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How the Snyder family has kept In-N-Out hot for half a century
JULIA CHILD HAD IN-N-OUT burgers brought to her in the hospital while she was recovering from surgery. Chef Thomas Keller of Napa Valley’s renowned French Laundry has publicly ruminated on the pleasures of eating one. Richard Clark, owner of Clark’s Copper Heads and Gaskets in Minneapolis, flew in 30 Double-Doubles from Ontario, California, for his son’s 21st birthday. “Once you’ve had In-N-Out,” Clark says, “you always want it.”
Long ago, In-N-Out Burger ceased to be just another fast-food chain. It is a cultural institution, a feisty family-run enterprise that inspires devotion from its customers and envy from its competitors. In-N-Out’s power lies in its iconoclasm—it defies nearly every tenet of the industry—and in its decidedly simple values. The basic menu of grilled hamburgers, fries, sodas, and milk shakes made with real ice cream has stayed the same since Harry and Esther Snyder opened their first store in Baldwin Park in 1948. At $2.50, the most expensive item is the trademarked Double-Double (two meat patties and two slices of cheese). The cheese is 100 percent dairy, the lettuce is leafed by hand, and the buns are baked daily. Company butchers grind their own beef. Ingredients are delivered each day to stores, which have neither microwaves nor freezers.
The Snyders began selling burgers the same year that brothers Dick and Mac McDonald opened a restaurant in San Bernardino. McDonald's—which, like many fast-food companies, began in California, then expanded nationally—is now a multibillion-dollar corporation that symbolizes the homogenization of America and the dark side of globalization. In-N-Out remains regional and independent, refusing to be sold, franchised, or taken public.
If you were to chart the growth of the two companies, you might think In-N-Out had atrophied in the shadow of its early rival. After all, its 180 units in California, Arizona, and Nevada pale in comparison with the world's 31,108 Golden Arches. In 2002, In-N-Out's revenues reached an estimated $285 million, according to Technomic Inc., a Chicago-based restaurant consultant, while McDonald's hit $20.3 billion. However, In-N-Out's average single-store sales—an estimated $1.7 million—not only beat McDonald's, which rang up $1.6 million, but were more than double the industry average. "It's remarkable," says Ron Paul, Technomic’s president. "They have a narrower menu, there is no kid's menu, slower service, and they make more money than McDonald's."
In-N-Out officials and, for that matter, the Snyder family are as tight-lipped as they are successful. They have given few interviews and are loath to offer even seemingly innocuous information, let alone discuss the tragedies that have tested, but never threatened, their resolve to keep the business private.
While other chains spend hundreds of millions on marketing, In-N-Out occasionally airs a decades-old radio jingle—"In-N-Out, that's what a hamburger is all about"—or a ten-second spot on cable. There are no grand openings. A store appears and the lines form. The company's most effective advertising is a combination of rabid customers who sport T-shirts and display bumper stickers and the judicious use of real estate. Rather than flood the market, In-N-Out spaces out its stores in highly trafficked areas. "We spend a few months building a new store, and there is a COMING SOON sign," says Carl Van Fleet, general manager and vice president of planning. "If we picked a good location, and we think we do, 20,000 to 30,000 people have driven by it while it's under construction."
Many In-N-Outs are placed by key freeway off-ramps and marked with huge signs that serve as beacons. Even the industry's harshest critics have a soft spot for In-N-Out. In his book Fast Food Nation, Eric Schlosser commends the company's business ethics and its treatment of its employees. Moreover, despite an artery-clogging 41 grams of fat, the Double-Double has gone largely unscathed in the debate over obesity and fast food. The biggest complaint about In-N-Out is that there just aren't enough of them.
HARRY SNYDER, A FORMER G.I., met Esther Johnson, a former navy surgical nurse, in post-World War II Seattle. They moved to Southern California and were married in 1948. Harry took advantage of two emerging trends—car culture and fast food—and created the state's first drive-thru hamburger joint. Instead of using then-popular carhops, he devised a two-way speaker box to take customers' orders. The Snyders did everything themselves. They prepared the food, Harry manned the grill, and Esther handled the books.
The Baldwin Park store quickly became a hangout. It was open until 1 a.m. More important, it was a stop on the local drag racing circuit. Young men in hot rods cruised the boulevards looking for challengers, much to the dismay of the police. In 1965, Harry invested in a 50 percent stake in a new drag strip, the Irwindale Speedway, and the association between cars and In-N-Out took hold. The food, which was supplied by the Snyders, was almost as big a draw as the races. "Everybody loved the concession stands back then," says Steve Gibbs, a friend of the Snyder family for 30 years and the track's former manager.
Harry put his two sons, Guy and Richard, to work when they were in their early teens. They did odd jobs, first at Irwindale and then at the Baldwin Park store, peeling potatoes and emptying trash like every new employee. "Harry had high standards," says Gibbs. "He wanted the kids to work. He didn't want the boys to be spoiled."
He also believed in treating his employees well—paying more than the going rate and sharing profits. "They've inculcated a culture in which they say, 'We're the best, so you're the best. That's why we've hired you,'" says an executive at another Southern California restaurant chain. In-N-Out has one of the lowest turnover rates in a high-churn industry On average, store managers have stayed with the company for 13 years. They can earn about $99,000 and are eligible for monthly bonuses tied to store performance and also trips to Hawaii and Europe. Part-timers start at $8.25 an hour and receive paid vacations, 401(k) plans, free meals, and flexible schedules.
Harry abhorred debt, preferring to use cash to open each restaurant. "Harry had a temper," Gibbs says. "If he was upset, he'd tell you why. He was probably right, but if you had a good answer, he'd accept it." He was also known for his generosity. "If he liked you, there was nothing he wouldn't do," says family friend Paul Althouse.
In 1976, Harry died of cancer at the age of 63. Esther continued as secretary-treasurer, while Richard became president. He was only 24, but according to friends, it was clear from early on that he was the entrepreneur. Guy, who was a year older, preferred racing to business and struggled with drug problems. He was named a vice president but was not as involved in running the company.
If Harry instilled in In-N-Out his philosophy, Richard imbued it with his personality. He was a fun-loving conservative and a committed Christian who transformed the restaurants into a big business without damaging the integrity of the small burger chain his parents had built. "When Rich took it on, it was a nice little place with a '50s style," says Andrew Puzder, once Esther's attorney and now the CEO of Carl's Jr. "He really marketed it and played it up."
In its first 28 years, In-N-Out had 18 stores. Richard increased the number to 93. He also opened a food processing center in Baldwin Park to maintain quality control and consistency. Even as others automated their restaurants, Richard emphasized the human touch. "If you lose your workers," he once said, "you lose your customers. I don't know how others do it, but we just try to keep everybody happy. That's what works for us."
Richard ignored conventional wisdom by mixing business and religion, printing Bible verses on packaging (including John 3:16—"For God so loved the world, that he gave his only begotten Son ..." —on soda cups). The move fueled urban myths, the most common being that a Christian sect owns the company. "Hamburgers are so popular, he thought it was a great way to awaken people to the fact that the Bible is relevant and has the answers to today's problems," says the family's pastor, Chuck Smith of Calvary Chapel in Costa Mesa.
Sharing his father's spirit of largesse, Richard wrote Calvary a check for $125,000 when he learned it needed funding for its "Harvest Crusade" evangelical stadium meetings. He supported Republican political commentator Bruce Herschensohn in his failed 1986 bid to oust U.S. senator Alan Cranston. "He heard one of my speeches," says Herschensohn. "I loved In-N-Out burgers, and we became friends."
In 1992, at the age of 40 Richard got married. He and his wife bought a mansion in Newport Beach, and he initiated the move of corporate headquarters from Baldwin Park to Irvine. It was one of his last executive decisions. On December 15, 1993, while scouting store locations, Richard was killed when the private plane in which he was traveling crashed in Santa Ana.
Richard's death raised questions about In-N-Out's future—and the viability of maintaining family leadership. However, Guy became president even though he had been and would remain, by most accounts, a peripheral figure in the company. "Richie kept him out of the business when their dad passed away," says Althouse. "He kind of kept him out because of his drug problems."
"Guy was a different sort [from Richard]," says Pastor Smith. "He was more into racing than into things that were really spiritual. Richard tried to help him. Their lifestyles were diverse. They weren't that close because of it. There had been tension."
Guy loved life on the drag circuit or at his Flying Dutchman Ranch in Shasta Country where he was said to spend his days riding his tractor or playing video games. "You'd never know he was a millionaire," says family friend Jerry Darien. Twice divorced, Guy had a daughter, Lynsi, with his first wife. Although Guy was an unassuming, if not reluctant, executive, friends say he was committed to In-N-Out's success during his years as president. The chain expanded to 140 stores. He was active in discovering new locations; under him, In-N-Out moved into Nevada. He also continued to develop the company's relationship with racing, which raised its national profile.
Guy may have ventured into drug use by the time he crashed his motorbike in Mexico in the early 1970s. What is certain is that drugs became a major part of his life after the accident, which left him severely injured and in chronic pain. He lost about 50 percent of the use of his right arm. "He couldn't shift his four-speed," says Althouse. "It hurt his ego that he had to build automatic transmissions." There would be periods when he was at the track and then long stretches when he would disappear.
Despite attempts to straighten out his life, Guy was plagued by depression and health problems. Early Christmas Day 1995, according to the Orange County Register, Claremont police found him passed out in his car. Inside a briefcase they discovered a small pharmacy that included marijuana, Valium, and codeine, $27,475 in cash, and a loaded 9 mm Glock semiautomatic handgun. "He was a hell of a guy," says Althouse. "The drugs screwed up his life."
On December 4, 1999, Guy died of an accidental overdose of hydrocodone, the synthetic opiate found in the painkiller Vicodin. With patriarch Harry and both of his sons dead, and the family's only other direct heir, Lynsi, just 17, Esther—herself on the brink of 80—assumed the presidency.
FOR YEARS INVESTORS HAVE tried to find a way into In-N-Out. (The company has declined to entertain offers or even attend meetings on the subject.) Restaurant analyst David Geraty conservatively estimates that the Snyders have received thousands of proposals. "There are rumors all the time that they're selling. It's always percolating." After the deaths of Richard and Guy, the rumor mill went into overdrive. It appeared, on the outside at least, that In-N-Out was vulnerable.
That presumption, however, underestimated the will of Esther, who is firm in her desire to keep the company private. If Harry was the source of In-N-Out's initial success, Esther—a woman of great fortitude and faith—is the one who has preserved his legacy. At 83, she is by most accounts frail, relying on a wheelchair or a walker. In 1999, at an In-N-Out opening in Redding, she reportedly fell and broke her hip. Nonetheless, Carl Van Fleet—who is widely considered to be the company's guiding hand these days—says Esther is involved in every decision and continues to visit stores. "I speak with her twice a week."
Even at a time when the fast-food industry is struggling, In-N-Out keeps growing stronger. In 2002, sales rose by 7.7 percent, according to Technomic, while McDonald's sales rose 1 percent. The big franchises keep pursuing ways to pump up sales by cutting prices and introducing items like salads and turkey Caesar clubs. In-N-Out's only major menu shift occurred in 1996 when it added Dr Pepper.
Nowhere is its bond with the public more evident than in the Secret Menu, an unofficial set of variations on the standard bill of fare. Favorites include "the 4x4" (four patties and four slices of cheese), "the protein burger" (meat wrapped in lettuce), and "animal style" (any burger cooked in mustard with sauteed onions, pickles, and extra special sauce). "Some people think that the protein burger came about recently because of all the Atkins dieters," Van Fleet says,"but it's been around since the late 1970s."
In-N-Out has not been totally insulated from trouble. In May 2003, it settled a lawsuit filed by the family of a Palo Alto girl who claimed she contracted E. coli after eating at a store in Central California. A year earlier, the chain received an out-of-court settlement from a Texas businessman who it claimed had planted moles in an attempt to duplicate In-N-Out with his Lightning Burger restaurants.
The future of In-N-Out rests with Guy's 21-year-old daughter, Lynsi, who is expected to inherit the company when her grandmother dies. Three years ago Esther indicated that she had a succession plan, although she did not reveal any details. She did make clear her intention to keep the chain independent and family run, and to have several chief employees stay on—her granddaughter among them. "Lynsi is getting involved" is all Van Fleet will say "This is a private thing." For the most part, Lynsi has been kept out of the spotlight. She is said to be a business student in Southern California and a drag racer like her father. She is thought to have worked at In-N-Out stores.
Of course, nothing will quell the speculation. Discussion centers on two scenarios. The first involves Esther's succession plan and the possibility of an interim arrangement until Lynsi has the experience to run the business. (A highly touted option is an employee ownership agreement that would include Lynsi in management.) Industry watchers are pushing for the opposite: that In-N-Out will finally be sold or will succumb to an IPO. Starbucks and Krispy Kreme have shown that highly identifiable regional chains can go public and expand without losing their luster or distinctive character. "My feeling is this company has legs," says Technomics' Ron Paul. "It could go national. There is only one way to prove it."
Photograph courtesy in-n-out.com
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