Jessica Gueghlein never used to give it a second thought when she wanted a good hamburger -- she headed to In-N-Out, that drive-through icon of California car culture.
"We chose this over In-N-Out," said Gueghlein, chowing down with family members at the Five Guys in Valencia, which opened in January. She liked the fresh, flavorful burgers and hand-cut fries at Five Guys -- as well as the novelty of trying something new. "It's the fourth time we've been here since they opened."
Five Guys executives insist they're not out to complete with In-N-Out, which started in Baldwin Park in 1948.
"We're not hurting them," said Five Guys spokeswoman Molly Catalano, "but we're glad that people are open to having another option."
But the two chains are clearly going after some of the same customers.
"They will definitely be a competitor to In-N-Out," said Steve West, restaurant industry analyst for Stifel Nicolaus & Co. in St. Louis. "The prices are comparable, and the product is comparable."
Like In-N-Out, Five Guys' menu is focused on single and double hamburgers and cheeseburgers, along with hand-cut fries. And like In-N-Out, Five Guys restaurants are red and white, with perky employees in red-and-white uniforms.
And Five Guys is coming on strong.
The privately held chain, which has 770 locations in the U.S. and Canada, began moving into California two years ago with a handful of shops in Orange County and the Inland Empire.
Now there are 27 locations in the state, including 12 in Northern California, but Five Guys has sold the rights to open hundreds more around the state.
But to really make inroads here, Five Guys will have to get past a major hurdle: the intense loyalty of In-N-Out customers.
"They're going to probably take market share from In-N-Out," West said. "Will they supplant In-N-Out? I don't think so."
Five Guys, based in Lorton, Va., outside Washington, D.C., was founded in 1986 in nearby Arlington by five brothers in the Murrell family. They opened five of the restaurants and then started franchising, according to company spokeswoman Molly Catalano. Last year, the privately held chain had sales of $721 million, she said.
In-N-Out, now based in Irvine, was founded by Harry and Esther Snyder and has about 250 locations. The chain does not give out sales figures, but trade publication Restaurants and Institutions estimated that in 2008 it took in about $466 million.
In-N-Out Executive Vice President Carl Van Fleet said the company was not planning to make changes to meet the Five Guys expansion.
"We've been focusing on the same thing for 62 years," Van Fleet said. "Freshness, quality and cleanliness in our restaurants. We're just going to continue doing what we do."
There are key differences between the two chains. In-N-Out's menu items are generally less expensive -- the chain is most popular with men ages 18 to 24 with an income of less than $70,000 a year, according to NPD Group. By contrast, Five Guys patrons are generally 25 to 50 years old, with an income of more than $100,000.
In-N-Out locations are famous for their busy drive-through lines, with uniformed attendants sometimes going from car to car to take orders. Five Guys restaurants do not have drive-throughs, and most of the locations are in shopping malls.
Both chains are growing, but In-N-Out is expanding much more conservatively. With 200 locations in California and about 50 more in other Western states, In-N-Out plans to open eight new restaurants in the Dallas-Fort Worth area by the end of this year.
"In-N-Out is a step above other fast-food hamburger places," said Bonnie Riggs, restaurant industry analyst for NPD. "Now with Five Guys entering the market, that becomes a competitive step over In-N-Out."
By pricing its product higher and offering bigger burgers and a larger dining room than chains like In-N-Out, Five Guys is trying to capitalize on an important recent trend in the restaurant business -- the growth of mid-level eateries that are more expensive than fast food but cheaper than fancy restaurants.
These "fast casual" chains -- whose ranks include Chipotle and Panera Bread -- grew even as other restaurants suffered during the economic downturn. Experts in the field ascribe this to customers seeking high-quality food at moderate prices.
With touches such as a bulletin board posted with the names of farms that provided the day's potatoes, and options like spicy Cajun fries, hot dogs and small grilled cheese sandwiches meant for children, Five Guys is hoping to capitalize on that trend, spokeswoman Catalano said.
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