In-N-Out Burger at a crossroads?

Thomas Lifson
Sometimes a company comes along that helps restore your faith in American capitalism. It is a shame that more Americans have not had the opportunity to visit In-N-Out Burger, which is just such a company.  It comes as close to the ideal of a hamburger as is possible in a fast food setting. Prices are a little higher, but the quality is first class. Everything is fresh and top quality. The menu is limited to burgers, fries, and drinks, including the best fast food milkshakes I have ever had.

The company famously pays its staff more than other fast food places, and it shows. They are uniformly cheerful, on the ball, and anxious to get it right for the customer. I still remember my first visit to In-N-Out Burger; bye-bye, McDonalds.

I rarely eat fast food, but when I do, it is nearly always In-N-Out. Normally, that is when traveling by car, and I know exactly which freeway exits to use on the way to LA, or Sacramento, or Santa Rosa to find superior fast food.

Most intriguing to me, the company does not use the franchise system, but rather owns all of its 232 units, and finances growth through internal cash generation. Privately held, the company's financial results are not released publicly, but it is reckoned to be very profitable. This is conservative management personified: keep it simple, do it right, invest in quality, and treat the customer as king.

And, oh yes, have a personality.

The company is endearingly quirky. You can find Biblical verses on the inside of the rim at the bottom of drink cups. Everyone knows where to look. It is almost like a Christian version of the fortune cookie. The company has a "secret menu" (it calls it the not-so-secret menu) with slight variations on its items. This cleverly builds patron loyalty, as once initiated in the secrets by friends, people feel like an insider. I always order my burgers protein-style (lettuce substituting for the bun), for instance.

We Californians tend to feel a bit possessive of In-N-Out, as our superior version of the fast food on offer elsewhere in America (the company has expanded into neighboring states in the past decade, but no farther).

But according to a story in today's LA Times by Michael Hiltzik, thanks to a court battle, control of the company is about to pass into the hands of a 27 year old heiress, Lynsi Martinez, and nobody knows what, if any changes she will make. Given the structure of ownership (which is on the public record, thanks to a family legal battle), she will apparently have absolute control.

Once she takes formal ownership, if she declares In-N-Out will henceforth sell only Buffalo Burgers or Broccoli Burgers, or will dispense prayers rather than food, her word will be law. Indeed, given the inviolability of the trusts, her word probably already is law.

What should keep the chain's fans up at night is whether In-N-Out can continue to tread the fine line between modern business imperatives and its own traditions. [Chief executive Mark] Taylor has been quoted as saying he intends to stick to a pattern of opening 10 to 12 new stores a year, though [former executive Robert] Boyd claimed in his lawsuit that he had heard him express national ambitions.

An expansion across the Mississippi would probably strain In-N-Out's self-generated financial resources to the limit -- the chain doesn't even accept franchisees. But a public offering, much less a buyout by a public company, would almost certainly render it unrecognizable. The homogenizing cost-cutting of corporate number-crunchers ("let's drop the beef by a grade; the customers won't notice") could mean the end of In-N-Out as we know it.

If the company is sold and ruined by the new owners, we will all be the poorer for it. For those readers who have never indulged in the company's burgers, on your next West Coast trip, make a point of visiting a store.

Hat tip: JBW
Sometimes a company comes along that helps restore your faith in American capitalism. It is a shame that more Americans have not had the opportunity to visit In-N-Out Burger, which is just such a company.  It comes as close to the ideal of a hamburger as is possible in a fast food setting. Prices are a little higher, but the quality is first class. Everything is fresh and top quality. The menu is limited to burgers, fries, and drinks, including the best fast food milkshakes I have ever had.

The company famously pays its staff more than other fast food places, and it shows. They are uniformly cheerful, on the ball, and anxious to get it right for the customer. I still remember my first visit to In-N-Out Burger; bye-bye, McDonalds.

I rarely eat fast food, but when I do, it is nearly always In-N-Out. Normally, that is when traveling by car, and I know exactly which freeway exits to use on the way to LA, or Sacramento, or Santa Rosa to find superior fast food.

Most intriguing to me, the company does not use the franchise system, but rather owns all of its 232 units, and finances growth through internal cash generation. Privately held, the company's financial results are not released publicly, but it is reckoned to be very profitable. This is conservative management personified: keep it simple, do it right, invest in quality, and treat the customer as king.

And, oh yes, have a personality.

The company is endearingly quirky. You can find Biblical verses on the inside of the rim at the bottom of drink cups. Everyone knows where to look. It is almost like a Christian version of the fortune cookie. The company has a "secret menu" (it calls it the not-so-secret menu) with slight variations on its items. This cleverly builds patron loyalty, as once initiated in the secrets by friends, people feel like an insider. I always order my burgers protein-style (lettuce substituting for the bun), for instance.

We Californians tend to feel a bit possessive of In-N-Out, as our superior version of the fast food on offer elsewhere in America (the company has expanded into neighboring states in the past decade, but no farther).

But according to a story in today's LA Times by Michael Hiltzik, thanks to a court battle, control of the company is about to pass into the hands of a 27 year old heiress, Lynsi Martinez, and nobody knows what, if any changes she will make. Given the structure of ownership (which is on the public record, thanks to a family legal battle), she will apparently have absolute control.

Once she takes formal ownership, if she declares In-N-Out will henceforth sell only Buffalo Burgers or Broccoli Burgers, or will dispense prayers rather than food, her word will be law. Indeed, given the inviolability of the trusts, her word probably already is law.

What should keep the chain's fans up at night is whether In-N-Out can continue to tread the fine line between modern business imperatives and its own traditions. [Chief executive Mark] Taylor has been quoted as saying he intends to stick to a pattern of opening 10 to 12 new stores a year, though [former executive Robert] Boyd claimed in his lawsuit that he had heard him express national ambitions.

An expansion across the Mississippi would probably strain In-N-Out's self-generated financial resources to the limit -- the chain doesn't even accept franchisees. But a public offering, much less a buyout by a public company, would almost certainly render it unrecognizable. The homogenizing cost-cutting of corporate number-crunchers ("let's drop the beef by a grade; the customers won't notice") could mean the end of In-N-Out as we know it.

If the company is sold and ruined by the new owners, we will all be the poorer for it. For those readers who have never indulged in the company's burgers, on your next West Coast trip, make a point of visiting a store.

Hat tip: JBW