Does the world really need another burger joint? The big threeMcDonalds, Burger King and Wendysclog strip malls and highways, with 28,000 locations in the U.S.; smaller players like Jack in the Box, Hardees and Five Guys Burgers & Fries add another 12,000. Then there are the myriad hole-in-the-wall burger stands and mass-market chains like Applebees, T.G.I. Fridays and Ruby Tuesday.
Yet for all that supply there remains hungry demand: Americans gobble 13 billion burgers a year43 for every man, woman and child. Half the country reports eating a burger at least once a week. At this point its an American birthright that a beef patty snuggled between two buns be found within a short drive of even the most ¬desolate towns.
The hamburger is our favorite food, says Tom Ryan, founder of Smashburger, yet another new kid on the burger block. And still were not satisfied.
Thats why in 2007 Ryan began building a burger chain that is fast, affordable and even worth talking about. Its working: In the midst of a severe recession his Denver company will have grown to 143 locations (half company-owned, half franchised) and $54 million in annual revenue by the end of 2011. Another 450 franchise agreements are already on the books.
Such torrid expansion earned Smashburger top honors on our list of Americas Most Promising Companiesprivately held up-and-comers with compelling business models, strong management teams, notable customers, strategic partners and precious investment capital. (Click here for our full methodology.)
Credit Smashburgers success to a blend of thoughtful product design and deft execution. Like its fast casual competitors Chipotle Mexican Grill, Panera Bread and Così, Smashburger offers more interesting fare and a (small) dash of ambience at a reasonable price premium. Beyond burgers, Ryans menu includes fresh salads, hand-breaded chicken sandwiches, veggie frites (flash-fried carrots and asparagus), Häagen-Dazs milk shakes, even beer and wine. Average ticket price: $8. (A McDonalds combo mealburger, fries and drinkgoes for around $6.)
The name Smashburger refers to the process by which its ¼-pound, 1/3-pound and ½-pound burgers are made. It begins with a ball of raw Angus beef, which a grill cook smashes with a handheld steel mold onto a butter-brushed grill for ten seconds, giving the patty a caramelized sear to lock in the juices. Then come unconventional toppings like avocado, fried eggs and garlic mushrooms, as well 11 sauces, including chipotle mayo and spicy brown mustard. Buns? Everything from multi-grain to a pretzel roll.
Service matters, too. During two recent visits to Smashburgers swabbed downtown Brooklyn location, the cashiers smiled, made solid eye contact and cheerily explained the nuances of the menu. Floor runners routinely filled drinks and cleared plates. Baby boomers, guys like me, really value good service and a good experience, says Scott Hume, editor of Burgerbusiness.com. I think they understand that.
Dave Prokupek, Smashburgers CEO, believes you get what you incentivize. We overinvest in the things that matter most, he says. New employees at company-owned stores make $9 an hour (minimum wage is $7.25) and earn bonus Smash Cash for various achievements. If a line cook fills orders in under six minutes on average, he gets an extra 50 cents per hour. Store managers can earn monthly bonusesup to 30% of their base salarybased on monthly revenues and customer reviews. Franchisees arent required to use this model, but many do.
Theres a real wow factor when we tell employees they can earn more based on performance, says Kurt Riske, manager of six Smashburgers in Arizona. Its very effective in terms of morale.
Ryan and Prokupek, both Midwesterners, are a complementary pairing. They met in 2003 through Rick Schaden, CEO of Quiznos, where Ryan was head of marketing; Prokupek managed the Schaden family fortune. A native of Grand Rapids, Mich., Ryan, 54, has a feathery shock of gray hair, along with a masters in lipid toxicology and a Ph.D. in flavor and fragrance chemistry from Michigan State University. Theres so much technology behind ketchup and mayonnaise, this everyday stuff we take for granted, he says. I was always fascinated by that. After graduate school Ryan worked on Jif peanut butter and Folgers coffee for Procter & Gamble. In 1988 he moved to Pizza Hut, where he led the team that came up with stuffed-crust pizza. By 2001 he had ascended to chief marketing officer for McDonalds in the U.S.
The lankier Prokupek, 50, looks a bit like Joe Namath, if the quarterback had aged more gracefully. Originally from Milwaukee, Prokupek is an operations guyand not long on patience. As a junior at the University of WisconsinMadison he landed a job at IBM by passing himself off as a graduating senior. Following business school at Northwestern Universitys Kellogg School of Management, he worked in the leveraged buyout group at Bankers Trust. He left in 1989, bought a small paging and cellular business, and began snatching up spectrum licenses. He sold the company, called NationPage, to Vanguard Wireless for an undisclosed price in 1997. Four years later he unloaded Tucker Anthony Sutro, an investment bank he helmed, to Royal Bank of Canada.
Ryan and Prokupek joined forces in 2006, when Ryan decided he wanted to buy a burger chain and spruce it up; Prokupek signed on as an outside advisor. Everything we found, we knew wed change at least half the model, says Prokupek. So it didnt seem worth it to buy anything.
Instead the pair, staked with $15 million from Schadens private equity group, purchased a single restaurant, Icon Burger in Denver, and used it as their laboratory. Icon Burger was attractive because it was small, had been around for a couple of years, had cash flow and was for sale, says Ryan. They toyed with recipes and kitchen designs, testing ideas with customers every day. Finally satisfied, they opened the first Smashburger in Denver in June 2007. Within a month the restaurant had a line out the door.
Eighteen months later Prokupek became CEO, allowing Ryan to focus on the menu, which he beefed up with chicken sandwiches, a veggie burger and fare with local flavor. (The Brooklyn burger features pastrami and swiss cheese on a pretzel bun; the San Diego has avocado and cilantro on a torta roll.) Prokupek engineered the expansionsussing out new locations, standardizing the back office, signing up franchisees and tracking customer feedback.
There have been growing pains. It was tough in terms of keeping our culture and hiring the right people, says Prokupek. Today the company keeps a psychologist, Bill van Bark, Ph.D., on retainer to help assess managers ¬aptitude for the hospitality industry. Candidates take an online exam that measures 40 skills, including the ability to keep a budget and cope with stress. Those who pass are asked to show how they would handle a variety of typical workday snafus, from dithering customers to long service lines.
Americas most promising company has global ambitions. In September Smashburger announced plans to launch six locations in Kuwait, three in Bahrain and eight in Saudi Arabia, all franchised. Middle Eastern consumerswhatever their opinion of Americahave an affinity for premium Western brands, says Prokupek. Not by accident, all the Saudi stores will be at airports, giving global travelers a taste of whats to come. Ryan and Prokupek also have their eyes on Canada, the United Kingdom, East Asia and South America.
Says Prokupek, ever restless: I dont see the need to wait to bring this brand to the world.