In N Out - Part 1

The In-N-Out Burger Story: Proving the Power of Planning, Part I

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This is the first of a two-part series on family succession planning lessons we can learn from the In-N-Out Burger story.

The In-N-Out Burger Experience

I remember the first time I ate at In-N-Out Burger. I was driving my 1974 VW Bug through Southern California, on my way from Sacramento to Phoenix the summer after graduating from law school.

CEO and Attorney Kent Phelps
CEO/Attorney Kent Phelps

I was determined to experience the mystique of this, at that time, exclusively Southern California icon and bring home an In-N-Out Burger T-shirt. I remember being impressed by how friendly the employees were. Although I was a starving law school graduate, I not only enjoyed the #1 double-double combo, but I bought the T-shirt and wore it for years.

Since then, In-N-Out has expanded outside of Southern California to all of California, Arizona, Utah, Colorado, Nevada, Texas, and Oregon. I still look forward to the #1 double-double combo meal (“protein style/animal style, please!”) whenever I’m at our Peoria, AZ office – conveniently located across the street from In-N-Out! 

I love that I can always count on a consistent experience no matter where my travels take me. The simple menu, fresh ingredients, friendly workers, efficient order processing, and sparkly-clean environment have established In-N-Out as the gold standard of the fast-food industry.

Replica of the first In-N-Out Burger location in Baldwin Park, CA.
Replica of the first In-N-Out Burger location.

Thriving Amidst Tragedy

In-N-Out is one of the largest family-owned restaurant chains in the country. It has never solicited investors or gone public. Its stock has always been owned by or for the benefit of the founders, Harry & Esther Snyder, or their bloodline heirs.

In-N-Out has found a way to thrive in spite of family dysfunction, self-destructive behavior, untimely deaths, a limited gene pool, and leadership by the very young or the very old by necessity. Consider the fate of each of these Snyder family members and the ironic correlating success of In-n-Out:

Harry Snyder, co-founder with his wife, Esther, died of lung cancer in 1976 at the age of 63. Harry and Esther opened the first In-N-Out location in 1948. They developed the systems built around a simple philosophy: “Quality, Cleanliness, and Service.”

Harry and Esther Snyder, circa 1948

Rich Snyder was the youngest son of Harry & Esther. Rich took over the company in 1976 at the young age of 24 and died in a plane crash in 1993 when he was only 41 years old. He had no children.

During Rich Snyder’s leadership, despite a policy of conservative growth in the limited geographic area of Southern California in order to fulfill the “Quality, Cleanliness, Service” promise, In-N-Out expanded from 18 to 93 locations. Annual revenues grew 15% yearly to $133 million, with profit margins exceeding those of McDonald’s.

Guy Snyder was the oldest son of Harry & Esther. Guy was passed over to lead the company on Harry’s death due to substance abuse. Guy took over the company as chairman, president, and majority stockholder on his younger brother Rich’s death in 1993. At times during his tenure, Guy lived a vagrant’s life, disappearing for weeks at a time and living out of a travel trailer. Guy died in 1999 of a drug overdose at only 48 years old.

Despite Guy’s struggles, the chain grew from 93 to 140 stores, and revenue grew 83% to $212 million a year during Guy’s tenure.

Esther Snyder was 79 years old and recovering from an infected broken hip when she took over the company in 1999 after losing her only two children under tragic circumstances. Esther led the company as president until her death in 2006.

Under Esther’s leadership, In-N-Out grew from 140 locations in 1999 to over 200 locations at the time of her death. For the first time in over 50 years, the company expanded outside of California into Nevada and Arizona. The company was worth an estimated $300 – $400 million at the time of Esther’s death.

Lynsi (Snyder) Martinez was Guy’s daughter and the only grandchild of Harry & Esther. Only 24 years old at the time she became the sole heir of In-N-Out, Lynsi became president of the company in January 2010, at the age of 27.

Since young Lynsi took over 13 years ago, In-N-Out has grown to approximately 387 locations.  Most impressively, this expansion has not come at the expense of the company’s core values of “Quality, Cleanliness, and Service,” as is evident to anyone who frequents In-N-Out today.

The following quote from the book In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain that Breaks All the Rules, relating the state of the company at the time of Rich’s death, is telling:

“As a result of the infrastructures Rich Snyder had put into place, the leadership transition – at least in terms of operations – was practically seamless. The company could still grow and expand and increase its sales volume by following the chain’s philosophy of “Quality, Cleanliness, and Service” and the systems put in place to achieve it…He created a management system that could ensure quality even as it added new stores each year…All Guy had to do was follow the system already in place.”

The In-N-Out story demonstrates the power of planning.  In the Snyder family’s case, a combination of smart family estate planning and business planning that allowed the Snyder family’s wealth and business to survive cancer, plane crashes, drug addictions, the infirmities of old age, and the indiscretions of youth.

So, what planning did the Snyders put in place that could withstand such difficult circumstances?  Stay tuned for next month’s blog post!

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