QSR 50 | August 2013 | By Daniel P. Smith

The Whataburger Way

Little known outside the South, Whataburger rides passionate consumer loyalty and slow and steady growth into quick service’s upper ranks.

Whataburger's burgers and fries menu inspires passionate consumers in South.
Whataburger’s signature burger and fries have earned the brand an impressive base of passionate consumers across the south. Whataburger
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In Tulsa, Oklahoma, down the block from a McDonald’s and around the corner from a Jason’s Deli, Whataburger store No. 304 on Peoria Avenue features the same iconic, orange-and-white, A-frame exterior as nearly every other restaurant in the 740-unit Whataburger system. It serves the same quarter-pound hamburgers on five-inch buns, and its people inside display the same friendly demeanor that has catapulted the Whataburger brand through seven decades.

While seemingly a nondescript restaurant in the Whataburger portfolio, store No. 304 nevertheless remains distinctive for one reason: It is the quick-service chain’s northernmost location. Move farther north or west from Tulsa’s doorstep and Whataburger’s sphere of influence slows; the 63-year-old burger chain becomes more of a mystery as it departs its Southern base. It remains a unique outlier, a Texas-born, bred, and based family-owned business that understands who it is and what it’s doing, even in an era of global expansion and fast-evolving consumer trends.

“We do it slow and steady, not fast and quick,” says Whataburger CEO Preston Atkinson, who has been with Whataburger since 1986.

Slow and steady, of course, isn’t to suggest sluggish or unsuccessful.

In 2012, Whataburger’s sales approached $1.5 billion, a 12.6 percent jump over 2011. The double-digit sales gain propelled Whataburger over Carl’s Jr. in the QSR 50. Now sitting in the 23rd position, Whataburger is the nation’s eighth-largest burger concept.

The steady, stable rise of Whataburger

When founder Harmon Dobson first opened Whataburger’s doors in 1950, sales at the original Corpus Christi, Texas, eatery topped $50 on the first day. After that inauspicious start, however, Whataburger only grew. Swelling interest from entrepreneurs led Dobson into franchising in 1953 and, six years later, Whataburger expanded beyond Texas’s borders with a shop in Pensacola, Florida.

After Dobson died in a tragic airplane accident in 1967, his widow, Grace, resisted overtures from buyers and seized control, honoring her late husband’s will, which stated his “desire that the business which I have created shall be preserved and continued if at all possible and feasible.” Grace Dobson remained directly involved in the operations until the Dobsons’ son, Tom, took the helm in 1993.

Whataburger opened its 100th restaurant in 1972, its 300th in 1980, and its 500th in 1995. Today, the chain’s 740 units stretch across more than 300 communities in 10 Southern states from Arizona to Florida.

Much of Whataburger’s success can be attributed to its passionately loyal consumer base; the San Antonio–based chain’s cult following has manifested itself in a Facebook fan page for its fancy ketchup; a highly publicized 2012 tale of a Texas couple who visited every Whataburger location during a 20,000-mile odyssey; and the brand’s recognition by the Texas legislature as a Lone Star State treasure.

But the fact that it hasn’t sold out to the highest bidder also helps guide Whataburger’s growth. The burger brand joins the likes of Chick-fil-A, Panda Express, and Little Caesars as high-performing quick-service enterprises still under the family thumb.

The current group of Dobson family leaders—Tom, Lynne, and Hugh—was raised in the restaurant business and each remains actively engaged. Tom Dobson, in fact, still serves as Whataburger’s chairman two years after retiring from the CEO post.

“Our biggest point of differentiation is that we’re an operations-driven company, not an investor-driven company,” says Atkinson, who jokes that his “Wall Street” adviser—Tom Dobson—sits in the office next door.

Whataburger’s family-owned and operated philosophy defines much of its operational and development strategy, creating a consistent focus on long-term gains, patience, and pride. “This is a marathon, and we all look at it that way,” says Whataburger senior vice president and COO Clifton Rutledge.

The company’s leadership has long favored corporate-owned stores over franchised units. More than 80 percent of the nation’s Whataburger outlets today are owned and operated by the company. Meanwhile, franchise partners who have been with the Whataburger system for more than 20 years lead the majority of the company’s 119 franchised restaurants. “And just like us, they’re operators at heart,” Atkinson says.

The familiarity operators have with the brand has developed a company unity that cultivates enthusiasm and drives results. Leaders call it “Being Orange,” a nod to Whataburger’s primary brand color.

“It’s not about the stock dollar or Wall Street,” Rutledge says. “Nobody wants to disappoint the Dobson family.”

And that’s a two-way street, Atkinson says.

“The team works hard not to embarrass the Dobsons and the Dobsons work hard not to embarrass the team,” he says.

Lane Cardwell, president of Dallas-based Cardwell Hospitality Advisory and former CEO of Boston Market and P.F. Chang’s China Bistro, says the Dobsons’ presence is a consistent motivational tool that provides the company’s 24,000 “family members” (Whataburger-speak for “employees”) the gusto to improve the service, quality, and brand.

“There’s a distinct pride factor that resonates throughout the Whataburger system,” Cardwell says. “People aren’t working for the shareholders, but for the family.”

Differentiation in the battle for market share

Whataburger’s successful 63-year run, however, stems from far more than a warm and fuzzy family culture. Indeed, it takes more than positive sentiment to sell 70 million burgers each year and push AUV toward $2 million.

The chain’s made-to-order, customizable burger allows diners nearly 37,000 different burger combinations. And the pure beef, quarter-pound burger—one that needs to be held with two hands—is often perceived as a greater value than many of Whataburger’s quick-service counterparts.

“In the battle for market share, representing good value and quality puts you in the consumers’ good graces and maintains traffic and usage,” says Darren Tristano, executive vice president at Chicago-based research firm Technomic. “Good value is something Whataburger represents very, very well.”

Cardwell, a self-described Whataburger fan, credits the chain for giving fast-casual service and quality at a quick-service price point. When he visits Whataburger, Cardwell says, he sees staff not only bring food to the table, but also a condiment tray with napkins, straws, ketchup, and more.

“They go that extra mile to please,” Cardwell says, adding that Whataburger also benefits from a diverse clientele base that includes students, laborers, white-collar workers, and moms.

“The common denominator is that they’re all attracted to a good burger,” Cardwell says.

In addition, most Whataburger stores are open 24 hours, closing only for Christmas. One of the earliest pioneers of the 24-hour quick-serve restaurant—a function that came at considerable investment without immediate returns—Whataburger’s all-day operation remains an undisputed advantage.

“Whereas most operations close at 10 p.m. and reopen at 11 a.m. the next day, Whataburger has an extra 13 hours to make an impression,” Cardwell says.

In the Dallas market, Cardwell says, Whataburger is “single-handedly responsible” for residents’ slow response to In-N-Out Burger, a similarly heralded chain in its home state of California.

“I think people go to In-N-Out Burger and they think it’s good, but say, ‘We already have Whataburger,’” Cardwell says. “Plus, Texans are pretty protective of their brands.”

How to keep an old brand relevant

In recent years, Whataburger has continued its push to retain relevancy in the increasingly heated quick-service marketplace.

Over the last three years, Whataburger has introduced six “All-Time Favorite” sandwiches to its menu, such as the Chop House Cheddar Burger and Whataburger Patty Melt. It also launched a 20-item 550 Calories or Less Menu, an effort to appease health-conscious customers. Even the chain’s cinnamon roll comes in at less than 550 calories.

“It’s not a diet food that tastes like a diet food,” Rutledge says.

The company has also rolled out more Latin-flavored items, an effort to appeal to the South’s large Hispanic population and Americans’ growing attraction to bold flavors. Recent introductions include the Monterey Melt burger and a red jalapeño-infused spicy ketchup.

These progressive extensions, however, haven’t ushered Whataburger into unfamiliar territory. By and large, the company remains targeted and confident.

“We’re not going to serve pizza because that’s not what we do,” Rutledge says. “And we’re still going to make the burger the same way it was made in the 1950s.”

For each daypart, Whataburger’s customer feedback tools assess the three essentials: quality of food, speed of service, and friendliness. Follow-up action is taken against low-performing stores, while high performers and those with improvements earn incentives.

“The whole key is taking care of our customers day in and day out,” Rutledge says. “Are they getting that ‘wow’ moment that proves we’re not just another burger store on the corner?”

“To do the volume we do, the food has to be great, not good,” Atkinson adds. “The people have to be great, not good.”

For the first time in more than a decade, Whataburger is also enhancing its physical look.

Throughout the 1990s and 2000s, some Whataburger outlets veered from the company’s signature orange-and-white color scheme in an effort to stand out in cluttered commercial strips. Some units welcomed blue trim, while others added neon for splashes of eye-catching pop. Now Whataburger is reversing that trend and has committed to embracing its roots and a consistent look across the system. Last year, the chain began a two-year reimaging project of more than 600 stores. Fresh paint is returning stores to Whataburger’s historical orange-and-white color palette, while the addition of Austin stone to the outside of buildings provides the restaurants a natural touch.

“Customers are clapping their hands with their pocketbooks,” Atkinson says of the re-imaging effort, which is about 50 percent complete and on pace for a 2014 finish.

Loyal customers are also applauding the company’s growing use of social media after an initially slow adoption. Whataburger’s Facebook page reached one million fans last January, less than two years after its launch. The company has since utilized Twitter and Instagram to run contests, share news, and gauge customer sentiment. For instance, when Whataburger ended its limited-time run with spicy ketchup last spring, the social media response pushed the company to reintroduce the condiment as a permanent fixture.

“These three platforms are the most popular with our customers, so we think it’s important to meet our fans where they are and join the conversations already taking place rather than trying to create a conversation where one doesn’t exist,” Atkinson says.

The increased social media presence proved useful in April when Whataburger ventured into the retail world for the first time with the bottling of its popular condiments: Fancy Ketchup, Spicy Ketchup, and Original Mustard. The products are available exclusively at all Texas and Mexico H-E-B stores.

“Like a teenager who won’t take no for an answer, our customers kept asking us to get into the retail space so they could get a little more love from Whataburger all day long,” Atkinson says.

True to Whataburger form, however, the move into retail wasn’t rushed. Whataburger prepared for years to understand retail’s sales and innovation cycles and to establish the necessary retail infrastructure.

More of the same

As an outside observer, Tristano admires Whataburger’s persistence and adherence to a consistent growth strategy.

“Whataburger’s a concept that sticks to what it knows and what it has learned over the last 60 years,” Tristano says. “It knows where its wheelhouse is and doesn’t try to be all things to all people.”

In any given week, Rutledge says, the Whataburger office will field about 100 phone calls from past diners or prospective franchisees inquiring about new restaurants and expansion. With favorable sales gains and consistent interest, it would be easy for Whataburger executives to push the company beyond its comfort zone, hurry development, and chase the dollar. But Rutledge says that’s not the Orange way.

“We’re not out there trying to put dots on maps and we’ll never be the brand opening 100 stores a year,” he says. “We want to be fiscally responsible with the Dobsons’ money.”

The company remains content to grow at a sustainable pace. Last year, for instance, Whataburger added 12 units, a modest 1.6 percent uptick over 2011’s count. The chain has executed a similar game plan in 2013, and leadership promises a consistent philosophy.

We’re solid in the 10 states we’re in right now and feel we have a lot of real estate to grow [within those states],” Atkinson says. “In the interim, we’ll just send [hopeful franchisees] a bottle of ketchup.”