Smashburger is an American hamburger restaurant chain that was founded in 2007 in Denver, Colorado. In the present time, it has more than 370 corporate and franchise-owned restaurants in 37 states as well as in 9 countries.
The restaurant was named Smashburger because it serves smashed burgers using a specific procedure of cooking them on a flattop grill at a high heat. This way, the fat and juices will be locked in the burger. Then, they are topped with different kinds of ingredients and can also be customized. Smashburger also offers different and unique burgers in each city they are in. Their menu includes chicken and turkey sandwiches, as well as French fries, sweet potato fries, fried pickles, and more.
Smashburger is one of the fast-food chains that had grown rapidly. But before its success, it has also gone through different events. Read on if you want to know the history of Smashburger.
The Creation of Smashburger
Two fast food industry veterans founded Smashburger in 2007. One of them is Tom Ryan who had previously helped in developing Pizza Hut’s stuffed crust pizza concept and also became the chief concept officer for McDonald’s. The other founder is David Prokupek, who was a former owner of Quizno’s.
Tom Ryan and David Prokupek launched the venture with private equity firm Consumer Capital Partners. They envisioned the restaurant to highlight a higher market for hamburgers, which is similar to the technique of other restaurants such as Shake Shack. They had a $15 million capital which they used in buying a Denver restaurant, Icon Burger, for them to experiment on with cooking and management techniques for a higher-end burger restaurant.
Tom and David spend six months in developing an efficient and fast kitchen engine. They designed the restaurant’s kitchen to have modular surfaces, as well as a central griddle that houses a refrigerated area underneath to store meatballs in. This will allow the burger cook to be properly supplied without the hassle of walking back and forth from the griddle. This concept was later on adapted and standardized for ever Smashburger location.
Smashburger’s signature “smashing” method is achieved using a special cutter and technique. These help them train new cooks quickly and open new locations without the need to redesign the back-end process. The restaurant uses flattop grills for the kitchen and rejected char broilers or barbecue grills.
Tom and David also did a blind taste test of 300 kinds of beef such as Wagyu and Kobe for the burgers before settling on chopped Angus beef. The two narrowed down their choices until they came to just four, and they found all four were Angus beef that are provided by different distributors.
The Growth of Smashburger
In June 2007, the first Smashburger restaurant opened in Denver. After that, the chain expanded to Houston and then to Minneapolis. These are areas where Ryan and other founding management were familiar with especially when it comes to the local real estate market.
Smashburger’s marketing focused on the customizability of the menu, freshness of ingredients, and features to give each of their restaurant a local feel. Their first marketing revolved around the tagline, “Smash, sizzle, savor.”, and as the business grew, it changed its theme to, “Smashed Fresh. Served Delicious.” In 2011.
They have identified fourteen distinct customer archetypes to pursue which are based on education and lifestyle, geography, and income levels. It has built its brand on social media, but it 2013, the company started television and radio advertising with Denver-based Definite Productions as their marketing manager.
By the end of 2011, Smashburger’s restaurant chain grew to 143 locations, half franchises, and $54 million annual revenue. In the same year, the chain was reported to have as many as 450 franchise agreements. They also announced their plan to open new locations around the airport in Kuwait, Saudi Arabia, and Bahrain through franchises.
In 2013, Smashburger had grown to 170 locations around the world with $228 million in revenue, to 256 locations with $300 million in revenue in 2014. In 2015, it had grown to 312 stores with 7,000 employees, and to 365 locations in 2016.
Also in 2016, the company announced a franchise agreement with Pearl Investments LLC to open 26 new locations in UAE and Qatar. By mid-2017, Smashburger had grown to 380 locations in 38 US states and nine countries, where 220 of those were company owned while the rest were franchises.
One of the things that made Smashburger successful is the changed consumer tastes, because of a customer perception that their foods were of higher quality and more customizable even when they are sold at higher prices compared to other fast food brands like McDonald’s.
However, since the restaurant is still quite new, it commands a relatively small portion of the larger US market for burgers. Smashburger had an estimated 0.2 percent US market share in 2014, which is much smaller compared to 1.4 percent from Five Guys, and 71 percent combined share from McDonald’s, Wendy’s, and Burger King.
Acquisition by Jollibee
In October 2015, Jollibee Foods Corporation, a Philippine-based quick-serve operator, had bought a 40 percent stake for $100 million in Smashburger. It was in an agreement that gave the chain an enterprise value of $335 million. According to Smashburger’s CEO, Scott Crane, selling the chain would mean more stable long-term growth compared to relying on the stock market which is unpredictable.
After that, Smashburger introduced a subscription-based rewards program platform which is called Smash Pass, to increase customer traffic. This was followed by other specials such as a pass that will allow customers to buy a $1 burger a day for 54 days in a bid to build loyalty. It also introduced new menu items including tater tots and a turkey burger.
However, Smashburger had also faced difficulties in continuing to grow because customers began to shift away from shopping in traditional retail centers where most of the restaurants are located. Also, other larger restaurant chains increased their labors in increasing sales and brought on higher-quality menu items to compete with Smashburger. The chain’s overall same-store sales declined as a lot of “better burger” concepts grew.
In April 2016, Crane left as CEO and was replaced by Mike Nolan. But after nine months, Nolan resigned and Ryan took over the role. Smashburger reduced its expansion strategy and focused more on existing markets. The company began mentorship programs to develop leadership talent from its workers. It also bought back some of its franchise restaurants in several major markets, which was also experienced by Smashburger’s competitors such as Five Guys and Shake Shack.
Even when Smashburger faced some difficulties, it still continued to work and in 2016, the chain was estimated to have $338.3 million in sales. On February 13, 2018, Jollibee has increased its ownership stake to 85 percent in another $100 million deal. With this move, it is believed that Smashburger will continue to expand its presence in southeast Asia.
Smashburger is indeed one of those burger chains that envisions to put burgers back into people’s lives. It has a unique strategy that can change the way people think about burgers and the way they feel when they have a burger. With its mission and philosophy, chances are it will further expand to different countries all over the world.