In-N-Out Burger

by Stacy Perman

  Her friendship with Margaret and Carl Karcher was an enduring source of support for Esther. After Harry died, the three remained in close touch. “We went to dinner twice a year,” Karcher proudly explained. While the Snyders and the Karchers had earned more money than they could have ever imagined and could easily have dined at any of Los Angeles’s finest eateries, they chose instead to alternate their dinner meetings between In-N-Out and Carl’s Jr. Philanthropically minded, the two families supported each other’s charities. One of the Karcher daughters, Barbara Wall, recalled that her parents “could always rely on [Esther]. She always came through with any personal request of dad’s.”

  After Harry’s death, Esther often sought out Carl Karcher’s counsel. In fact, as In-N-Out Burger continued to grow and began to open up new stores in Carl’s Jr. territory, Karcher and his wife remained uncommonly generous. “I always called the Snyders colleagues, not competitors,” explained Karcher. “I joke that that was a mistake with the success they became.”

  CHAPTER 15

  In the fall of 1988, following the opening of the Thousand Palms store in Riverside County (the chain’s fiftieth outlet), Rich came up with big plans to mark another milestone: In-N-Out Burger’s fortieth anniversary. Without a doubt, it was a significant event, and Rich intended to celebrate it in high style. He hired a specially outfitted passenger train just for the occasion. The Snyders invited a number of associates and guests to the private onboard fete. The anniversary party took off from Anaheim Station on October 22 and then traveled down to San Diego by rail. It was forty years ago to the day that Harry and Esther Snyder had opened their first drive-through in Baldwin Park.

  As the train pulled out of the station with a jerky hiss, Esther and Rich came out and stood under a red and white In-N-Out awning at the edge of the caboose. An audience of spectators and reporters gathered on the platform below to see the party off; Esther and Rich smiled broadly and waved to the crowd below. The pair looked to be in great spirits. For Esther, it was an especially nostalgic day. San Diego was a city filled with memories—it was there that some forty-five years earlier Esther, a navy WAVES, had been stationed at the Naval Hospital.

  The trip to San Diego wasn’t purely a celebration for Rich. As In-N-Out’s revelers made the return trip north, he got off the train to take care of some business. He had set San Diego in his sights for the chain’s expansion plans. At the time, In-N-Out Burger was negotiating over a couple of sites and he decided to use the trip to survey the area. His goal was to open the first San Diego–area In-N-Out by mid-1989.

  Just north of California’s border with Mexico and south of Orange Country, San Diego, 122 miles from Baldwin Park, was the farthest point outside of In-N-Out’s core radius. It marked Rich’s most ambitious geographical push to date. “San Diego is a totally new market area for us,” he acknowledged excitedly on the chain’s anniversary. “So it’s a big move.” The second-largest city in California (after Los Angeles), San Diego had a growing population with a diverse economy and considerable affluence. It was home to miles of beaches, sixteen military facilities, fifteen colleges and universities, and a flourishing tourist industry. Perhaps more important, scores of residents had more than a passing familiarity with In-N-Out, and they had long bemoaned the absence of the beloved chain from their own backyard. For years, many drove for an hour or two up to Orange and Los Angeles counties for a Double-Double fix. As far as San Diego was concerned, a new In-N-Out couldn’t open up fast enough.

  It took another year and half following In-N-Out’s fortieth anniversary before a San Diego drive-through became a reality. Store number fifty-seven was located in the neighborhood of Lemon Grove (just off of Highway 94). Besides being the first In-N-Out in the San Diego-area, Lemon Grove was reportedly the first store in the chain’s fold to sell 1 million hamburgers in a single year. Before the year was up, Rich launched a second unit in the northern San Diego suburb of Vista, store number sixty-one.

  Certainly, nobody could accuse the chain of oversaturation; the Vista outlet was located about forty-three miles from Lemon Grove. It proved equally popular, reportedly setting an opening day record by selling over five thousand burgers. Lemon Grove’s tally wouldn’t be broken for another nine years, until store number 137 in Redding, California, sold an estimated seven thousand–plus burgers during its own opening.

  It was during this time, as Rich pushed deeper and further into new markets, that a debate erupted inside the chain’s Baldwin Park headquarters about the direction of the company’s future growth. By 1990, In-N-Out had grown to sixty-four stores, becoming a chain about three and half times the size it had been when Harry had died. And the chain’s revenue, an estimated $73 million, continued on an upward trajectory, growing at an average rate of about 15 percent annually. Still, industry-wise, In-N-Out remained a small player. By contrast, at least in terms of size, McDonald’s had about 8,576 domestic restaurants while Burger King had opened 5,468. Wendy’s had reached 3,436 stores, and even Sonic Drive-Ins had passed the 1,000-unit mark. The argument in Baldwin Park centered on the nature of its continued growth; should it be slow and narrowly focused, or slow and widely spread?

  While most fast-food chains deployed a deep penetration policy, opening up in every conceivable high-traffic spot—blanketing intersection corners as well as malls, locations near schools, urban centers, and airports with multiple stores in a single location—In-N-Out had remained incredibly selective about where it placed its units. Originally its drive-throughs were established in suburban and outlying neighborhoods, where the land was cheaper and could be purchased outright. As real estate prices in California continued to soar, Rich continued to follow this strategy. For instance, Lemon Grove was chosen over the more expensive tourist corridor along the Interstate 5. As Rich had told Forbes, “Why pay $2 million for a property if I’m going to sell the same amount of burgers as I would on the property I pay $500,000 for?”

  Unlike nearly every one of its competitors, In-N-Out rarely if ever put more than one drive-through in the same market. The fact that there were so few locations, spaced so far apart, only added to In-N-Out’s allure. It made eating a Double-Double a conscious act, an experience. As big burger chains employed a host of consultants and even commercial satellite photography to capture the best potential locations, In-N-Out’s consumers proved time and again that they would go to extraordinary lengths to eat at In-N-Out.

  A key part of In-N-Out’s location strategy was to find spots that would generate high volume and large turnover. For the most part, In-N-Out still catered to the car-reliant consumer. In 1989, following the San Diego push, the chain opened its fifty-sixth store in Barstow, California. An important silver mining town and busy railroad point in the Mojave Desert during the 1860s, more than a century later, Barstow was known for little more than standing at the entry point to California on the old Route 66. A small, hot, and dusty afterthought of a town, Barstow had lost much of the luster of its glory days, when it was called Calico Junction. However, it did sit on an important crossroad: the intersection between Interstate 15, Interstate 40, and State Highway 58. In the late twentieth century, Barstow had become a popular rest stop for those on their way to or from Las Vegas.

  Store number fifty-six opened up on Lenwood Road, not far from the Mojave National Preserve and the U.S. Army National Training Center; its large customer base was not found among those who were staying, but among those who were just passing through. It was a smart move, and business took off. The Barstow drive-through was the first In-N-Out to be built with three grills and it had the largest indoor seating capacity of any In-N-Out to date (almost three hundred people). The line approaching the counter in Barstow was divided by metal bars to keep customers orderly and moving forward.

  As Rich pushed the chain’s geographical boundaries, each store was still within a radius that allowed the company to deliver its fresh beef patties and produce from the Baldwin Park commissary on a daily basis. It was obvious that
the slow, controlled rollout strategy had contributed greatly to In-N-Out’s mystique and popularity. Rich and his crew of relatively new professional managers were pressing for a broader expansion. At the same time, some of the top managers, including many of the old-timers who had started under Harry, believed that In-N-Out’s mystique was one of the chain’s most important assets. Many of those longtime managers spearheaded the argument against further growth at the expense of its mystique. Would In-N-Out be able to retain its intimate, local feeling as it expanded? Would In-N-Out’s enigmatic appeal and personal touch be sacrificed by a further rollout? Could In-N-Out remain In-N-Out? It was a question that even the largely absent Guy Snyder had considered.

  Although the paucity of stores had helped to drive demand, it also led to traffic jams and idling cars that blocked parking lot exits and entrances, obstructed parked cars, and irritated the owners of nearby businesses. The long lines had become the chain’s unofficial trademark. For the most part, In-N-Out’s customers appeared not to mind waiting twelve to fifteen minutes (or more) for their orders.

  However, Rich had some practical issues to consider. Given the limited number of stores, even if no new stores were opened, the chain needed to find some way to relieve the congestion. For a time, the company tried to alleviate the bottleneck by adding extra grills and fryers to help speed up each store’s ability to cook orders. (The chain would later deploy associates with PDAs to help move the drive-through lane along.) But those measures only helped so much.

  Rich had learned from a series of focus groups that the mystique of his chain only went so far. After talking about how special In-N-Out was, the groups complained about the long lines and distance between stores that left their fries cold by the time they arrived home. What customers wanted were more In-N-Outs—and fast. In the end, Rich went with his gut and decided to proceed with his rollout. In executing his desire to open some ten new stores per year, Rich had to reconsider certain factors of the chain’s longtime growth strategy. Cautiously, he had begun moving out of the sites in peripheral suburbs to more central locations. In 1989, In-N-Out opened store number fifty-five in West Los Angeles on Venice Boulevard, near the 10 Freeway. Gradually, the chain opened stores in other, bigger cities and urban locales such as Hollywood (on Sunset Boulevard) and eventually San Diego proper (near the I-5 corridor).

  In another break with the Harry Snyder tradition, Rich also began to open new stores in markets where an In-N-Out was already located—slowly, sparingly, and, for many years, not within a six-mile radius of one another. In doing so, the company had to be ever more vigilant in monitoring its locations. It wasn’t just a highly trafficked intersection or freeway off-ramp that made an In-N-Out a success; although In-N-Out’s prices remained modest, the company found that the highest volume stores were located in higher income areas. As In-N-Out began to put more than one store in a single territory, income was a criteria that the company could not ignore.

  At first, some of the managers (whose bonuses were tied to their stores’ profits) were concerned that the new strategy would eat away at their business—but the company had conducted impact studies that showed the opposite to be the case. In fact, after an initial drop-off, the original store’s volume not only rebounded but increased.

  When Harry and Esther turned the reins over to their youngest son, Rich, In-N-Out owned its warehouse, offices, and meat department on East Virginia Avenue, in addition to all eighteen of its stores. Harry was strictly old school; if he couldn’t afford to own a property outright, he didn’t need it. Rich did not operate under the same conservative rubric. He wasn’t afraid to go outside of the company for financing and sought a line of bank credit in order to facilitate his expansion plans.

  At the start of the 1990s, there were fewer than one hundred In-N-Out stores—not enough units to generate the kind of income needed in order to open ten new stores a year. The next best option was to lease. For one, it helped ease up the cash flow. Secondly, Rich was also finding that increasingly he was up against large property developers. If he wanted to continue to operate in key locations, he had no choice but to lease from them. One of In-N-Out’s first leased stores was in Norco, a rural equestrian community in northwest Riverside County where hitching posts remained a common sight. Around 1990, In-N-Out owned all but a handful of its sixty-four stores. That changed over time; eventually, the chain owned roughly 60 percent of its stores and leased the rest.

  Around this time, Rich established a separate business entity called Snyder Leasing that received income based upon a percentage of the gross income generated by a number of In-N-Out stores as well as a number of commercial properties. While the company purchased the land and built the properties, the stores listed in Snyder Leasing were deeded over to Rich, who was its primary beneficiary. Between 1991 and 1992, perhaps ten In-N-Out units were listed in Snyder Leasing’s portfolio of properties; not surprisingly, they were some of the highest-performing shops in the In-N-Out fleet.

  It was a potentially lucrative move. In-N-Out was classified as an S-Corporation, largely for tax purposes. S-Corporations are not taxed on profits; rather, its owners are taxed on their proportional shares of the company’s profits. As In-N-Out’s president, Rich’s salary had a ceiling for tax reasons, and Snyder Leasing gave him another stream of revenue.

  In his official capacity as executive vice president, Guy Snyder oversaw the meat department and warehouse. In actuality, he could be found at the Baldwin Park complex on average not more than two or three times a week. He was not involved in the chain’s day-to-day operations. Marriage and fatherhood notwithstanding, he had yet to shake his reputation as a rebel. It was an assessment usually colored by Guy’s own cycle of behavior. Impulsive, Guy might decide to fly to Cancun one week, taking a group of friends with him—or he might spend the day riding dune buggies. Once, a friend recalled, Guy went to another fast-food restaurant and ordered one of everything on the menu just to see the reaction of the young cashier.

  Increasingly, Guy and Rich were not on the same page. In the years that followed their father’s death, Guy distanced himself further from In-N-Out’s daily workings and from the Baldwin Park corporate offices. More than anything, Guy seemed to follow his own interests. Around 1988, he opened the Flying Dutchman Tobacco Hold in Glendora, a store that sold exotic blends of tobacco and pipes from all over the world. More of a hobby than a serious business venture, the Hold closed for good after only about two years. He spent a great deal of time on his 170-acre ranch up in Shasta County, and soon the family made the Flying Dutchman their main residence.

  Drag racing was Guy’s primary vocation, and during the late 1980s, he stepped up his already considerable involvement in the sport. He had amassed about half a dozen racers including a green Dodge Charger, a Blue Dodge Dart, and a blue 1941 Willys—but it was his 1986 IROC Chevy Camaro that he raced seriously. When he wasn’t racing on the official circuit, Guy, who raced sportsman’s class, frequently rented out drag strips in California and Arizona for his own personal use. He’d call up his crew and they would haul his trailer to the Famoso Raceway in Bakersfield or the Firebird Raceway in Phoenix, where he ran his own races.

  In 1984, the same year that Rich launched In-N-Out University, Guy convinced his mother and brother to sponsor a professional NHRA team. It was a particular desire of his to see the In-N-Out logo displayed on a winning dragster. The family started small, initially paying a few thousand dollars to partially sponsor the Over the Hill Gang’s Funny Car. The Over the Hill Gang was a group of five friends from the San Gabriel Valley who got involved with drag racing in the 1970s. “We could afford to partner up and build the car,” explained Joe McCaron of the Gang team, “but we didn’t have enough money to race it.” (Financing a successful NHRA team could cost more than a million dollars.)

  In-N-Out’s sponsorship increased incrementally over the years from partial sponsorship to full sponsorship, underwriting about three races a year for the team. However, by
1987, In-N-Out’s management had become concerned about the money they were shelling out for the team, particularly because it hadn’t won a major race. As luck would have it, that same year the team qualified and landed on TV, In-N-Out was just about to pull its funding. In 1988, the Over the Hill Gang won the Winternationals in Pomona. The Snyders and all of In-N-Out’s associates were thrilled. The winning Funny Car was pulled through Covina’s Christmas Parade and displayed at In-N-Out’s Christmas celebration. At the party, the children of associates were allowed to play with the car, pretending to race, sitting behind the wheel.

  In 1989, Guy hired Earl Wade, the longtime, highly regarded tuner for Don Nicholson, to build his engines. Wade had been something of a legend on the drag racing circuit from its earliest days, and the pair had known each other for about fifteen years. Guy had hoped to take his racing to a professional level and wanted Wade to help him. The two men set up a meeting at Earl Wade Racing, the tuner’s shop in Monrovia. “Here was a man with a lot of money that can do anything he wants,” was how Wade described Guy Snyder. “Money was never an object. He sure didn’t lack in that department.”

  In fact, the Snyders kept a tight rein on Guy’s spending. Drag racing might have been Guy’s hobby, but he didn’t hold the purse strings. “Mama and Rich, they oversaw everything that Guy did,” recalled Wade, who said that the Snyders’ main concern was for Guy’s safety. Rich saw this as an opportunity to encourage his brother. He also viewed the venture as something of an investment in advertising for In-N-Out. The family came up with a private plan, and the Snyders agreed to fund Guy’s racing. Anytime Guy needed money for the venture, he had to go through Rich. It was Esther who signed the checks. The annual budget discussions were often the source of blowouts between the brothers.