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Butterburger, Anyone?

Find out why fast-food newcomer Culver's is overcoming consumers' initial reactions.

Elizabeth and Ashley, my 9-and 12-year-old daughters, were adamant: "Butterburgers? That's gross, Daddy." There was no way they were going to ride with me for an hour, each way, to try a restaurant featuring frozen custard and Butterburgers. I expected this objection as I, too, had imagined a cold stick of butter sandwiched between two buns, but reviewing new concepts is part of Daddy's career.

I explained to my daughters that we were going to a Culver's Frozen Custard, a somewhat upscale fast-food restaurant, because it's part of a young franchise chain experiencing phenomenal growth in the upper Midwest. In fact, it's the No. 1 custard franchise-- No. 175 overall--in Entrepreneur's 1999 Franchise 500®. We were headed to one of only three locations in Texas. Although Culver's has more than 55 locations in Wisconsin, I couldn't see how the concept could survive in Texas with an unknown name and limited marketing impact. Then we tasted our first Butterburgers.

Wow! That's the only word for it. The people at Culver's know how to make a burger. By using fresh ground chuck that's leaner than the beef used by many other fast-food chains and putting it on a buttered, toasted bun, Culver's made one of the best burgers I've ever had. The girls were ecstatic as they slurped away at the custard flavor of the day, made fresh at the store. The fries were tasty and the servers delivered our meal to our table. I didn't think it possible, but Culver's has redefined quality in fast food.

The Culver's revolution was started in 1984. Father-son team George and Craig Culver had been driving to Milwaukee for years to satisfy their frozen custard cravings; so when an opportunity arose, they opened their own custard restaurant in Sauk City, Wisconsin. In 1987, they added a second store and began franchising. Now the map on Culver's place mat is covered with locations, with 70 franchises as of December 1998; and the company predicts 100 stores will be open by 2000. Missouri and Nebraska, and perhaps Texas, look like the next frontiers for growth.

Delivering great food at good prices is not without its sacrifices. According to Item 7 in the company's Uniform Franchise Offering Circular, franchisees should be prepared to spend anywhere from $923,080 to $1,915,700 to open a facility, depending on land costs and which of the three building styles you choose (ranging from 3,200 to 3,800 square feet).

During the first three months of operation, you'll probably need an additional $200,000 to $350,000 to keep the doors open, which takes into consideration your monthly 4 percent service fee and 2 percent advertising fee. These estimates don't include any of your financing expenses or your salary. Franchisees are expected to spend 16 weeks in training at Culver's corporate headquarters and one of the company's three corporate restaurant locations, and it's my uneducated guess that you'll gain at least 10 pounds during that time.

Average 1998 sales for all existing locations were $1,250,902; unfortunately, the company did not disclose operating expenses. Because of the quality of the food, though, food and paper costs are estimated at 34.8 percent of sales.

Culver's is masterful in the public relations field. The image of the operation is that of wholesome American dairy freshness. It may be advisable to purchase a franchise in an area adjacent to where other Culver's locations already exist so you can take advantage of name recognition and goodwill.

For more information, contact Tom Wakefield with Culver Franchising System Inc. at (608) 356-5938 or visit the company's Web site at http://www.culvers.com


Todd Maddocks is a franchise attorney and small-business consultant. You can reach him at TMaddocks@aol.com

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This article was originally published in the May 1999 print edition of Entrepreneur with the headline: Butterburger, Anyone?.

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