In-N-Out Burgers Inc.

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In-N-Out Burgers Inc.

4199 Campus Drive, 9th Floor
Irvine, California 92612
U.S.A.
Telephone: (949) 509-6200
Fax: (949) 509-6389
Web site: http://www.in-n-out.com

Private Company
Incorporated: 1948
Employees: 3,500
Sales: $285 million (2002 est.)
NAIC: 722211 Limited-Service Restaurants

In-N-Out Burgers Inc. is a leading fast-food retail chain with more than 200 locations in California, Arizona, and Nevada. Known for its made-to-order hamburgers, fresh ingredients, and efficient service, it has maintained the same basic menu and a simple, customer-friendly philosophy since its founding in 1948. The company serves up hamburgers, cheeseburgers, the Double-Double, French fries, malts, shakes, and sodas. The restaurants do not use microwaves, heat lamps, or freezers, guaranteeing that each guest's order is fresh and made-to-order. In-N-Out Burger is a private, family-run, non-franchised company.

Dawn of the Drive-Thru

In-N-Out Burger started in the Los Angeles suburb of Baldwin Park, California, in 1948. Harry Snyder developed the idea of a drive-thru hamburger restaurant where customers would be able to order their food via a two-way speaker unit. This was a rather novel idea, as most hamburger stands of the post-World War II era employed carhops to serve food to customers seated in their cars. Thus, Harry Snyder and his wife, Esther, opened what is said to be California's first drive-thru restaurant. The menu was limited to burgers, french fries, soft drinks, and milk shakes. The Snyders' priorities were simple: serve customers high-quality, fresh food with efficient, friendly service in a clean and tidy environment. This business philosophy and the original menu have remained largely unchanged throughout the years.

It was very important to the Snyders to maintain control of each location in order to continue achieving the high standards they had set as In-N-Out Burger's norm. Consequently, Harry and Esther Snyder did not rush to open further outlets. In fact, three years passed before they added a second In-N-Out Burger location. This new outlet was in the San Gabriel Valley east of Los Angeles in the town of Covina. As Californians became progressively car dependent and fast-food drive-thru restaurants grew in popularity, the Snyders gradually added more outlets, some with double-lane drive-thru service to accommodate more customers. The Snyders' two sons, Rich and Guy, began working at In-N-Out Burger at an early age. They were expected to work in the restaurants and learn the business from the ground up.

Harry Snyder oversaw In-N-Out Burger until 1976, when he passed away from cancer. By then, In-N-Out Burger had grown to 18 units, all in Los Angeles County. At the age of 24, Rich Snyder assumed the role of president. His older brother, Guy, became vice-president, and Esther continued to work in the accounting department.

Corporate Strategy

Though Rich Snyder had plans for In-N-Out Burger's expansion and growth, one thing he would not change after taking over as president was the menu, which included the following items: Double-Doubles (a double cheeseburger), cheeseburgers, hamburgers, French fries, milk, coffee, pink lemonade, iced tea and various sodas, and milk shakes in vanilla, chocolate, or strawberry. The only addition to the original menu was a lemon-lime soda. A non-menu item that eventually gained word-of-mouth popularity in Southern California was the Animal, a Double-Double with grilled onions and extra sauce (all In-NOut burgers came with a special sauce somewhat similar to Thousand Island dressing), which was voted "Best Off-the-Menu Special" in the 1996 Buzz Magazine restaurant awards.

Refusing to change the menu was unusual for a fast-food chain, but adding other items, the Snyders feared, would affect the quality of the food and the service. By keeping the menu short, In-N-Out Burger could maintain control and guarantee high-caliber food. In the July 24, 1989, issue of Forbes, Rich Snyder stated, "It's hard enough to sell burgers, fries and drinks right. And when you start adding things, it gets worse."

Rich Snyder remained true to his parents' goal of serving only the freshest foods available. None of the ingredients were frozen, and no microwaves were used. All items were made to order, contributing to what some in the food industry considered a long wait for a fast-food hamburger. The milk shakes were made with real ice cream, and the burgers were 100 percent beef. The beef was ground and formed into patties by In-N-Out workers at the Baldwin Park facility. The lettuce was broken into leaves by hand, and the buns were baked fresh using an old-fashioned sponge dough that took six to eight hours to rise. The potatoes for the french fries were shipped in burlap sacks to the outlets, where associates cut them by hand. In-N-Out has used Southern California-grown Kennebec potatoes, which are said to be ideal for frying. The French fries have always been fried in cholesterol-free vegetable oil.

Rich Snyder also maintained his family's opposition to franchising. While McDonald's, which began the same year as In-NOut, decided to franchise in 1954, the Snyders, though inundated with franchise inquiries, remained firm. They thought franchising would cause them to lose control of In-N-Out Burger and the business philosophy they had worked so hard to achieve and maintain. As Rich Snyder commented about franchising in Forbes: "My feeling is I would be prostituting my parents by doing that. There is money to be made by doing those things, but you lose something, and I don't want to lose what I was raised with all my life." Fast growth was not one of the Snyders' goals, but they did have plans for In-N-Out Burger's expansion.

The Snyders were also committed to viewing employees as if they were family members. Employees, called associates, were treated with respect. Pay was a step above that at other fast-food restaurants. In 1989, part-time associates earned $6 per hour, well above the minimum wage of $4.25. Managers made an average of $63,000 annually. The combination of intensive training and good wages parlayed the associates into capable and friendly workers. At In-N-Out, the customer did not receive a pile of change but had the change counted back out loud. Because the Snyders demonstrated their appreciation of the associates, employee loyalty has been high at In-N-Out Burger. Some associates have been with the company for more than 20 years, and many have worked their way up from entry-level to managerial positions.

Growth in the 1980s

Soon after taking the reins at In-N-Out Burger, Rich Snyder founded a commissary at the In-N-Out Burger headquarters in Baldwin Park. The establishment of this commissary, where InN-Out Burger could receive, store, and ship equipment and food supplies to its outlets, gave In-N-Out Burger quality control over all In-N-Out ingredients. The commissary was a busy location: hamburger patties were formed, potatoes were checked for blemishes and quality, equipment was maintained, and supplies were received and distributed to In-N-Out locations. Rich Snyder also established the In-N-Out University in 1983. The university, a training school for new managers, reinforced In-N-Out Burger's business tenets and standards and ensured uniformity of management techniques and methods.

The number of outlets continued to grow steadily under Rich Snyder's guidance. Expansion, however, was still a slow process, which can be partly attributed to the difficulties involved in securing building permits. Because In-N-Out Burger's food was cooked to order, the average wait at a drive-thru was approximately 12 minutes, significantly longer than at other fast-food drive-thru restaurants. This long wait occasionally resulted in traffic jams along busy urban streets, which caused city officials to delay building permits for In-N-Out Burger.

In-N-Out Burger changed tactics in the late 1980s and chose to open fewer double-lane drive-thru units and more restaurants with one drive-thru lane plus indoor and outdoor seating for patrons. The Snyders felt this change would accommodate larger crowds and better serve the customer, which was still one of their top priorities. Another change was their decision to lease property rather than to purchase it. Until 1989, In-N-Out Burger purchased most of their property. This meant seeking lower-priced locations, which were usually in outlying, suburban areas. Leasing property allowed In-N-Out to venture into more metropolitan areas with high property values, such as Santa Monica and West Los Angeles.

During Harry Snyder's leadership, expansion was limited to the Los Angeles County area. Rich Snyder decided to take InN-Out Burger south of Los Angeles County to the growing counties of Orange, Riverside, and San Bernardino. Most of the outlets were strategically located near freeway or highway off-ramps in highly visible locations to cater to the car-reliant customer.

Rich Snyder also expanded the company's non-food items. At In-N-Out, customers could purchase not only a juicy burger but also T-shirts, bumper stickers, and caps. Because of the success of the T-shirts, Rich Snyder in 1989 began a mail-order catalog, which eventually also included pins, key chains, mugs, and golf balls. Most of the T-shirts were emblazoned with artists' renderings of vintage cars parked outside In-N-Out Burger restaurants, reinforcing the nostalgic spirit that pervaded In-N-Out.

Company Perspectives:

The Snyder's business philosophy was simple: "Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment." These principles have worked so well over the years that they are still the company's fundamental philosophy.

In-N-Out Burger became active in donating funds to the prevention of child abuse in 1986. The In-N-Out Burger Foundation was established, and every April In-N-Out sponsored a company-wide fund-raising campaign. Canisters were placed in all In-N-Out outlets. In-N-Out matched three dollars for every dollar given up to $100,000. In-N-Out Burger also hosted a Children's Benefit Golf Tournament every spring. The money raised from this event was added to funds collected from the stores. All funds were then donated to various organizations throughout California with the intent to help abused and neglected children.

Corporate Changes in the Early 1990s

By the time Rich Snyder readied In-N-Out Burger to venture out of the Los Angeles area and into San Diego County in 1990, he had brought the number of locations up to 55. The first San Diego location was in Lemon Grove, south of the city of San Diego. The second unit, planned for northern San Diego County, was in Vista.

As In-N-Out Burger outlets were spreading outside Los Angeles County, Rich Snyder decided to relocate the corporate headquarters and the In-N-Out University from Baldwin Park to Irvine, California, a city 45 miles south in Orange County. The move, which took place in 1994, affected most of In-N-Out Burger's 200 corporate employees. The commissary, including the maintenance, meat plant, and warehouse employees, would remain in Baldwin Park. Irvine was home to the corporate offices of many other food-service giants, including Taco Bell, Red Robin, and El Torito. Another factor that might have been involved in selecting Irvine was that Rich Snyder resided in Newport Beach, located less than ten miles from Irvine.

On December 14, 1993, just months away from moving the corporate headquarters to Irvine, Rich Snyder was killed in a commuter plane crash. Snyder was on board an executive jet when it crash-landed at Irvine's John Wayne Airport. Snyder, Philip R. West (a childhood friend of Snyder's who was In-N-Out Burger's chief operating officer and executive vice-president), Jack Sims (another friend), and two pilots were killed. They were returning from a one-day trip to scout possible In-N-Out locations in Southern California and also to attend the opening of a Fresno store. Snyder and West had a personal agreement not to fly on the same plane together but apparently had broken the policy for this flight. It is believed that Rich's mother, Esther, had also been aboard the plane, but she chose to deplane at an earlier stop.

Rich Snyder was 41 years old at the time of his death. He had been married for the first time just a year before and had a daughter. During his tenure as president, he had increased the number of In-N-Out Burger units from 18 to 93. A born-again Christian, philanthropist, and conservative Republican supporter, he began each company meeting with the Pledge of Allegiance. Rich Snyder led In-N-Out Burger to tremendous growth while maintaining the simple philosophy his parents adopted in 1948.

Continued Expansion in the Mid-1990s

As a result of Rich Snyder's untimely death, Esther Snyder assumed the role of president and continued to work in the corporate offices. Rich's brother, Guy Snyder, who had been an executive vice-president but had not been actively participating in daily management duties at the time of Rich's death, was named chairman of the board. Rich Snyder's widow was appointed to the board of directors.

In April 1994, the corporate headquarters relocated to Irvine, California, as planned. Expansion continued under Guy Snyder's direction, with new In-N-Out Burger outlets opening in northern California and Las Vegas, Nevada, as well as in towns with existing In-N-Out outlets. In-N-Out offered rentable cookout trailers for special occasions or corporate functions. Despite this growth, Guy Snyder did not stray from his family's business outlook and continued to promote simplicity, efficiency, and fresh, cooked-to-order food.

By the late 1990s, with more than 120 outlets in California and Nevada, In-N-Out Burger showed no signs of slowing down, and as the number of their restaurants grew, so did their popularity. In-N-Out Burger was the winner, for example, in the quick-service burger division in the 1997 Restaurants & Institutions annual poll. In-N-Out beat Wendy's, which had won the category for the previous eight years. According to the February 1, 1997, issue of Restaurants & Institutions, the criteria upon which the restaurants were judged included quality of food, menu variety, service, atmosphere, value, cleanliness, and convenience. In-NOut Burger ranked first in four (quality of food, service, value, and cleanliness) of the seven categories. It was quite a coup for the family-owned chain, as this was the first year In-N-Out Burger was eligible to compete in the survey. In-N-Out Burger scored highly in the customer-loyalty category as well, with many respondents ranking it highest in overall satisfaction.

Within its base of Southern California, In-N-Out was also maintaining a popular, almost cult-like following. In Pasadena Weekly's "Best of 1996" readers' poll, In-N-Out Burger won the categories "Best Fast Food" and "Best Burger." According to the July 24, 1989, issue of Forbes, In-N-Out Burger's following included movie stars and corporate executives. Bob Hope, David Letterman, Farrah Fawcett, and Ryan O'Neal were among some of In-N-Out's more famous patrons.

Late 1990s and Beyond

Success continued for In-N-Out in the late 1990s. Steady and calculated growth continued, and by 1999 there were 140 restaurants scattered throughout California and Nevada. In-NOut was dealt a tragic blow that year when Guy Snyder died suddenly in his home in December at age 49. Esther, outliving her husband and two sons, reassumed the role of president and pledged to maintain the founding philosophy that she and her husband had created so many years ago.

Key Dates:

1948:: Harry and Esther Snyder open the first In-N-Out Burger.
1976:: Harry Snyder dies; there are 18 In-N-Outs in operation.
1983:: In-N-Out University is formed to train restaurant associates.
1989:: An In-N-Out mail order catalog is launched.
1990:: A store opens in San Diego county.
1993:: Rich Snyder is killed in a plane crash; Esther Snyder takes over as president and Guy Snyder is named chairman.
1999:: Guy Snyder dies at age 49.

In-N-Out continued opening new locations in the early 2000s at a pace of approximately ten per year. The chain's following was stronger than ever, and its sales often outpaced its competitors. Restaurant sales tracker Technomic estimated the company's 2002 revenue at $285 million, up 10 percent over the previous year's figure. Meanwhile, sales at McDonald's were stagnant and Burger King's sales had dropped by 3.4 percent. An In-N-Out fan summed up his perspective in an August 2005 Oakland Tribune article, claiming, "I think In-NOut is like Starbucks. Even if there is one on every corner, people will still come."

The chain's popularity often led entrepreneurs to "copycat" In-N-Out's strategy. For example, the company filed suit against James Van Blaricum in 2001 for turning his Lightning Burgers restaurant in Texas into an In-N-Out look-a-like. Van Blaricum allegedly told former employees to steal ideas from In-N-Out and had them sneak into In-N-Out restaurants to take pictures. He even froze an In-N-Out hamburger and took it to a lab for testing. As part of an out-of-court settlement, Van Blaricum agreed to pay $250,000 to In-N-Out, transfer all restaurant assets to the company, and stay out of the hamburger business for at least ten years. In-N-Out found itself involved in a similar trademark infringement suit in 2003 with Gerald Hans Rizza and Marie Manriquez Rizza.

During this time period, the company expanded its presence in California and Nevada and began opening stores in Arizona. Esther Snyder, now in her 80s, remained at the helm of In-NOut. The lack of third-generation family to run the business, however, left many industry observers wondering what would happen to the chain in the years to come. Nevertheless, company executives maintained that In-N-Out would continue to operate as a privately run entity and had no plans to go public or to franchise the chain.