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Market for Better Burgers Sizzles in San Diego

Burgermeisters, such as the 40-year-old Habit Restaurants LLC, are about to see just how big San Diego County’s growing appetite for premium hamburgers really is.

When the Irvine-based company debuted its local The Habit Burger Grill on Oct. 19 in Mission Valley — just ahead of another set to open by year’s end at Carmel Mountain — it became the latest in a continuing parade of high-end burger purveyors looking to wean local aficionados from the old fast-food favorites.

This has been a banner year for the “better burger” category, with several local openings by chains such as Five Guys Burgers and Fries, Smashburger, Elevation Burger, Burger Lounge, The Counter Custom Built Burgers, and Stacked: Food Well Built.

“San Diego has been on our radar screen for the past couple of years,” said Habit Restaurants President and CEO Russ Bendel. “But because of the topography — where the ocean is, and other elements — it’s been a challenge to find great locations.”

Habit Restaurants, which owns and operates all of its 42 restaurants, snagged a former Baja Fresh spot across from Westfield Mission Valley, and another vacated restaurant space at Carmel Mountain Plaza. The company is scouting more local sites, and Bendel said there is room for many players in the fast-growing segment, although the location search remains daunting amid limited new retail construction.

On a Budget, Seeking Better

Observers note that the “better burger” segment caters to budget-minded consumers looking to trade up from fast food, but still looking for speed of service and a tab below that of a full-service restaurant. Most fast-casual restaurants have customers order at a counter, and the food is brought to their table in about 10 minutes.

Purveyors in the category offer meals priced from $8 to $10, using premium grades of beef with an array of fresh and sometimes exotic toppings. The menus also offer relatively healthier items like chicken and salads.

“We’re trying to fill that gap between fast food and the casual dining segment,” said Michael Burger, managing partner of Virginia-based Elevation Franchise Ventures LLC. That company, which touts a menu featuring grass-fed beef, veggie burgers and other organic items, recently opened its first local Elevation Burger at Bressi Village in Carlsbad.

One or two more San Diego County openings are planned during 2012, and the company is aiming for 10 to 15 over the next five years, working with local franchisees Ron Weinberg and Atul Jain. Burger said the county has good demographics and California in general is a good fit for its health-oriented approach.

However, there is a tight supply of attractive locations, which Burger said has meant that San Diego County rents, as with other key markets such as Los Angeles and Washington, D.C., remain relatively pricey for chain operators.

According to the consulting firm Technomic Inc., the “better burger” segment has witnessed some of the U.S. restaurant industry’s fastest growth during the past year, despite a still tough economy for eateries.

The category in 2010 saw sales grow 16 percent and the number of locations rise 17 percent over the prior year. That compared with 1.6 percent sales growth and 0.2 percent store growth for the limited-service “fast food” burger players.

A Virginia Juggernaut

Among the fastest growing restaurants of any kind, and the leader among fast-casual burger purveyors, is Virginia-based Five Guys Burgers and Fries, which last year saw its U.S. store count rise nearly 35 percent and its sales jump nearly 38 percent, to $625 million. The category overall raked in more than $1.4 billion.

Five Guys is in the process of opening its eighth San Diego County location in Vista, following debuts earlier this year in San Marcos and Encinitas. Denver-based Smashburger has openings in the works in Oceanside and Vista, which will bring its local total to eight locations.

Culver City-based The Counter Custom Built Burgers opened its second local restaurant earlier this year at Del Mar Highlands Town Center in Carmel Valley, following a prior debut in Carlsbad. Local franchisee Tom Yoo said his newest location has benefited from a steady mix of customers from area homes and office buildings, and he’s preparing for more local debuts.

Yoo said he expects his next Counter eatery to open in early 2012 in downtown San Diego’s Gaslamp Quarter, and he is scouting sites in places including Mission Valley, UTC and Pacific Beach. His aim is to reach diners who are getting weary of “trading down” at mealtime.

“Because they’re on a budget, they might not be going to the fine-dining places very often,” Yoo said. “But if they’re a burger aficionado, they’re looking for something with a little more quality than some of the fast-food places.”


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