Competition | August 2017 | By Daniel P. Smith

The Secret to In-N-Out’s Cult Following

For 69 years, In-N-Out Burger has marched to its own beat and emerged a cult phenomenon. Just don’t expect the company to brag about it.
In-N-Out pays its employees above market norms, which helps drive customer satisfaction. Flickr / Marc Flores
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The City of Baldwin Park, California, sits northeast of the I-10 and 605 junction, covering some 6.6 miles of land in the San Gabriel Valley Region of Los Angeles County. A former agricultural outpost roughly 18 miles east of downtown Los Angeles, Baldwin Park is today a city of working-class souls eager to capture their slice of the American Dream.

While Baldwin Park is like a thousand other towns that pepper the American landscape, there is one very distinct point of differentiation: The city birthed a cultural phenomenon that continues to elevate Baldwin Park’s standing as something more than a dot on the map.

That phenomenon, In-N-Out Burger, is seemingly doing the impossible: It’s thriving nearly 70 years after its inception—and it’s doing so even as a glut of better-burger concepts duke it out for Americans’ business.

The counter chain

Today, In-N-Out Burger is one of the nation’s top restaurant chains, a roughly 320-unit system with estimated annual sales over $600 million and, more impressive, a loyal legion of fans that speak about the brand in reverential terms. Celebrities gush over the place on social media; even Anthony Bourdain, foodie traveler extraordinaire, has declared it his favorite restaurant in Los Angeles.

Over its 69-year history, the Irvine, California–based chain has endured recessions, monumental industry shifts, consumer fads, and surging competition, particularly from the better-burger category that has consumed the nation over the last decade. The private, family-owned company has eschewed menu expansion, refused to engage in price wars, and rejected franchising and external investors.

And yet here In-N-Out remains, largely unmoved by premium new players and decidedly committed to its bucking-the-trend ways, its characteristic yellow arrow quite literally pointing ahead. The brand’s social media presence is, to put it kindly, minimal; its development strategy slow and plodding; its menu R&D efforts nonexistent. Many of the strategies espoused by quick-service leaders in today’s competitive environment fail to exist at In-N-Out.

“The company has maintained a razor-sharp focus on keeping the brand what it is rather than migrating to what it is not. It has defined its brand positioning and doesn’t waver,” says Dennis Lombardi, a longtime industry observer with brand strategist WD Partners who now runs his own restaurant advisory firm, Insight Dynamics.

In doing just that—and little else—for the last seven decades, the brand has emerged a top industry player courted by Wall Street, beloved by its fans, and celebrated by other industry up-and-comers hopeful that they, too, can follow In-N-Out’s path.

“It just blows the mind that something created in 1948 remains so relevant today,” says Californian Quasim Riaz, cofounder of Dog Haus, the 23-unit, Pasadena, California–based hot dog, sausage, and burger fast-casual chain. “I know it’s where we hope to be someday, and it’s inspiring.”

But how does In-N-Out pull it off? After all, this is a brand whose presence is limited to six Western states (California, Nevada, Arizona, Utah, Texas, and Oregon) and yet has emerged as a cult phenomenon that locals adore and outsiders just have to try. It’s a brand that has maintained virtually the same menu—burgers, fries, sodas, and shakes—since Harry Truman occupied the Oval Office and yet not only survived, but also thrived in the age of next-big-thing hunting. And it’s a brand that is still, nearly 70 years in, family-owned, led by a 35-year-old billionaire heiress.

The secret sauce to In-N-Out’s success? It might be simpler than anyone would expect.

Behind the success

Once just a humble hamburger shop founded by newlyweds Harry and Esther Snyder, In-N-Out possessed an innovation that would expedite the industry’s evolution and the brand’s success: an outdoor, two-way speaker box connected to the restaurant’s kitchen. One of the nation’s first drive thrus (and the inspiration for the In-N-Out moniker), the speaker system drove In-N-Out’s popularity; the Snyders carefully opened new restaurants, never growing beyond their means, and cultivated a swelling fan base. At the time of Harry Snyder’s passing in 1976, the chain had 18 stores. Under the direction of the Snyders’ youngest son, Rich, the chain grew to 93 outlets, including its first expansion outside California. Not long after Rich’s death in a 1993 plane crash, In-N-Out crossed the 100-unit threshold. The chain reached 200 restaurants in 2005 and opened store number 300 in 2015.

From businessmen in tailored suits to Snapchat-happy teens, and from laborers in blue jeans and steel-toed boots to Hollywood starlets and culinary luminaries like Thomas Keller and Gordon Ramsay, In-N-Out continues to attract folks from all walks of life. Some loyalists favor the shop’s celebrated Double-Double, while others gravitate toward items from the not-so-secret menu, like the Animal Style (a mustard-cooked patty with extra spread, pickle, and grilled onions) and the Protein Style (a burger wrapped in lettuce instead of a bun).

“People fetishize In-N-Out, and it’s cool to know the brand and doubly cool to know its secret menu,” says Culinary Institute of America (cia) associate professor Willa Zhen, a sociocultural and food anthropologist.

Just as the Snyders opened In-N-Out in 1948, the McDonald brothers were setting up shop 45 miles away in San Bernardino, California. But while the McDonalds focused on speed, lower prices, and high volume—eventual tenets of many 20th century quick-service giants—Harry Snyder and his generational successors favored simplicity: a slim menu, clear operational standards, and private ownership.

“It’s about the quality, the friendliness, and the cleanliness. We keep it simple,” said Lynsi Snyder, In-N-Out’s owner and president, in a rare CBS interview in 2015.

For nearly 70 years, In-N-Out’s culinary formula hasn’t flinched. Cooked-to-order hamburgers are crafted from fresh ground beef, topped with fresh produce, and served on fresh-baked buns. Potatoes are hand-cut; milkshakes are hand-spun with real ice cream.

“Time and again, they’ve delivered on their promise, and that consistency can’t be discounted,” NPD Group restaurant industry analyst Bonnie Riggs says.

Indeed, while other quick-service chains have tried to hook people with new offerings or big data-driven marketing plays, daypart expansion, or cobranding, the In-N-Out of today remains much as it did during the life of Harry Snyder.

“There’s something immensely reassuring about that,” the CIA’s Zhen says.

Every In-N-Out store sits within a day’s drive from one of the chain’s three distribution centers. Nothing is frozen or microwaved, a fact showcased in the chain’s open kitchens—another industry innovation In-N-Out helped popularize—that have long allowed customers a peek behind the curtain.

Beyond its cherished menu, In-N-Out also has a longstanding practice of paying its employees above market norms, confident that its additional investment in people drives customer satisfaction. Some store managers reportedly earn annual salaries above $100,000. Combined with other perks, such as flexible schedules, paid vacations, a 401(k) plan, and a promote-from-within culture, In-N-Out continues to land motivated, friendly associates who buy into the chain’s customer service philosophies.

“It’s always been clear that the company is more focused on keeping its brand promise to consumers and employees than in growing EBITA (earnings before interest, taxes, and amortization),” Lombardi says, noting that In-N-Out ranked 13th on Glassdoor’s annual Employees’ Choice Best Places to Work list in 2016.

Leaders since Harry Snyder, meanwhile, have activated a disciplined and controlled development strategy and winked at the infamous secret menu that creates an insider feeling among consumers.

They’ve also remained tight-lipped about everything from the chain’s secret sauce to its twin palm trees that guard locations and the Bible verses printed on the restaurant’s cups and hamburger wrappers. (That extends to media; In-N-Out declined to participate in this story.)

All of it has generated mystique and popularity.

“In-N-Out is a brand that advertises itself,” Zhen says. “You’re chasing them, not the other way around.”

While In-N-Out certainly has time on its side, Stacy Perman, author of the New York Times bestseller, In-N-Out Burger: A Behind-The-Counter Look at the Fast Food Chain That Breaks All the Rules, says the company has also built an intimate relationship with its consumers, many of whom do the chain’s heavy lifting. The company, she says, has consistently curried favor by being simply what it is—earnestly, consistently, and unapologetically so. Leaders haven’t commercialized their secret menu or chased trends and national growth.

“In-N-Out has brand loyalty, and it’s based on a real thing, not contrived,” Perman says.

Looking into In-N-Out’s future

The question now is if In-N-Out can continue its run—or, perhaps more accurately, if anything can slow it down.

Last year, according to NPD, lunch traffic to quick-service hamburger restaurants dropped 5 percent, the single largest year-over-year decline NPD has ever witnessed.

In-N-Out, though, shows no signs of slowing, opening about 10 new restaurants each year and continuing to reject anything that runs counter to its core.

The company’s future now sits squarely in the hands of third-generation leader Lynsi Snyder, Harry and Esther Snyder’s lone grandchild and Rich’s niece. Upon turning 35 this past May, Lynsi Snyder received the remaining shares of a family business Forbes estimated to be worth $1.3 billion (she’d received half upon turning 30). It is an oft-discussed reality of family businesses, however, that the first generation creates the business, the second generation builds the business, and the third generation blows it all up.

Thus far, Lynsi Snyder has followed the long-held family line, marching to a familiar tune since becoming the company’s president in 2010. She’s resisted overtures from private equity and franchising; continued the patient, calculated growth plan exercised by those before her; and maintained the status quo because, well, it works really, really well.

“My heart is totally connected to this company because of my family and the fact that they are not here; I have a strong tie to keep this the way they would want it,” Snyder said in the CBS interview.

Even so, Snyder remains a “wild card,” Perman says.

“Will she maintain this philosophy and desire, especially since she didn’t work her way up through the business as previous generations did?” Perman asks.

If Snyder continues embracing the status quo, Perman says, she will have to walk a tightrope between thoughtful expansion and exclusivity. The demand for In-N-Out is most certainly there, though future development will come down to how far and how fast. Will there be an itch to hit the gas pedal or pressure to evolve the concept for the 21st century marketplace?

“Those are open questions moving forward, but there has been no sense to date of In-N-Out moving away from the core way they have been doing business over the last seven decades,” Perman says.

And why would it? NPD’s Riggs asks. While the better-burger segment has become crowded and stagnant, In-N-Out keeps rolling along, weathering the industry’s ebbs and flows today much as it has throughout its 69-year history.

“When you’ve got the type of loyalty that In-N-Out has, it stands out, and that’s the only way you’re going to grow in today’s marketplace,” Riggs says.