The Surprising Menu Psychology Behind Five Guys’ Success

In 2011, five guys became the fastest growing fast food chain in America. The burger joint grew by 786% over a six-year period. There are hundreds of reasons why five guys is so successful, but my guest on the stage today says one reason. Backed by behavioral science, contributed most to five guys' success. We have this idea, we have this assumption that those who specialize are higher quality. Find out why in today's episode of Natch. When someone asks AI for a solution, a product, a service, like yours, does your business come up? Does AI suggest you? Well most companies have no idea, and by the time they find out, they've already lost the deal or the sale to someone who did. HubSpot AEO helps you show up in those moments, with the right answers buyers are looking for, before the first click and before the first form is filled out. That's the moment HubSpot AEO is built for. Check out HubSpot.com, the Agenteic Customer Platform for growing businesses. Today I am joined by a legendary author and applied behavioral scientist. My name is Richard Chawren, and I specialize in applying behavioral science to marketing. Richard is the author of two of my favorite books, The Choice Factory and The Illusion of Choice. But just last month, Richard released a new book. Titled Hacking the Human Mind, the book details how some of the world's most successful brands have applied behavioral science to succeed. The book starts with the five guys example. And there's this fascinating story about this guy called Jerry Murrell. He gives his sons an offer, I'll either pay for you to go to college, or I'll give you some cash to SAPA business. And they decide that they're going to SAPA business and four go college. The four sons needed to find a business idea quickly. They're interested in a restaurant, that seems like quite a simple thing to set up. And this is back in the mid 80s. And they go to Ocean City to try and learn what businesses are doing well. And as they are walking up and down the boardwalk, what they notice is there are loads of different restaurants, fast food shops. But there is one restaurant that has this 100 yard queue. So everyone else has a few people keep standing outside. This restaurant has a hundred yard queue. And it's called Thrash's Fries. In the early days of the boardwalk in Ocean City, Mr. JT Thrashers introduced a unique concept. A food concession stand that would specialize in only one product, the noble French fry. And the thing that Thrashers fries do differently is that they only sell fries. They only sell fries and they only give you one continent, get side of it again. Yes, in 1926, Mr. Thrashers had one goal to produce the best tasting french fry ever. Today, five generations and 82 years later, tradition still reign supreme. Nowhere will better french fries be found. Everyone else is giving you like chicken wings, burgers, you know, all they're trying to be all things to all people. And Marl thinks to himself, well wait a minute, why is this brand doing so brilliantly? It's because they are specializing. And there's something in this power of specialization in sacrificing, peripheral offerings. Jerry Marl described this experience on the how I built this podcast. I saw something like, just couldn't believe it was Ocean City, Maryland. And they had a place and they were selling boardwalk fries. There's a place they're called Thrashers. And there must have been 20 places selling boardwalk fries, but only one place had a long line. And that was Thrashers, it was one hundred feet long all day long. So me and the kids that got into our mind like, our hamburgers, fries, keep it simple, might work. And that's where the idea came from. Keep it simple, that was Jerry's mantra. Marl decides this is going to be the kind of key focus of his brand. He sets up his restaurant with his four sons, so straightforwardly enough, he calls it five guys. And he just offers a very, very short menu. It's basically burgers and fries. He doesn't have it to begin with yogurts and salads and chicken. He specializes in one area. This specialization worked. Shotten writes that the first store thrived. Jerry Quitt's day job and in 2002, as the brand grew, they began offering franchises. Since then, five guys has grown to become one of the American favorites in the Better Burger category. Back to 23 ABC and to make you a little hungry this morning, I'm finding out that in and out has officially lost its title as America's favorite burger chain. Now five guys hold the honor. And the brand is taking off globally with 1,800 stores worldwide and 1,500 more on the way. The CEO, Marl was asked by Forbes what led them to all this success. And he said this. We were pretty lucky. I'm real lucky that we stuck with our, we stuck the word guns, kept it simple. He says it was partly luck, but partly sticking to his guns, keeping it simple. And Richard says that keeping it simple really did help the brand grow. Now from a kind of no economic or logistical point of view, there are benefits to doing that. But what's really interesting is there is also a psychological benefit. Now let's say there's an alternate universe where there's five guys and there's six guys and they're competitors. And five guys do brilliant burgers. And nine out of ten. And six guys do brilliant burgers. And they score nine out of ten in terms of taste. Well, if six guys offer pizza and chicken and Chinese, even if the physical quality of their offering is just as amazing as five guys, people will not perceive it that way. Richard has evidence to prove this. Specifically, a study on the Gold dilution effect. Now that's not speculation. You mentioned this idea of the Gold dilution effect. So that's a study back from 2007 by Zhang and Fishback, the University of Chicago. And they did this beautifully simple study. They recruit a group of people. And then they split them into two subgroups. And half the people hear about the benefits of tomatoes. So you eat tomatoes and you have a reduced cancer risk. And those people are then asked, how good is tomato consumption at reducing cancer? They get their answer. They then get a new group, the second subgroup. They give them the same paragraph about cancer prevention. But then at the end, they add on a bit about tomatoes being good for stopping the generation of the eye. So the first group is told of one benefit of eating tomatoes. And the second group is told about two benefits you'll get if you eat tomatoes. That second group are then asked about how good a tomato is preventing cancer. And even though they have exactly the same information regarding cancer, they score it about 12-13% lower. This is totally irrational. People rated eating tomatoes as 12% more effective at preventing cancer when this was given as the only benefit compared to it being listed alongside with another benefit. It's not logical. But we are more confident when just one advantage is presented. To zang and fishback, this suggested that conveying one clear benefit is simply just more persuasive. Adding multiple benefits seems to dilute credibility. So the point here is if you add on extra reasons about why a vegetable is super healthy or a burger joint is really tasty. If you give people multiple reasons, rather than those additional reasons adding to the appeal or the believability of the offering, they actually reduce it because people have a rule of thumb that we can't be all things to all people. That a jack of a trade, that jack of all trades is a master of none. And once we have this rule in our head, we apply it even in situations where it's probably not appropriate. Five guys kept it simple and succeeded because of it. They now serve 165 million burgers a year. They rake in over $2.3 billion in sales per year. And Richard is fairly certain that this success wouldn't have happened if five guys had tried to offer a full menu. By applying this evidence-backed behavioural insight, the gold dilution effect, five guys succeeded. But that's not the only example we'll cover today. We've got two more, starting with craft and their world-famous mac and cheese. There's a theme that runs through an awful lot of experimentation, especially around food, which is what we expect to taste, affects the actual taste. So if you think something's going to be amazing, it becomes a self-affilling prophecy. So if you think five guys are going to be amazing because you know they're a specialist, the same burger will taste better than if you thought they were a poor quality generalist. Now that specialism is a positive effect on perceptions and then taste. One of the things that leads to a negative expectation about taste, especially in America, and this is definitely a culturally specific one. I don't think you see the same effect in France. I'm pretty sure there are studies to that effect. But there is this expectation that if something is unhealthy in America, people assume that it will taste better. If you think food is unhealthy, you'll actually assume it tastes better. Evidence for this comes from a 2006 study. So the study in question comes from Ragunathan. So it's 2006 study and he's at the McCoom's Business School at Austin. in Texas University and what he does gets his group of Americans to try an Indian buffet and every different food item they have to score how much they like it. Raghunathan doesn't care about the scores for most of the items. The basmati rice, the nons, the curries. He only cares about how people score the mango lassi. The rest of the food is there just a smoke scream. Now with the mango lassi some of the diners are told that it is a Indian health drink, other diners are told that it is an unhealthy Indian drink. Now when people come to rate the lassi the key finding is that the people who think it's unhealthy, they rate it 55% higher than the people who think it's healthy. Now that is a massive change. Here's Raghunathan explaining the results. In the context of food more tasty equals less healthy. And most people if you ask them do you think that healthy food is less tasty or unhealthy food is tasty? They probably say yes. But why is this? If we are told something's healthy we assume it's going to be poor quality. That leads us to look for confirming evidence and it becomes this self-fulfilling prophecy. So the danger here is when brands want to communicate a health message they are actually diminishing the taste that people experience. And that's exactly the challenge Kraft had back in 2016. So 2016 Kraft is an absolute gigantic gargantuan brand in North America. In Canada it is huge. It's like a real kind of part of people's childhood and culture, massive sales. Kraft and I've been being too unkind though is not the healthiest of dishes. It's got lots of artificial preservatives in that era. And what they realise is that there is an increasing trend of people disliking that. So they want to remove those chemical nasties and they'll replace them with natural colourings like paprika or turmeric. Specifically Kraft wanted to improve its mac and cheese. The most popular mac and cheese ready meal in the world. But they also realise though is that just as Raghunathan has said, if they tell people they're doing that they will create this negative perception. So what they do is they change the recipe. They get rid of the chemical nasties, they replace them with much healthier, fresh, natural turnitives. They don't tell anyone. Obviously on the side of the pack and that little white box with the ingredients they have to legally say what they're doing but no one reads that. They wait a few months and then to a massive fanfare they come out and say, we have just been doing the world's largest blind taste test and they do it in a very funny, very witty, very attention grabbing way. And the great thing there is because people had tried this product for three months, they hadn't noticed any difference. Kraft managed to get around this problem of self-fulding prophecies. Richard's right, the reaction was very positive. Kraft macaroni and cheese, the original comfort food, the meal mom's whip up for less than two dollars is getting a healthy makeover. I think they're keeping up with the times and they'll be a wonderful thing. God knows what's really in it. So that's great. No more synthetic coloring, artificial preservatives and flavors. New coloring will come from natural sources like paprika. If the taste is the same, then it's all good. And Kraft avoided negative reactions because they only told buyers about the change three months after they made it. Evidence for this comes from a 2006 study by Lee, Frederick and Arieli. They asked 388 bargoers to taste two drinks. One was a regular beer, it was a Budweiser, and another was a slightly altered beer. It was called the MIT Brew. This was a regular Budweiser beer, plus a few drops of Balsamic vinegar. Now, the drinkers were split into three groups. The first group tasted the beer without knowing anything about the secret ingredients. So they weren't told about the few drops of Balsamic vinegar. And one question, 59% of them actually preferred the MIT Brew, the Balsamic vinegar brew, to normal Budweiser. So the majority actually preferred that kind of strange concoction. Now, the second group were told that the MIT brew actually contained Balsamic vinegar before tasting it. And consistent with other experiments that Richard has discussed, hearing about and off putting ingredient affected taste perceptions in this setup, a mere 30% preferred the MIT brew. So a massive drop from the control. Now, the third group were told that the beer contained vinegar too, but they were only told that after they tasted it. Here, 52% of the drinkers preferred the MIT brew. That is almost double compared to those who were told about the vinegar before sampling. This proved that perception will shape what you taste. If craft had told people about the changes immediately, expectations would have shaped perception and loyal customers would have just tasted a worse product. But by telling customers that the ingredients have changed after they had charred it for three months, craft mac and cheese fans, well, they just didn't mind so much. So that, I think, was a really smart way of recognising a behavioural science inside that is causing a big problem. And then rather than trying to just ignore that human truth, they launch their campaign in a way that mitigated it. Crafty's behavioural science to create a healthier product without turning off buyers. Five guys use the gold dilution effect to create one of the fastest growing fast food chains of all time. But that's not all. Richard claims Starbucks used behavioural science too, and he makes a very interesting claim. I think if Starbucks had behaved logically, pumpkin spice latte would be a distant memory. Here all about that after this quick break. The podcast I'd like to recommend today after you listen to Nudge is Billion Dollar Moves, hosted by Sarah Chenn Spellings, and is brought to you, of course, by the HubSpot podcast network, the audio destination for business professionals. Listen and you will hear Sarah ask the hard questions and uncover these triumphs, failures and lessons from the top business leaders. Also, you can make your own billion dollar moves in venture, business and life. It's a wonderful podcast, so go and listen to Billion Dollar Moves, wherever you get your podcasts. Hello and welcome back, you are listening to Nudge with me, Phil. Agnew So far, Richard has shared how five guys and craft have used behavioural science to market their products. But arguably the most well-known example from Richard's book is Starbucks and their pumpkin spice latte. I think with pumpkin spice latte, it's a phenomenally large brand, I think it's a billion dollars in sales. And it's been around about 20 years. You go back to when it launched. It'd have lasted a couple of years and then been taken off the menu because no one was buying it. Because it's got quite a powerful taste. And when they launch, it does very well. What 99% of marketers would think is, "Oh, we've got this amazingly high selling item. Let's promote it more, let's push it more. Let's try and maximize the revenue we can get." But what Starbucks did is take it off the menu and then they brought it back the next year. And then it sold a huge amount and then they took it off the menu. They were very much focused on long-term revenue not maximising immediate sales. And the real benefit in the long-term of taking this best selling item off the menu is it avoids the problem of habituation. So habituation is, you might like a product or a service. But over time, we kind of acclimatise to it and we appreciate it less and less. When a resource is limited, we want it more. It happens with pumpkin spice lattes, glass-dumbrie tickets, reservation at Michelin Star restaurants, and also with gift vouchers. In 2010, researchers, Shoe and Ganesi offered participants a gift voucher worth $6 for free coffee and cake at a local cafe. Quite a nice gift voucher. Now, they randomly gave participants one of two different variations of the vouchers. One variation expired in three weeks and the other variation expired in two months, much longer. Now, conventional wisdom suggests that giving customers a longer window to spend the voucher would make the customers more likely to use it. After all, they have more time to use it. But that is not what happened. When the expiry date was two months away, only 6% of the vouchers were redeemed within that time. But with a shorter deadline, just three weeks, 33% of the vouchers were used within that time. It showed that scarcity inspires action. And Richard has more evidence to show that pausing and experience, stopping an experience, whether it be access to a pumpkin spice latte or perhaps an enjoyable massage, will make us value that experience more. So some lovely studies that back this up, there's a lesser known study by Leif Nelson. So he's at NYU and he does this in 2008. And he gets people to try massage chair and then they rate how much they like the experience. And everyone enjoys it. So it's a pleasant experience. But there's a bit of a twist. Sometimes people get a three minute uninterrupted massage and they rate the experience at 6.05 out of nine. Other people, they still use it for three minutes. But there's a gap in the middle of 20 seconds. Now that group, even though they get less positive stimulus, they rate it at 7.05 out of nine. Remember the other group with 6.05. So they rate it 17% higher. So by giving people less of the positive experience, you actually create a bigger impact. And what's happening here is you are removing the stimulus before people habitual. This sounds counterproductive. If the experience is enjoyable, then why should you add breaks? But research proves that breaks help us avoid habituation. Richard writes that the break in pleasure prevents us from becoming too familiar with the positive experience and thus noticing it less. This is exactly what Pumpkin Spice Larty do. You know, have it out for six weeks, eight weeks, whatever it is. And people maybe have a chance to have two or three Pumpkin Spice Larties. But by not letting them get their seventh or the eighth or their ninth in a short succession, you stop this problem of habituation. And then when it comes back in a year's time, everyone is enthused and looking forward to it. And that, I don't know, some might say, that's obvious, that's kind of, we all know this. But how many brands do it? I mean, virtually every other brand would have destroyed Pumpkin Spice Larties by keeping them on the menu permanently. So it's one of my favourite examples in the book. Because even if lots of people know the experimentation, it takes, I think, a brilliant, forceful, strong-will-marker to actually make it happen. In the book, Richard and Michael Aaron share a similar British example. They write how tempting it is for a brand to cash in on popularity for a limited product. And in the 1980s, Cadbury's felt this pressure with their limited edition Cadbury's cream eggs. Previously, the eggs were only available in the run-up to Easter. But facing pressure to hit sales targets, Cadbury's started to make the eggs available all year round. What happened? Or sales slumped? The novelty wore off. Unfortunately, Cadbury's noticed the problem. They quickly reverted the Cadbury's eggs back to seasonal availability. And 40 years later, Cadbury's cream eggs are still one of the most successful limited products today. That is all we have time for on today's episode of Nudge. But don't worry, Richard and I recorded a few more episodes of Nudge. And the next one will be airing next week. To make sure you don't miss that, then please do go and subscribe to the Nudge newsletter. Not only will you get the incredibly popular Friday newsletter, which almost 10,000 of you read every single week. And on that newsletter, I share the best behavioral science insight I have found from that week. It's well worth a read. But in addition to that, you also get an email reminder every Monday when the latest episode goes out. So if you don't want to miss Richard's next episode, sign up to the newsletter, just go to nudgepodcast.com, add his nudgepodcast.com and click newsletter in the menu to sign up. It is totally free and you can read all of the previous newsletters at no cost as well. If you've enjoyed today's episode, you'll love Richard and Michael Aaron's book, Hacking the Human Mind. I think it is incredible. It is fantastic. I genuinely love all of the books, Richard writes, but this one is one of his best. Just search for Hacking the Human Mind, wherever you get your books, and you will find it. Thank you for listening folks. I've been your host Phil Agnew, and I'll be back next Monday with another episode of Nudge, again with Richard Chotten. Next week, Richard explains how Guinness became the most popular pint in Britain. Don't miss it.