I recently read an article [1] profiling In-N-Out Burger, a fast-food chain based in California that has a cult-like following for their burgers and fries. In-N-Out recently opened their first restaurant in Colorado, and the wait time on opening day was up to 14 hours [2] at one point in the day. Customers at the end of the line would not reach the drive thru window before the restaurant closed! One customer was determined to be the first in line for the grand opening and waited for over 60 hours before opening to assure that was the case.

This likely sounds crazy to a lot of you, as it does to me, but it brings up some interesting business observations as well. How can a company who provides such a simple product offering (In-N-Out’s menu only includes less than 15 items) find such a following? Here are a few observations:

1. Privately Owned – In-N-Out is a private, family-owned company, now in the third generation. This gives them more control over their business model, as they don’t have to answer to outside stakeholders such as shareholders or stock analysts.
2. Specific Strategic Focus – As the Forbes article outlines, the company has a specific focus from a strategy perspective: deliberate expansion without using debt. It is somewhat remarkable that such a large company could boil down their growth strategy to something so simple.
3. Consistent Experience – I have never been to an In-N-Out Burger but can pick up through reading about the company that the customer experience is remarkably similar restaurant-to-restaurant, as it is with Chick-Fil-A, another fast-food restaurant that is family-owned and has an extremely loyal customer base. Both chains put a specific focus on training their employees to provide an experience to their customers, rather than simply churning through orders, avoiding situation such as this one.
4. Profitability – The company is more profitable on average than their competitors, and specifically manages to ensure that is the case. Above average profitability combined with very little leverage gives them more control over the growth plan for the company. They are not forced to grow to keep up with obligations or grow net income, so they can choose to be more deliberate with their growth, lowering the overall risk profile of the business.

When reflecting on In-N-Out’s profile, I am struck by the amount of fortitude it takes to run their business in today’s business climate. Today, ‘growth’ is the imperative in business, and that growth is usually thought of in terms of revenue or market cap. We are flooded with news of the latest “unicorns” (companies who are valued at $1b+), overnight millionaires and blockbuster IPOs.

Instead, In-N-Out’s focus has been on quality, consistently and profitability which, ironically (or maybe not so ironically), has led to more growth and sustainability than their competitors, defying the odds of current conventional wisdom. I suspect most/all of us would rather run a In-N-Out type business than a unicorn, and that takes focus, intentionality, and an eye towards to the future.

 

Garry North, CFP®
Managing Partner

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[1] https://www.forbes.com/sites/chloesorvino/2018/10/10/exclusive-in-n-out-billionaire-lynsi-snyder-opens-up-about-her-troubled-past-and-the-burger-chains-future/?sh=7093ae5f4b9c

[2] https://www.foodandwine.com/news/colorados-first-in-n-out-lines