In a post about the relationship between proximity and market dominance Matthew Yglesias asks:
Why doesn’t In-and-Out Burger spread to the east coast?
That’s a question I think I can shed a little light on. In-N-Out is a southern California chain and it isn’t franchised and there are no plans to do so. From the company’s web page:
In-N-Out remains privately owned and the Snyder family has no plans to take the company public or franchise any units.
Franchising tends to help a company spread farther and faster. Lots of local chains have difficulty spreading beyond five or six units. With that number the founder is able to spend a day in each location personally maintaining the brand and still have a life outside of work.
Growing significantly beyond that number requires professional management and that’s a step that some entrepeneurs find extremely painful to make.
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In the case of In-n-Out Burger, I think their refusal to franchise is more about their management philosophy and the owners’ control over the chain (they have at least 100 locations & probably more). They are one of the few fast-food chains to pay all employees well over the minimum wage; they also pay a premium for some ingredients and are not as inexpensive as other fast food chains. Franchising or taking the company public would make it harder to maintain these policies.
In-n-out employees are almost always energetic, motivated, well-groomed — all the things the usual Burger King employee is not. You see the same thing at Chick-Fil-A which is privately owned (by a religious nut.)
Is the conclusion that going public requires companies to sink to some lowest common denominator of service?
Michael, I think the issue is one of motivations. Going public or franchising has a different set of rewards than running your own restaurants does.
And as I suggested above when any chain reaches a certain size professional management is required and professional managers have different priorities than founders do.
Despite the megatons of material written on business strategy, you can really boil it all down to several basic business models: 1) low cost production/delivery, 2) niche marketing, 3) high quality product offering, 4) leapfrog technological innovation and 5) change the distribution model (eg skip the middle man).
In and Out is the high quality model (ahem, such as it is for fast food). Business models #2 and #3 by their very nature limit growth, as Dave pointed out. However, they are usually high margin, and have loyal, almost cult, customer bases. But go national? That’s a different model. You become Micky D’s.
If interviewed, everyone says they want “high quality,” “high service.” But the fact of the matter is the majority simply buy on price.
See: WalMart.
i think in-n-out will take a while to go to the east side of the contry because it was started in california.
P.S michael reynolds likes to suck big cocks and cody is gay