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.
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
Awww, comon, get really big before the west coast gets tired of you! I was there once, and you really left an impression, I do think you would be a hot favorite… right now my favorite is Houstons, but that’s one ordeal . You are a blow away to any other burger and fries.. thanks Elle Burke
I just came across this FB page that is starting a movement to bring in n out burger to the east coast…pretty rad! I signed the petition and you should too if you feel the same way!
more details here:
http://www.facebook.com/In.aNd.Out.Burger.East
Couldn’t they just make one or two on the East Coast, PLEASE….
I love In and Out Burger and I live on the East Coast. It is hard to say why one would not franchise but the same philosophy was once shared by Five Guys, the closest we will get. They started in 1986 and did not franchise till 2001. By 2009 they had 300 stores. Now they have over 1000, 48 States, Canada and on July 4 will be opening in Covent Station, London.
75,000 per unit is the franchise fee plus fee on sales.
Everyone I have been to is clean, great employees and they have an awesome bonus plan for the employees.
Don’t see why In and Out cannot follow that. Soon no one will remember In and Out. Five Guys is going for world wide dominance. England is already sold out on franchise rights.
And they did their research to find a beef supplier that best matches the quality of meat in the US.
my family has experenced in and out exprencience my daughters were inpressed. my youngest asked about franchise. I looked on line.we live on the east coast. what are the possibilities of expansion. I look forward to your response. possibilities are unlimited
Plain and simple. The model is based on weather & drive thru’s. My office adjacent to one and live within 3. Best burgers (questionable fries), old fashion quality. Not designed to be franchised. Else, go to Wendy’s. A TOTAL SOCAL TREASURE….oops where did Mickey D’s start?
I love In ‘n’ Out” Burger and live in Kentucky. I do not want them out East. Some things are better left as they are and everything doesn’t have to be ubiquitous. I liked it when you could get Pilsener Urquel only in (the old) Czechoslovakia and when Coors was only west of the Mississippi River. It makes those items more precious and desirable. When I go to California, In ‘n’ Out is my first stop. Rarity and Scarcity breed anticipation and desire. Everything doesn’t need to be on our doorstep.
I believe the primary reason is that they keep all ingredients fresh, they do not use frozen anything. That includes the beef. They have processing plants in three locations now, with the Dallas,TX area being the newest. They will only build restaurants within a certain radius of that processing plant to ensure they can deliver fresh ingredients without freezing. It’s part of what makes their product so awesome! I miss it like crazy and get my fix every time I visit Cali.
Jack Teeple well said; I grew up in South Cal and really did not appreciate In n Out until after I moved to the east coast and did not have the luxury of walking down the street to grab a burger. Now when I go back to Cali my first stop after deplaning is In n Out. By far the BEST burger on the market; and you cant beat the price.
Continue on set course In n Out.
P.S.: Michael Reynolds your a misguided soul; the CEO is a God fearing man and there’s nothing wrong with that. Seems like they are doing pretty well despite allowing their employee to have Sunday off. Last time I checked they grossed over $3M per year per unit. All this and they are still a private cmpy. It appears to me that the good Lord is reigning financial blessing down on them.
I love In n Out Burger and I think if they were to franchise they would have to add food items to their simple menu of just burgers, fries and shakes. Then people will then want chicken nuggets, chicken sandwiches, breakfast, salads, then In N Out Burger will become just like all the other chains in the U.S. and that is not their philosophy. Stay Simple and Delicious In N Out Burger, don’t franchise out.