Five years ago, Diversified Restaurant Holdings Inc. chief executive Michael Ansley was looking to complement his successful Buffalo Wild Wings franchise business with locations of Five Guys Burgers and Fries. But at the last minute, he decided to forge his own path into the exploding better-burger segment by developing Bagger Dave’s Legendary Burger Tavern.
Diversified opened the first Bagger Dave’s more than a year later, debuting the burger concept with a full bar in Berkley, Mich., in January 2008. The create-your-own and specialty burgers were meant to attract the office crowd that had traditionally flocked to fast-casual burger brands, Ansley said, but the full bar with 90 craft beers from Michigan breweries, the table service and the local-tavern decor were intended to appeal to families.
Headquarters: Southfield, Mich.
Segment: full-service better burger
Menu: burgers, fries and chips; craft beers
No. of restaurants: 5
Average check: $10.75
Systemwide sales: estimated $59 million between five Bagger Dave’s, 21 Buffalo Wild Wings units
Leadership: Michael Ansley, chief executive; Bill McClintock, senior vice president of franchise development; Jason Curtis, chief operating officer
Year founded: 2006
Method of growth: company and franchise stores
“The better-burger guys will be fighting over lunch, and we’ll be sitting here with dinner and weekends,” he said. “Not to take anything away from Five Guys and the rest, but that’s already been done, so I don’t want to go head-to-head with them.”
With a per-person average check of $10.75, not including alcohol, Bagger Dave’s sits above typical fast-casual prices but remains a more affordable option when compared to casual-dining bar-and-grill concepts, he said, noting that positioning puts Bagger Dave’s in a sweet spot.
“We cost a little more than fast casual, and we think it’s to our advantage,” Ansley said. “The Five Guys and Smashburgers are doing 70 percent lunch, but we’re doing 40 percent dinner, 20 percent lunch and 20 percent midday. … I don’t believe full service is dead or that everything’s going to go fast casual. Everybody still wants to be waited on.”
And burgers are undisputedly hot, with consumption increasing notably in the past two years, according to Technomic. In a report released in July, the Chicago-based research firm found that nearly 50 percent of consumers eat a burger at least once a week, compared to 38 percent who did so in 2009.
Bagger Dave’s five Michigan locations are company owned, but Diversified has permission to franchise in Ohio, Indiana, Kentucky, Illinois and Wisconsin.
Bill McClintock, senior vice president of franchise development, said Bagger Dave’s would recruit experienced multiunit operators for its franchise push to avoid growing the brand too quickly or with the wrong people. Bagger Dave’s is offering two incentives: Prospective franchisees who agree to open three restaurants in three years will receive a 26-week waiver on royalties, and those who agree to open six stores in five years will receive a 52-week royalty waiver.
“We’re not giving money away, but we’re making a statement that this is a solid brand, we have lots of experience, and we’re doing it the right way,” McClintock said. “If you come onboard, we’ll share some risk.”
“That’s a significant investment on our part,” Ansley said, “but given the lending environment, we need to do it to get this jump-started.”
The states Diversified is targeting for Bagger Dave’s have some of the highest unemployment rates in the country, Ansley said, but many markets in those states still have the population and wealth to support a full-service concept at Bagger Dave’s price point.
While Detroit’s population has fallen to 700,000, he added, the metro area still has 4.7 million people with a high per-capita income. Ansley likes other “overlooked” markets, like Indianapolis and the Ohio cities of Dayton and Columbus, for similar reasons.
He added that his experience as a franchisee in the Buffalo Wild Wings system — Diversified has 21 locations open in Michigan and Florida, with rights to build 16 more by 2017 — taught him how to be a restaurateur and will give him credibility with future Bagger Dave’s operators.
McClintock agreed, saying: “It’s unique in franchising to have a solid franchisee like Michael become a franchisor. I think it will be attractive as we build the brand. Franchisees will see him and know he understands both sides of the equation.”
Contact Mark Brandau at [email protected]  .