In-N-Out Burger

by Stacy Perman

  A custom-made staircase with handmade railing and turnings bridged the second-floor executive offices, separated by antique doors imported from Spain. The suite’s ceilings were made of lighted stained glass. Rich had the largest of the offices. A voracious reader of politics, his workspace was filled with shelves lined with books and decorated with an eclectic assortment of mementos such as his coin collection, photographs of various Republican apparatchiks, and Rich’s prized 1944 Wurlitzer jukebox. Although he was rarely there, Guy had an office on the second floor, too. Smaller then Rich’s, Guy’s office was filled with mounted fish and game as well as drag racing memorabilia. Sumptuous and decidedly feminine, Esther Snyder’s office was decorated with a suite of antique Louis XIV furniture more in keeping with Rich’s idea of the kind of office that Esther should have rather than what she herself might have designed. In fact, she was hardly ever found behind her second-floor desk. Most of the time, Esther was downstairs with her sleeves rolled up, working among the cubicles in accounting.

  When it came to rebuilding the warehouse, meat department, and other ancillary facilities, Rich had very specific ideas that built on Harry’s original concept of total quality control. The function of the new warehouse remained the same (it would still receive, store, and ship food supplies to the stores), but it performed on a larger scale. For instance, In-N-Out retained a potato buyer whose job it was to select the proper quality potatoes for the chain’s fries.

  However, if anything paid homage to the ideals of Harry Snyder and In-N-Out’s unwavering commitment to freshness and quality control, it was the new warehouse and meat department. Rich exhaustively researched slaughterhouses and meat processing plants around the country for best practices before constructing the new processing center (crowned with a Spanish mission-style bell tower) that operated seven days a week.

  Inside, specially selected cow and steer chucks arrived at the antiseptically clean commissary. The chain proudly proclaimed that it paid “a premium to purchase fresh, high-quality beef chucks.” And it required all of its beef suppliers to sign a purchase specification agreement prohibiting them from using “downer” (non-ambulatory) cattle. To better enforce In-N-Out’s quality standards, each chuck was inspected before being accepted.* After In-N-Out’s inspection, a team of skilled butchers boned and removed the meat. A blend of the meat was then put through a double-grinder—with the first mill breaking it down and the second readying the beef for five special machines that molded the beef into patties at a rate of twelve hundred patties per minute. Boxed and loaded into In-N-Out’s refrigerated trucks, the finished patties were then sent off to the drive-throughs. In spring 1984, the San Gabriel Valley Tribune reported that the family-owned chain was selling more than 14 million burgers each year.

  Five years after the rebuild, having grown to thirty-two stores (with thirteen more set to open), Rich needed to enlarge and update the warehouse again. Roughly two dozen local business executives and a handful of Baldwin Park city council members attended the ground breaking of the new $3 million facility. The San Gabriel Valley Tribune featured the event in its February 11, 1986, edition with a large photograph showing Rich Snyder and four city councilmen (all in suits, ties, and hard hats) on-site.

  By 1990, Rich had once again doubled the size of the chain; there were now sixty-four restaurants. In-N-Out’s growing critical mass (and continued profitability and popularity) spurred analysts to estimate the private company’s sales. Nation’s Restaurant News reported that In-N-Out was generating roughly $60 million in sales annually. However, Technomic Inc., a Chicago-based restaurant consultancy that published a series of industry surveys, put the figure closer to $73 million.

  From the very beginning, it had been the Snyders’ policy not to divulge the company’s numbers. They ignored all requests to do so, regularly frustrating the financial community. As Technomic president Ron Paul put it, “They are very different. They don’t allow us to interview them or provide any data. We try at least once a year. They just don’t respond.”

  At the start of the new decade, once again Rich renovated the warehouse to keep up with the growing demand, this time expanding it to seventy-five thousand square feet. That In-N-Out was able to maintain its fresh, quality, flavorful burger even as it scaled up was a distinction of which Esther was especially proud. As she once explained (in remarks published by the Baldwin Park Historical Society not long after the new headquarters were built), “The aims set forth by Harry Snyder since the founding of the company are still our chief endeavor—‘Quality, Cleanliness, and Service.’”

  Before long, investors had begun to take notice of the popular little Baldwin Park–based burger chain. They began sniffing around—only to be politely but firmly rebuffed. Voicing the desires of many, David Geraty, at that time the managing director of the Minneapolis investment banking firm Dain Rauscher Wessels, once exclaimed, “Every investment banker in the country would love to take them public.” As early as 1986, Rich remarked that he had to deny the IPO rumor “at least twenty-five times a week.” Although flattered and certainly aware of the potential financial windfall of such a move, Rich showed little interest in the attention given by excitable investment bankers. “In-N-Out is a great vehicle to do something like that,” he once confessed. “But my feeling is that I would be prostituting what my parents made by doing that. There is money to be made by doing those things, but you lose something, and I don’t want to lose what I was raised with all my life.”

  Similarly, In-N-Out routinely rejected frequent requests to franchise (reportedly thirty to thirty-five a week). After a time, they didn’t even entertain the inquiries. The family saw franchising as a surefire path to losing quality control. “Franchising,” Rich stated firmly, “was simply not going to happen.”

  In-N-Out’s new headquarters became something akin to Baldwin Park’s mansion on the hill. On March 16, 1982, approximately three months after moving in, the Snyders erected a large tent outside of their corporate offices and threw a dinner and dancing party for nine hundred guests. Despite the light rain, inside the tent the party resembled a summer night. Fairy lights were strung overhead, while rich carpets were laid out over the concrete. It was a huge event among locals. The party warranted inclusion in the historical society’s inaugural issue of The Heritage of Baldwin Park newsletter.

  The Snyders held numerous invitation-only parties and mixers for the city’s chamber of commerce and a few other organizations on its premises. Semi-regular events such as “Business After Hours” were hosted by Rich and his mother, Esther, and usually included door prizes and food donated by the family. “Come join us for an evening of fun, fellowship, and great-tasting In-N-Out burgers!” announced a typical invitation.

  On special occasions, the Snyders opened up their headquarters to select members of community groups, city officials, and area residents. They were given tours of the facilities, including a chance to explore the warehouse and commissary that never failed to impress visitors. So coveted were the invitations that they were received not unlike winning the golden ticket to enter Willie Wonka’s chocolate factory. Eighty-five-year-old Bobbie Lightfoot, a longtime Baldwin Park resident, remembered the time she was invited on a tour in 1982. “They arranged for some of us real old-timers to go in vans,” she said animatedly. “What a beautiful building. There was a fancy fountain and mahogany wood. Boy, did Rich make that a showplace.” During the visit, Lightfoot pulled Esther aside and told her that “my grandson just loves In-N-Out, but he live[s] in Washington and [is] waiting for [you] to go there. She laughed and said, ‘We’re getting there.’”

  Manuel Lozano (who became Baldwin Park’s mayor in 1999) was a young city council member when he received his one and only invitation to tour In-N-Out’s headquarters. “It was a rare treat, because it wasn’t all that accessible and I was really excited,” he recalled. “But to tell the truth, I was most excited to meet Mrs. Snyder. I saw her as a historical individual, part of the history of B
aldwin Park.” When Lozano got the chance, he told Esther how impressed he was with the facility. “Everything was well cared for,” he said. “It was impeccably clean, and it obviously makes In-N-Out unique.” His compliments were followed by a hesitant confession. “I told her I didn’t eat meat.” Lozano said that Esther smiled and laughed, and then she told him about the secret menu. “She said, ‘You can request a grilled cheese.’ And from that point on that is what I get to this day.”

  Rich needed to build more than an elegant new headquarters to execute his vision. In-N-Out Burger was a small operation. When Harry ran the chain, the corporate hierarchy consisted of just him and Esther. After he died, the chain of command expanded slightly: there was Rich, the president; his mother, Esther, the secretary-treasurer; and brother Guy, the executive vice president. Rich created a human resources department, a financial department, and for the first time, a small advertising section.

  Intensely focused, Rich began assembling a new management team. “I want to grow In-N-Out,” he began telling friends—he told a handful, “I want you to come and work with me.”

  Rich well understood that if he wanted In-N-Out to grow, he needed professional managers, and he began hiring executives who had not come up through the ranks working at the stores. During this time, he brought in a group of men with college degrees who had already gained some management experience elsewhere, men like Roger Kotch, a graduate of business administration from California State Fullerton, who started as an accounting manager (two decades later he was the chain’s chief financial officer); Ken Iriart, vice president of human resources; Steve Tanner, chief financial officer, who earned his bachelor’s degree in accounting from Brigham Young University; and later Carl Van Fleet, a U.C. Berkeley graduate and former Pizza Hut executive. At one point, Rich poached an executive from McDonald’s, but apparently his ideas (and attitude) didn’t mesh with In-N-Out’s culture, and his tenure was short-lived. With few exceptions, the group that Rich put together proved to be a remarkably loyal, deep bench of talent. Nearly all stayed with the chain for decades, seeing it through a number of critical junctures.

  Around the same time, Rich decided to establish a new department devoted to real estate and development. It was his desire to roll out anywhere between five and ten new stores a year. Up until then, In-N-Out Burger had used its small maintenance department to build new stores—during the day, they worked on routine maintenance, and after hours they worked on new store construction. This setup severely limited the chain’s ability to build more than one or two new stores a year. If In-N-Out was to move forward, it needed to increase its ability to survey locations and erect new stores. The Snyders believed that quality control should extend to all areas, and the building of new stores was no exception.

  Rich tapped longtime friend Richard Boyd, a local contractor who owned his own business and had worked on a number of In-N-Out’s stores as well as the rebuild of the warehouse and new headquarters, to head up the department. Very quickly, Boyd developed a formula for construction that mirrored the system that the chain had with its food suppliers; it was based on establishing long-term relationships with contractors. As In-N-Out expanded, so did its real estate and development department. Under Boyd, the chain now had the capacity (at least in terms of construction) to build a minimum of ten new stores a year.

  Under Harry, one of the cornerstones of In-N-Out’s limited growth strategy was the determination to expand only as quickly as its management strength would allow. In order for Rich to be able to realize his goal of significantly expanding the chain, he needed to come up with a process to rapidly develop a strong, competent line of managers. By promoting solely from within, In-N-Out was able to preserve both its exacting standards and unique culture—but that very same system of rolling out a new store after someone had moved up to manager severely limited the chain’s ability to grow substantially.

  Rich was constantly on the lookout for management talent. He established incentives for store managers to find new management trainees. While eating out in a restaurant, if one of the staff caught his eye, Rich would strike up a conversation. If he liked what he saw, he’d say, “Hey, you’ve got a great personality. Why don’t you come work for In-N-Out?”

  It wasn’t enough. There was another crucial element that Rich needed: the ability to increase the number of well-trained store managers as well.

  CHAPTER 12

  In 1984, Rich founded In-N-Out University, a large-scale management training program on the corner of Francisquito Avenue and Vineland, across from store Number One. It happened to be located on the site of Harry and Esther Snyder’s former house. “If you are going to grow your organization,” explained William Martin, who devised the University’s initial training manual and curriculum, “you need a training program, and that’s the bottom line. That was Rich’s motivation for the University. He really understood that.” Originally built as a full-service drive-through restaurant (if bigger than a typical In-N-Out store), the University was where management-level employees could receive instruction and learn how to run a unit in a real-world environment.* It also allowed the company to reinforce its own particular methodologies and strategies.

  The concept was not entirely new. In 1961, McDonald’s had founded its own Hamburger University in the basement of one of its restaurants in Elk Grove Village, Illinois. A full-time training center, Hamburger U was originally set up as an instructional program for its licensees, intended to ensure uniformity in every aspect of the McDonald’s system. As McDonald’s grew, its university grew as well. By 1983, the company had moved from the Elk Grove Village basement to a new $40 million facility instructing five thousand students from 119 countries.

  In-N-Out University was as practical as it was bold—at least in terms of sheer size, the Snyders’ chain could not equal its early Southern California rival. The year that In-N-Out University was established, there were about thirty stores pulling in an estimated $30 million in revenue. In contrast, during the first quarter of 1984 alone, McDonald’s had opened forty-one new stores and reported record system-wide sales of $2.2 billion for the quarter. By the time that Ray Kroc died in January 1984, almost eight thousand pairs of golden arches circled the globe in some thirty-one countries, generating $8 billion annually. The ledger of the two companies’ numbers listed side by side might have seemed horribly mismatched, save for one figure; In-N-Out Burger was meeting the industry giant’s revenues on a store-to-store basis. In something of a surprise for the notoriously tight-lipped company, Rich himself admitted as much when he told a local reporter that in terms of volume, the average In-N-Out location came “pretty close” to the volume at an average McDonald’s.

  According to William Martin, who had previously directed the training and organizational development at another California restaurant chain, the Snyders gave him a great deal of autonomy to come up with a program. “They didn’t have an in-house, in-depth expertise for training.” When he started, Martin discovered a successful company with a special culture, one that was insulated and private but seemed to vibrate with happiness. He found Rich and Esther Snyder “absolutely wonderful.” Rich, he said, was “the ultimate great boss,” and Esther was “gentle, kind, and lovely…a saint.” Martin added that, “whole graciousness permeated though the company.” Guy, however, was rarely around.

  Initially, In-N-Out University’s program consisted of a once-a-week afternoon course conducted over five weeks. Later, the training expanded to classes of about twenty students who spent 165 hours in the classroom. Martin incorporated such management staples as Your Attitude Is Showing by Elwood Chapman and The One Minute Manager into the curriculum. “It was a natural because they were so attitude-oriented,” he said. The curriculum stressed how to hire, interview, and train. Perhaps not surprisingly, the program was intensely focused on areas that mirrored key aspects of Rich’s personality: communication skills, methods for motivating associates, and positive attitudes. It was also tailored t
o help associates spot potential as well as to give them a sense of challenge and decision-making. One of the basic tenets taught at the University was called rule number one: “The customer is always right.” Martin recalled that “Rule number two was, ‘If in fact the customer was not right, refer to rule number one.’”

  Although flipping burgers and dressing buns might be tedious, the Snyders made sure that working at In-N-Out was not. While those at the store level were expected to rigidly adhere to procedure, according to Martin the company had a real “respect for creativity and judgment.” Rich gave a great deal of latitude to his employees, rewarding and encouraging those associates who showed initiative and independent thinking, particularly at the corporate level.

  While Rich was eager to accrue more managers to facilitate In-N-Out’s expansion, it was not easy to join their ranks. In order to attend the University, an associate usually had to have already worked full-time at a store for a year before she was eligible to start at the fourth rung as an entry-level manager (In-N-Out has a four-tier manager system in each store). During that time, the associate had to demonstrate a track record of hard work, responsibility, and potential; he also had to show that he could make good decisions, take initiative, and exhibit considerable people skills with both the customers and his co-workers. As positions opened up (and new stores opened), there would be upward movement to the next level of manager, and each level had to spend time at the University once they were promoted for additional training.