In-N-Out: A Fast Food Cult
Analyzing In-N-Out's secret sauce (the operating model, not the spread packets)
As a California native living in Boston, In-N-Out is a must every time I go home. This family-owned, private chain has a cult-like following that includes celebrities and health fanatics. How do they do it? Let’s look at this company’s operations.
At its core, In-N-Out’s business model is selling mouth-watering burgers with great ingredients and customer service.
In-N-Out vows to use only fresh, quality ingredients. Harry Snyder, who co-founded the business with his wife Esther in 1948, was known to stand over butchers’ shoulders to make sure he got the meat he paid for. In the 1960s, when the fast food industry turned to frozen beef patties, Harry hired his own butchers to prepare fresh beef patties. This commitment to fresh, quality ingredients continues today. There are no freezers or microwaves in any of the restaurants. Every store is located within 500 miles of a distribution facility (in California, Arizona, Utah, and Texas) to ensure daily or nearly-daily deliveries of fresh patties and produce. This commitment to freshness is also why East Coasters have to eat at Shake Shack or Five Guys instead.
In-N-Out also differentiates itself from competitors with superior customer service. Employees are efficient, processing through long lines of customers at peak hours. Beyond that, they always respond pleasantly and smile when I ask for two extra packets of “spread” versus the disgruntled response I get when I ask for honey mustard at McDonald’s.
This difference stems from In-N-Out’s treatment of employees. The company ranked #8 on Glassdoor’s “Best Places to Work” this year. It is one of the few fast food chains in the United States that pays hourly employees more than the mandated minimum wage and provides benefits for everyone, including part-time workers. Store managers often make six-figure salaries, plus bonuses tied to store performance. As a result, they have the lowest turnover in the fast food industry, with an average manager tenure of 14 years.
Great service also comes from keeping things simple and streamlined. Harry Snyder’s philosophy was to “Do one thing, and do it well.” In-N-Out’s menu has burgers, fries, soda, and shakes, and looks resoundingly similar to the first menu. Its business and operating model have also remained constant. Unlike competitors such as McDonald’s that franchised to pursue growth, In-N-Out remains privately-owned, and per the website, “has no plans to take the company public or franchise any units.” With straightforward offerings and ownership, In-N-Out maintains focus on quality, friendliness, and cleanliness.
Lastly, In-N-Out has a philosophy that the “customer is everything.” The company prides itself on making customers happy. Every order is custom-made and prepared exactly per the customer’s request. For example, you can ask for fries “well-done” if you want them crunchier than usual, or “light” if you prefer fries that more closely resemble raw potatoes. You can also request fries covered in cheese or “animal style,” which means a regular order of fries covered in In-N-Out’s famous sauce, grilled onions, and cheese. Popular customer favorites led to a “secret menu” with dozens of customizations.
In an industry notorious for minimum wages and questionable ingredients (Remember Subway’s bread containing a chemical found in yoga mats and shoe soles?), In-N-Out’s operating model stands out as quite unique. The company has been highly effective at driving alignment between the operating and business models, resulting in decades of incredible success. I expect this success to continue as the current 33-year old president, Lynsi Snyder, carries on her grandfather Harry Snyder’s founding principles. In a 2013 interview, she reiterated, “We’re definitely not franchising, and we’re not going to sell” and “We’re not changing things like many other companies do…That’s kept us unique; it’s kept the customers feeling like we’re not a sellout.” While this commitment means that In-N-Out will expand at a much slower pace than competitors, it ensures In-N-Out will sustain its competitive advantage (and that I will be able to get animal-style cheeseburgers for years to come).
- http://www.businessinsider.com/in-n-out-heiress-expansion-2013-2 http://www.cbsnews.com/news/in-n-out-president-lynsi-snyder-keeping-burger-chain-a-family-business/
Student comments on In-N-Out: A Fast Food Cult
Having heard of In-N-Out but never having been there, I can now understand why it’s so popular in such a saturated fast-food market. Really interesting to look at their employment statistics, and I’d be curious to see how their HR and Revenues financials compare to McDonalds or other burger eateries.
Very interesting about the distribution centers and daily delivery, and the low employee turnover stats are impressive.
It’s also interesting to me that their slow geographical expansion is somewhat intentional, which I hadn’t really considered before. It definitely helps them maintain control over quality as well as preserve the West Coast allure of the brand, but at the expense of the volume that comes with faster geographic expansion. I’d be interested to see what their expansion plans are for the future. I’m also curious about their expansion within the geographies where they already exist – In these areas, have they been expanding to achieve a denser concentration of In-n-Outs?
As a California native, I really enjoyed reading about the “underbelly” of the single restaurant I go back to every time I go back to California (without fail). I’ve always wondered why In-N-Out keeps to the California area, and had assumed it was an “exclusivity” marketing ploy. I never knew that it was in fact related to their ingredient sourcing policies! I also like your point about keeping the menu simple and streamlined – it reminds me of the Benihana policy of only having 3 proteins on their menu to reduce consumer decision making time / food ingredient costs / storage space and reducing food waste. Nicely done!
… I also never knew you could ask for two packets of spread. :O