the details.

Tricia Baylis, who was an administrative assistant in Washington D.C., says the Five Guys corporate folks have also played an important role in the couple's early success. That's because most of the training they do is hands-on. “Instead of telling us what to do,” says Baylis, “they show us what to do.”

Tricia Baylis' passion for Five Guys, however, began long before she counted pickles. It actually goes back to 2005, when she was pregnant with Ava, the couples' second child.

Tricia Baylis spent the last half of that pregnancy home with the couple's first child, Amber. She discovered Five Guys one day and was hooked from bite one. “I don't know what it was,” Baylis says, “but I had to have it.”

So, in the last few months of her second pregnancy, Tricia Baylis would call her husband a few times a week before he left work and ask him to make a pit stop on the way home. Her regular order: Two bacon burgers, with the barbeque sauce on the side.

That craving got the couple to think about a life makeover.

John Baylis spent most of 2006 in research mode, when he compared Five Guys to other franchise opportunities. The Baylises looked into franchise rights for Wendy's, Taco Bell and a D.C.-area pizza joint.

And the couple nearly balked at Five Guys when the corporate office pushed available territories in Michigan and Massachusetts. Those states didn't interest the Baylises, but Florida did.

“We wanted a change,” says Tricia Baylis. “We also wanted a place to raise our little girls that was beautiful.”