Five Guys Franchise Due Diligence

About Five Guys Franchise

Fast-casual hamburger and fries chain known for fresh ingredients and generous portions.

The total initial investment for a Five Guys franchise ranges from $437,000 to $1,008,000, which includes the initial franchise fee of $25,000. These figures come from the most recently available Franchise Disclosure Document (FDD) filed with state regulators.

Beyond the initial investment, franchisees pay ongoing royalties of 6% of gross sales and marketing/advertising contributions of Varies. These ongoing fees significantly impact your real profit margin, and they are often underestimated by prospective franchisees.

What the Five Guys FDD reveals

Based on Five Guys Enterprises, LLC's 2025 Franchise Disclosure Document, Five Guys' own franchise development materials, and PlainFranchise FDD summaries. Five Guys is privately held by the Murrell family (founder Jerry Murrell, wife Janie, and their five sons Jim, Matt, Chad, Ben, and Tyler all in active operational roles). Founded 1986 in Arlington, Virginia. Began franchising in 2003. Delaware LLC formed November 7, 2002. Principal business address: 10718 Richmond Highway, Lorton, Virginia 22079.

Item 5 and 6: Fee Structure

Initial franchise fee is $25,000, with a Development Fee of $50,000 separately payable upon execution of the Development Agreement. Five Guys offers a Veteran Discount of $10,000 off the initial franchise fee for qualified veteran franchisees. Ongoing royalty is 6.0% of gross sales plus a 1.5% advertising fund contribution, for a combined 7.5% ongoing fee burden. That is notably lower than Subway (12.5%), Jersey Mike's (11.5%), and Orangetheory (10%). Initial investment ranges from $314,000 to $958,000 for standard buildouts (some higher-end sites reach $1,375,750).

Item 19: Earnings Disclosure

Item 19 provides financial performance data with average reported revenue of approximately $1,500,000 to $1,683,333 per location depending on report period. The estimated net earnings range cited in third-party databases is $202,000 to $252,500 per location, implying operating margin of approximately 12 to 15%. Payback period is estimated at 5.7 to 7.7 years. Five Guys discloses Item 19, unlike Subway, Chick-fil-A, and Servpro in our Tier 1 analyses.

Item 20: Unit Count and Structure

Approximately 1,757 total locations systemwide with year-over-year growth of approximately 2.9%. The system has a notable structural feature: a meaningful company-owned presence. Historical data from 2023 showed 899 franchised and 578 company-owned units (approximately 61% franchised, 39% company). This is an unusual ratio in modern franchising, where most brands operate at 95%+ franchised. More recent 2025 data suggests the franchised percentage has increased. The Murrell family ownership structure has remained stable since founding; no private equity involvement.

Top 3 Red Flags

1. Capital requirements are steep: $2.5M liquid and $5M net worth minimum. Five Guys' public franchise development materials disclose minimum requirements of $2,500,000 in liquid capital and $5,000,000 in net worth. That is an order of magnitude above typical QSR entry points (Great Clips $75K liquid / $300K net worth; Subway ~$500K liquid). Five Guys explicitly requires previous restaurant, franchising, or business ownership experience, and any operating partner must have equity in the company. This is not an entry-level or career-transition franchise. It is structured specifically for experienced multi-unit operators and institutional buyers. Prospective single-unit buyers will not pass the financial qualification filter.
2. Unusual 39% company-owned unit mix (historically) creates competitive tension. Historical data shows a substantially higher company-owned percentage than the 95%+ franchised norm most brands operate at. When the franchisor directly operates competing units in franchised markets, tension emerges around territorial protection, pricing coordination, promotional calendars, and capital allocation decisions. Company-owned units typically receive preferential treatment in real estate selection, supplier negotiation, and technology rollout, at the expense of franchisee-owned units. Prospective franchisees should specifically ask the FC franchise development team: "What percentage of my trade area population is served by company-owned vs franchised units?" and confirm in writing the commitment that no new company-owned unit will open within X miles of the franchised unit.
3. Menu rigidity and supply-chain exposure to beef and potato pricing. Five Guys operates a deliberately narrow menu: burgers, fries, hot dogs, milkshakes. The brand prides itself on never freezing beef and using fresh-cut potatoes from specific suppliers. This brand identity creates structural supply-chain exposure. Beef prices have moved substantially in 2024-2025 due to herd reduction and cattle cycle dynamics. Potato pricing has moved with drought conditions and fuel costs. Franchisees cannot substitute suppliers or ingredients to manage cost pressure. Unlike McDonald's or Taco Bell, where franchisees can ride corporate supply chain and volume leverage, Five Guys franchisees bear commodity pricing volatility more directly. Model three-year pro forma with 2024-2025 beef cost trends included as a base case, not an adverse scenario.

Verdict

Best fit for experienced QSR multi-unit operators or institutional investors with $2.5M+ liquid capital and $5M+ net worth, prior restaurant or franchising operational experience, and willingness to operate in a system with meaningful franchisor-level company-owned presence. The 7.5% combined fee burden is among the lowest in QSR franchising. The $1.5M+ average unit volume delivers reasonable unit economics at the 5 to 8 year payback window. Murrell family ownership has remained stable for 40 years, which removes the private equity exit-timeline uncertainty that affects most modern franchisors. Veterans receive a meaningful $10,000 initial fee discount. Not a good fit for first-time franchisees, operators below the $2.5M liquid threshold, buyers uncomfortable with competing against company-owned units in their trade area, or operators without supply-chain hedging capability against beef and potato commodity exposure.

This analysis reflects patterns visible in the 2025 FDD and Five Guys' franchise development materials. Your specific deal terms, territory, development commitments, and Development Agreement obligations are not publicly disclosed. Have our AI FDD Analyzer review your specific franchise agreement for deal-level red flags.

Compare Five Guys with similar franchises

Buyers evaluating Five Guys typically also review these related FDD analyses for structural, unit-economics, and ownership comparison.

• Culver's - Burger franchise comparison: Five Guys premium versus Culver's ButterBurger concept
• McDonald's - Burger QSR comparison: premium positioning versus global franchise scale

Key Questions Before Investing in Five Guys

These are the due diligence questions most buyers skip before signing a franchise agreement. They go beyond what's in the FDD.

• What is the realistic Year 1 take-home pay? After royalties (6% of gross sales), ad fund contributions (Varies), rent, labor, COGS, insurance, and debt service. What do you actually keep? Use our Profit Margin Calculator to find out.
• What is the closure rate? Check Item 20 of the FDD. How many Five Guys locations have closed, been terminated, or "ceased operations" in the last three years? A high number is a red flag.
• Are the territories truly protected? Item 12 defines your territory. Does Five Guys reserve the right to sell through alternative channels (delivery apps, online, grocery) in your territory? Many do.
• What happens when you want out? Item 17 covers renewal, termination, and transfer. What does Five Guys charge to transfer? Is there a non-compete after you leave? How long?
• What do current and former franchisees say? The FDD lists every franchisee's name and phone number. Call at least 10 current and 5 former ones. Our Validation Call Scripts tool gives you the exact questions to ask.
• Does the franchisor make money from you or with you? Check Item 21 (audited financials). Does Five Guys earn most of its revenue from royalties on operating franchisees, or from selling new franchise licenses? The latter is a warning sign.
• Can you afford to lose this money? If Five Guys fails in 18 months, what is your total financial exposure including the lease, SBA loan personal guarantee, and sunk costs? If the answer makes you sick, reconsider.

Other Food & Beverage Franchises to Compare

Smart due diligence means comparing alternatives. Here are other food & beverage franchises you should evaluate alongside Five Guys.