Fun on a Bun: The Business of Burgers
It used to be that the term “hamburger economy” referenced hard times, down markets and a general tightening of the belt for consumers. And while that may feel familiar in the face of rising prices and current economic uncertainty, the underlying metaphor is more than a little ironic as across the state and around the country, the burger business is booming.
Take David’s Burgers, a homegrown chain that operates 10 stores in Arkansas. Even during the lockdown of 2020, when dining rooms closed and many restaurants struggled to find traction, David’s Burgers welcomed long lines through its drive-throughs. And the easing of said restrictions has only loosened the floodgates more, according to founder Alan Bubbus.
“Our sales are up 20 to 30% in many of our stores,” he said. “I’m really excited about our business model. We’ve shown that our sales go up during pandemics. Our sales go up during recessions. Our sales go up during good times. We can handle a depression in the economy or a recession. I have a lot to be thankful for.”
Bubbus isn’t alone. According to Statista, the burger business has been on an almost-uninterrupted upward march for a decade. In 2011, U.S. burger restaurants accounted for $107.1 billion in sales, grew by $7 billion in just three years and reached $123.3 billion in 2019. After COVID’s big bite out of sales in 2020, the industry picked up right where it left off last year, generating just shy of $127 billion.
Industry experts point to fast food chains as the bellcow for 2022’s burger sales, which makes sense given the number of said outlets and the cheap menu prices that appeal to families struggling at the pump and the grocery store. But seemingly any restaurant or pub that serves burgers is getting in on the action.
“We go through about 100 seven-ounce burgers a day. Weekends, it’s more,” said Mike Dampier, chef and general manager at Hot Springs’ iconic Ohio Club bar and restaurant. “Friday, Saturday, Sunday during season, which down here in Hot Springs is like March to Labor Day weekend, you’re looking at 150 to 200 burgers going out a day. Friday 120 to 150, Saturday closer to 200, Sunday about 120 to 150, depending on what’s going on downtown.”
Both Dampier and Bubbus shared that the secret to their success starts with the quality of the main ingredient. Ground beef doesn’t generally enjoy a gourmet reputation, but you’d never know it talking to either of them, as they describe the extraordinary lengths to which they go to ensure the highest quality.
“Ours is fresh, it’s never frozen,” Dampier said. “We get Iowa premium, upper two-thirds, established aged. We get from a specific place that buys from specific ranchers. It’s not from all over the place. We can pinpoint where our beef is coming from.”
Bubbus is even more meticulous, skipping general suppliers to buy meat directly from the packers that comes from animals within a certain age window. The whole-muscle meat shipments arrive 2,000 pounds at a time, then undergo a step unusual for a burger place.
“We get the beef in, and we hang it,” Bubbus said. “We’re the only facility in Arkansas that’s hanging their beef on any kind of scale, especially for hamburger meat. We’re basically dry aging our hamburger meat.”
The two proprietors’ obsession with quality doesn’t translate into premium pricing, either. Dampier said Ohio Club prices have only been raised once since the pandemic began, at the start of 2022, and has weathered subsequent beef price hikes thanks to a fixed-price buying arrangement with the supplier.
“When you’re pricing your menu, you don’t want to lose money, but you don’t want to run people away,” he explained. “You kind of see what you can live with and what you can’t live with as far as trying to make a profit. With the burgers, we’ve been told some of our stuff is a little bit cheaper than others and that’s fun to hear. We’re making a profit and the customers can still afford to be able to come out and eat.”
Bubbus’ strategy for keeping prices affordable is even more straightforward.
“Instead of raising our prices, we’ve cut our margins,” he said. “That strategy has worked. Our margins have shrunk by probably a third, but our volume is up by a third.”
“We’ve really worked hard to provide a meal that’s less than $10 per person, and for a kid, you can still get a meal for $5, $6 with tax and everything included. I really believe right now we’re cheaper than McDonald’s for a similarly sized combo, and you don’t get all-you-can-eat fries and you don’t a sample of ice cream like you do with us.”
The future of the burger business also includes a trend toward self-sustainability. Bubbus said the next chapter in his business story lies in wholesale – buying directly from producers – to put even more control in his hands as an operator. Kyle Pounders, meanwhile, has a similar vision that he hopes will change the entire industry.
As founder of the seminal food truck Excaliburger, currently on hiatus, Pounders learned the ins and outs of the burger business, and believes direct sourcing of ingredients not only produces a better product, but represents a better system than what was exposed by the supply chain debacle of the past few years.
“It’s all tension and balance,” he said. “What do you need to do versus what you can do. Sometimes those two are not the same. You need to have a burger that’s within a reasonable price so people will come get it, but sometimes you can’t have it within a reasonable price point and make enough margin to cover everything. So, what gives?
“And the other thing is what you can do versus what you should do, like when everyone’s jacking their prices up out of control, do you just jack your prices up out of control too because no one notices and you get to blame it on inflation?”
Pounder’s experimental solution is to marry one local produce source to one burger outlet, perhaps even to the point of growing one’s own produce. The menu gets slimmed down in that model and along with it, the math for figuring out how such a system keeps the lights on. He’s convinced it’s entirely possible, with a little tinkering.
“If we have an Excaliburger that can support a family in the middle class and pay their employees a regular wage, how much agricultural land does it take to do that? Can we have systems where those things are close at hand?” he asked.
“You don’t have to have a crazy farm; you’ve got to figure out lettuce, you’ve got to figure out tomatoes, you’ve got figure out cucumbers for pickles,” he said. “How’s that going to shake out? You have to ask very literal and very lateral questions of how many acres does it take to support one drive-thru?
Pounders is already moving forward in his idea and hopes to have proof of concept over the next few quarters for his audacious brand of cheeseburger economics.
“Arkansas should be this beautiful place where tomatoes and lettuce just flow. Yet, we’re using all of our national sourcing for these things,” he explained. “I think the cheeseburger is a perfect indicator of how dependent we are on the one singular system, how in the last however many thousand years of human history – minus the last 200 – people have been able to survive locally, but we’ve forgotten certain things like growing your own stuff, right? It’s a great experiment to see how far back we can push this big monolithic system.”