As I mentioned last week, I am hanging out in the Southwest for a week or two, which means I have had the chance to be amazed once again at a local phenomenon – In-N-Out Burger. I have never visited one without a line of cars at the drive through spilling out into the street, and a comparable line inside. As a privately held company their financials are secret, but industry experts put their sales per store figures in the same league with McDonalds and Burger King. The difference is the much lower overall cost In-N-Out Burger enjoys.
That's it – no kids menu, no breakfast menu, no salads, chicken, fish, no low calorie, no diet anything – just very, very good burgers.
The burgers come from their own butcher operation in California, and the buns come from their own baking plant. The potatoes are peeled, sliced and cooked in the restaurant fresh. They are about as vertically integrated as a business can be.
Their employees make a buck an hour or more over the pay scale of the competition, and they participate in a 401K
In-N-Out Burger makes a lot of money.
So what are the lean lessons?
Focus – these people know what business they are in and they concentrate everything on it
Simplicity – they don't try to be all things to all potential customers. They have quite obviously rejected the old Alfred Sloan "A car for every purse and purpose" mantra, and have followed a simple model much more akin to Toyota's
Long term thinking – they grow at a steady snail's pace and keep it under control. The aim is obviously sustainable profits. They have about 230 stores and only recently have slowly spread from California into the neighboring states of Arizona, Nevada and Utah. No franchises – everything is company owned and controlled.
Control of the critical elements of the product – They are in the hamburger business and they maintain absolute control over everything that goes into it.
By avoiding the lure of offering a lot of things around the edges of their core business, they achieve a cost structure much better than McDonalds or Burger King. No floor space, inventory and maintenance costs are wasted on all of the resources needed to support peripheral products. The priority they put on people and quality is what makes waiting in those long lines worth the customers' while.
The owners of In-N-Out Burger are a great example of the folly of thinking that 'innovation' is a strategic imperative. Being the very best at the core product of the business is the key to success. They also demonstrate that outsourcing and keeping labor cost low doesn't equal success either.
All things considered, I believe In-N-Out Burger may well be as good an example of lean thinking in action you will ever see.