course material

1. In-N-Out Burger
In-N-Out BurgerThe first In-N-Out Burger restaurant opened in 1948 in Baldwin Park in
Southern California. It was the nation’ s first drive-through hamburger stand. The
originalmenu offered a simple burger and fries. The Snyder’ s early business philosophy
was, “ Give customers the freshest, highest quality foods you can buy and provide themwith
friendly service in a sparkling clean environment.By 1970 the chain had 18 outlets. Son
Rich Snyder took over as president when his father died in 1976. Between 1976 and 1993
In-N-Out Burger expanded the chain to 93locations and established a commissary facility to
give the company greater control over its ingredients and created a company university to
train new management. By2003, the company had 171 locations in California, Arizona, and
Nevada.In 2007, an opening in Tucson broke company records for most burgers sold in a
day and week. The crowd was so large news helicopters circled overhead to film
thespectacle. The chain expanded to Utah in 2008 and in 2011 the company expanded into
Texas where they now have 16 locations.Today In-N-Out Burger has 281 locations andmore
than 18,000 employees. Analysts estimate annual revenues (2012) at more than $500
million with average revenue per location at $1.8 million which is more thandouble the
national average.The company’ s operation focus has led it to pursue a very controlled
expansion strategy. In-N-Out Burger is a privately-owned company. The Snyder family
hasstaunchly refused to franchise maintaining that it is impossible to maintain quality when
control has been relinquished.In-N-Out’ s red-and-while color scheme and 1950s decor has
remained virtually unchanged through the decades. The company’ s packaging highlights a
golden arrowstretched over the words “ In-N-Out” representative of the Americana of the
1950s. The packaging also includes clearly marked Biblical passages.To ensure freshness,
quality, cleanliness, and customer service, the company has inspectors that visit each
location on a monthly basis. In-N-Out Burgers stress thesame values today that they have
always emphasized: freshness, superior products, and good service.In-N-Out’ s menu has
remained largely unchanged since the restaurant’ s found in 1948. The menu consists of six
categories: hamburgers, cheeseburgers, double-doubles,french fries, milkshakes, and soft
drinks. In addition to ordering from the official menu, customers also order from the
“ secret menu” customizations. The “ wishburger,” for example, is a burger without the
meat. Although these customized food offerings are included on the company’ s POS
terminals and on customer receipts,they were not posted on the menu and did not appear in
any advertising; rather, customers had to be “ in the know” in order to ask for
them. Customers typicallylearned about the secret menu items by hearing about them from

2. someone else.Most of the $1 million plus the company spends on advertising each year goes
to radio and outdoor advertising. In-N-Out also offers a selection of logo-
brandedmemorabilia that can be purchased in the restaurant. Despite the minimal
advertising budget, the company has an extremely loyal base of customers, many of whom
liketo brag about their fanatical attachment to the chain. Other customers like to compare
notes on how far they were willing to drive, or wait in line, for a burger.Others carry In-N-
Out directories with location maps or load the In-N-Out app to their smart phones.Customer
enthusiasm and loyalty is unprecedented. In 2003, for example, Epinions.com boasted 156
restaurant reviews of In-N-Out, many from the Midwest and East Coastwhere the closest In-
N-Out Burger is thousands of miles away. By comparison, McDonald’ s with revenues 75
times greater than In-N-Out’ s and with 175 times as manylocations had only 450
postings.In-N-Out takes pride in its corporate culture that values and rewards its
employees. Generally, In-N-Out Burger pays their employees at least $2.00 per hour more
thantheir competitors. Restaurant managers average more the $100,000 per year plus a full
benefit package! As a result, in an industry noted for high turnover (200% to300% range)
In-N-Out’ s turnover is about 50%. The average tenure for managers is nearly fifteen years
compared to just one year for overall retail food industry.In-N-Out Burger has plenty of
competition. McDonald’ s is the world’ s largest fast food chain with more than 30,000
restaurants worldwide. Burger King remains in thenumber two spot with more than
12,000 locations. In-N-Out has more direct competition with California’ s Fatburger and
Johnny Rockets. Five Guys is the most directproduct competitor.Five Guys, based in
Virginia, was founded in 1986 and has 770 franchised locations throughout the U.S. Both
Five Guys and In-N-Out Burgers are a “ step above” theother fast food hamburger
places. In-N-Out has drive- thrus, Five Guys doesn’ t. Five Guys has experienced rapid
growth and expansion; In-N-Out has a very controlledgrowth strategy.The Snyders’
insistence on never sacrificing quality for the sake of accelerated growth lies in stark
contrast to the entrepreneurial culture of today, hypnotized by5X multipliers, viral cultural
adoption, and the sprint to IPO. Selling hamburgers may be as red, white, and blue of a
business model as they come, but turning downthe quick buck is an entirely different story.
Perhaps this is why in the midst of a booming health and slow food movement, In-N-Out
Burger remains a favorite.Questions:1. Why do some business analysts say that In-N-
Out’ s business model is “ counter intuitive” ?2. Why is it said that In-N-Out Burger has a
type of “ cult following” ?3. Why do you think In-N-Out Burger has an estimated 20%
profit margin while McDonald’ s reports a 6% profit margin?4. How would you
describe the competition between In-N-Out Burger and Five Guys?