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.
Check out the menu:
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.
Jason Morin says
Any time I’m in California, I make it a point to find an In-N-Out location and get one of those scrumptous hamburgers. And similar to your experience, every location I have visited is bursting at the seams with customers at lunch…ALWAYS.
Just to add to your observations, I think the simplicity of their menu offering also benefits them the following ways:
1) They can serve customers more quickly, thus lowering wait times and boosting store sales with a higher volume of customers. When the menu is simple, regular customers already have it memorized or, if you’re a newbie, the decision-making process doesn’t take very long.
2) Perhaps CA natives can correct me, but they probably don’t advertise as much (if at all) as their competitors. There’s no need to spend millions on TV commercials about new products when your menu is simple and consistent.
Scott Edwards says
Great example, that hadn’t occured to me before! Another thing that fascinates me about In-n-Out Burger is the “secret menu”. Not so secret menu is hear: http://www.in-n-out.com/secretmenu.asp
Other urban legend varieties are here: http://en.wikipedia.org/wiki/In-N-Out_Burger_menu_items
I reckon their ability to provide highly customized variety is possible in the first place because of their “lean” menu.
Steve Harper says
There are no hot racks at In-n-Out either; everything is made to order only. I’ve lived in California for 12 years and I can’t remember seeing but maybe a few In-n-Out commercials on TV – definitely orders of magnitude less than BK, McD’s and Carl’s, yet even people, like yourselves, from the East Coast or other countries know about In-n-Out. That would suggest that a strong brand identity based on customer satisfaction would trump the best media campaign.
Paul Todd says
I’ve never been to an In-N-Out, but the concept sounds very much like the McDonald brothers’ Speedy Service concept of 1948 in San Bernadino.
Jason Morin says
Steve,
I lived in San Diego for 4 years back in the late 80s but I don’t recall any In-N-Out locations. I didn’t get my first introduction to them until around 2002 or 2003 when I was traveling frequently on business to Northern CA (Stockton area).
After my first burger, I was hooked.
mattf says
Bill, for a few summers I was in the LA area and I was always fascinated by the sheer simplicity of In-N-Out. However, I had pre-conceived notions that it would be the same as Burger King or McDonald’s. But man, first burger was just a completely different meal then I had ever expected. Just simple, good and affordable eating.
Granted, I do not agree with their religious connotations, but you can only get so far :P
Tony says
The best burgers I’ve had were at Nifty Fifty’s in Delaware County ( http://www.niftyfiftys.com/ ) – In-n-Out isn’t even close. And their milkshakes were just incredible. Of course, since their rapid expansion to 5 locations, their quality might have dropped a little.
Off lunch hour, In-N-Out generally isn’t too bad. And I don’t care for their fry’s — MickeyD’s original were better (and probably healthier — see http://clovegarden.com/ingred/oilshealth.html for a reasonable discussion).
If you look at all the different Toyota model available, you might think they’re trying to do a different car for everyone. The best I can say is that they’re trying the In-N-Out secret menu (many variations on a common theme).
However, that’s not true for Lexus (unless you feel their lineup is consistent because they’re all ugly). Audi, BMW, and Mercedes lineups have a consistent identity. Lexus (and Infiniti) are split, with some cars aimed at Mercedes (e.g. ES) and some at BMW (e.g. IS, G37).
Overall I like the post – and I think Lexus and Infiniti would be better if they became more coherent.
Brian Buck says
Great post. I really like the mention of peripheral products. Many organizations try other things because they do not have as much faith in their core product to explore and develop it to be better value. These distractions take a lot of energy away from improving what needs to be improved.
James Morgan - Puritan Financial Advisor says
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.