Five Guys franchise locations close in several states as costs rise

Franchise owners navigate rising costs and shrinking profits

A small number of Five Guys franchise locations across different states have closed, according to local reporting and location listings. The reasons appear to vary by market, but restaurant operators broadly cite higher operating costs and demand pressures.

What’s driving these sudden shutdowns, and how is inflation reshaping the way Americans dine out? Let’s explore the economic pressures behind the closures and what they mean for the future of one of America’s most popular burger chains.

What inflation means for restaurants

Inflation refers to the increase in prices of goods and services over time, affecting both consumers and businesses. Restaurants, including Five Guys, face higher costs for food, utilities, transportation, and labor, which reduces overall profit margins.

When franchisees cannot raise menu prices in proportion to competition, their revenue cannot offset rising expenses. Inflation is one of the most significant pressures on restaurant owners’ financial decisions today.

Impact of food cost inflation

Prices for core ingredients like beef, potatoes, and fresh vegetables have risen sharply due to inflation. These cost increases significantly reduce franchise owners’ profit margins if menu prices do not adjust accordingly.

Additional expenses, such as higher delivery and utility costs, add financial pressure on restaurants. Rising food prices are a critical factor prompting some franchise owners to close underperforming locations.

Labor costs increasing

Labor costs, including minimum wages and hourly pay, have steadily increased across the U.S. Restaurants like Five Guys must offer competitive wages to retain staff, raising operational expenses without guaranteeing higher revenue.

These higher labor costs take a significant portion of revenue, leaving less for rent, food, and other operational expenses. Franchise owners, particularly in smaller markets, face a difficult balance between staffing and profitability.

Declining dine-out demand

Rising everyday expenses, such as rent, gas, and groceries, have caused some Americans to reduce their dining out. Many households are choosing grocery meals or lower-cost alternatives over visiting fast-casual restaurants.

This shift has lowered customer traffic at establishments like Five Guys, especially those with higher price points. Decreased foot traffic directly impacts franchisees’ ability to maintain profitable operations.

Localized closures

Examples reported in local and national coverage include a Salem, Oregon location that closed in May 2025 and a Huntington Beach, California location reported closed in August 2025, decisions that appear to have been made at the franchise level.

Owners reported that rising operational costs and competitive pressures made these locations unsustainable. Local closures highlight the variation in success across different markets.

Community impact of closures

Local closures affect not only dining options but also employees who may need to find new work. Customers often have to travel farther or seek alternatives when their favorite restaurants close.

The loss of jobs and services can also impact local economies, especially in smaller towns. These closures show how operational and economic pressures can ripple through communities.

Five Guys franchise model basics

Five Guys, founded in 1986 in Arlington, Virginia, is a fast-casual burger chain. Growth has largely been driven by franchise owners operating local restaurants, with the corporate office providing branding and support.

Franchisees pay fees and royalties to the company while managing daily operations and finances. Success depends on strong sales performance, cost management, and market demand in each location.

Franchise economics under pressure

Franchisees must carefully balance revenue against rent, labor, food costs, and royalties. Rising expenses without corresponding sales increases quickly erode profits, sometimes forcing closures.

Maintaining profitability requires monitoring expenses and adapting to local market conditions. When locations consistently underperform, franchise owners may opt to close them to prevent further losses.

Competition in the burger market

The fast-casual burger sector is competitive, with chains like Shake Shack, Smashburger, and regional gourmet burger shops vying for customers. Increased options give diners alternatives if prices or quality do not meet expectations.

Competition forces franchise owners to maintain high-quality products while keeping costs under control. Failure to adapt to local market preferences can negatively affect sales and profitability.

Broader restaurant industry trends

Across the industry, several chains have publicly announced cost-cutting and footprint changes.

TGI Fridays has undergone bankruptcy-related restructuring and closures, and Red Robin has disclosed plans to evaluate and potentially exit underperforming leases over time.

Rising food, labor, and energy costs have created an environment where maintaining profitability is increasingly difficult. These trends highlight the systemic pressures facing restaurant operators nationwide.

The role of location economics

A restaurant’s success depends heavily on its location, foot traffic, and local consumer spending. Locations with insufficient customer demand are more likely to close due to unprofitability.

High rents or underperforming neighborhoods make it challenging for franchisees to cover costs. Local economic conditions, rather than brand-wide issues, often drive these closure decisions.

In other news, these department store chains plan widespread closures through 2026.

Franchisee decision-making

Franchise owners regularly evaluate operations based on profitability and local market conditions. If a location consistently loses money, closure may be the most responsible business decision.

These choices protect the owner from further losses and allow the owner to focus on more profitable areas. Economic pressures, operational costs, and competition all influence these decisions.

Did you hear the news? Chick-fil-A is offering free food for a year through its Golden Cup contest.

Drop a comment with your thoughts on how rising costs are changing the restaurant industry, and don’t forget to like and share this story if you found it insightful.

This slideshow was made with AI assistance and human editing.

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