The first South St. Burger Co. opened in Toronto in 2005; this week a 13th location, all in Canada, joined the fun. Although it’s one of several “better burger” concepts that have sprung up in recent years, chain President Jay Gould (right) says he believes South St.’s limited menu and emphasis on upscale toppings and side dishes will help it stand out from the pack and continue to grow. Gould outlined the strategy for BurgerBusiness.com:
Mega-topping specialty burgers seem to be the rage, but you’re going in a different direction with South St. Burger Co.?
There are a number of guys here in Canada with one to 15 or 20 units in the same space we’re in. We think we set ourselves apart in a couple of ways, but I guess I have to say that.
I suppose so. But why are your customers coming to South St. instead of others?
I think the product is good. I’m not sure how everyone delivers their product, but a lot of the competition we’re facing might have a lot of things to put on a bun and “better beef,” but they’re doing it behind the scenes. Ours is all upfront. We have a salad-bar-like arrangement from which customers can pick and choose toppings as they go through the line.
And the same with cheeses. There’s blue cheese and Swiss and Monterey Jack and so on. So that makes for a few changes. We don’t spend a lot of time at the register asking if they want ketchup or a gourmet sauce or whatever. It cuts down on the risk factor.
But eliminates the possibility for a drive-thru?
It just doesn’t fit. You couldn’t get across what we’re trying to do in a drive-thru, not if you’re not going to make any mistakes. Sadly [our style] takes quite a bit longer than the average drive-thru because your burger is cooked to order and we don’t use heat lamps.
And your burger?
I think our burger is different. It’s antibiotic and hormone free, naturally raised and all that sort of thing. In this part of the burger business that isn’t all that unique, I know. But perhaps the other significant different between us and the other guys is that we put as much emphasis on our sides as our burgers.
Our [company’s] primary business is called New York Fries. It’s a 25-year-old chain featuring fresh-cut fries cooked in sunflower oil, trans-fat free, skins on; fries as good as they can be made. Both in taste and quality.
So South St. really is an offshoot of New York Fries?
[New York Fries} is a food-court, shopping center concept. We’re in a lot of theaters as well. But we kind of ran out of grass in Canada for the triple-A shopping centers we wanted to be in. You can put a McDonald’s in a B shopping center but we depend on traffic, so we’re only in the bigger retail centers.
While we were running out of space for New York Fries, we started to develop this gourmet burger concept six or seven years ago. Because we were coming from the side-dish part of the market, we knew there was a market there. Our own humble opinion was that most burger joints have treated the sides as just that, side kicks. So we make our own onion rings from red onion and scratch-made batter; we sell New York Fries, which is a good calling card. Our milkshakes are the best ice cream we can buy. There are no syrups. Everything on the menu—and yes it’s limited—has to compete for best in class.
I think that as much as anything else sets us apart. There are other places that we read about in BurgerBusiness.com that are serving a great burger and buying locally and so on. We’ve tried to take that approach through the whole menu.
You have about 160 New York Fries locations, in several countries. Can South St. Burger Co. do the same?
I believe so. Obviously Canada is only about 10% the size of the U.S. market, but there are [1,400] McDonald’s here. I could easily scatter 100 South St. Burger Co. locations in this country and you wouldn’t be tripping over them. Our New York Fries operator in Dubai wants to open a South St. Burger Co., so I think it has lots of room.
With your emphasis on quality products does it worry you to put South St. in the hands of a franchisee?
Yes. We’re opening our 13th shop here in Toronto. Of the 13, exactly one is franchised. And it’s franchised to our New York Fries franchisee in Calgary, Alberta. But you’re absolutely right. While most of New York Fries is franchised, I’ve been reluctant to let this [concept] out the door.
But realistically, how long can you do that? At a half-million dollars a pop for stores, and without raising a significant amount of money or going public—and giving control to someone else in another way—we’ve got to get it to the point where (a) it’s attracting quality franchisees and (b) our systems are strong enough and our controls are good enough that we get good people to follow the plan. Easier said than done.
What’s your biggest hurdle to growth right now?
I’d say it’s finding the right franchisees. On the one hand, there are lots of people out there with golden parachutes and some cash, but they’re pretty skittish. You’ve got to find fairly sophisticated and willing partners is the challenge. Not finding cash, but finding the right guy with the cash. That and real estate.
How problematic is the burger marketplace right now. As you say, you’re seeing a lot of “better burger” places at the same time McDonald’s is charging more than $5 for the Smokehouse Deluxe up here, and Angus Third Pounders…
Which is what our burgers are, by the way. One-third pound. That was after careful consideration. A number of people in my office thought we should have a 6- or an 8-ounce burger. Just as we’ve done with the fries business over the years, we cut back the portion. We don’t want to overfeed people; we don’t want to be the poster child for everything that’s wrong in our society. Our mission is to get people to indulge wisely.
That every media outlet has been attacking not just fast-food in general but french fries in particular, we see that as an opportunity. If you’re going to eat fries less often, you might be a little pickier when you do.
Then you’re not worried about quick-service chains moving into your price and product turf?
Well, that is problematic to some extent, I suppose. I don’t really think the McDonald’s and Burger Kings of the world can get into our space. You’d be foolish to count them out because they’re just too talented and smart and their marketing budgets have no cap. But I think there’s room for guys like us.
I think guys like us have inspired the McDonald’s Angus Third Pound and the like, because we’re gnawing at their heels. But can they jump in and do a totally custom, fresh cut, fresh-made business? I don’t think it’s in their DNA. It requires such a change that they’d risk losing their value bias.
Certainly we’re competing with a lot of others who are trying to do exactly what we’re trying to do, and then there’s Chipotles and the others who are going after that same $10 lunch. So yeah, it’s competitive, but we’re doing OK.
Click here to read Jay Gould’s answers to BurgerBusiness.com’s “10 Burger Questions.”