In-N-Out's Unique Distribution

Something that was discussed in one of our earlier blogs is that In-N-Out only has stores 500 miles away from their two distribution centers, the farthest being 685 in Centerville Utah. This fact is actually very important to In-N-Out's future. 

In-N-Out prides itself on having never frozen patties and that is part of the reason the distribution centers cannot be very far away from the restaurants. According to D Magazine in Dallas the process from the meat being on the cow to being served is about 5 days. The McDonalds website openly states that their patties are flash frozen 2 to 3 weeks before being served. But what is unique about In-N-Out patties is that they are not actually made at the distribution centers or the restaurants. Business Insider points out there are separate patty making facilities that then send the patties to the individual stores every day. Some customers are not happy with this fact but if they are never frozen then what is the harm?

The two distribution centers in Dallas, TX and Baldwin Park, CA support 304 In-N-Outs. The distribution center in California supports 251 stores while the other center supports 53. This seems like a lot of restaurants for one center to support but it is still less than McDonalds whose facilities provide to 250 to 700 stores according to University of San Francisco. Because the distribution center closest to Texas can support so many more store in the 500-mile radius, it leaves room for In-N-Out to expand. Should they? This is the question our group has been struggling with from day one. If they were to expand could their never frozen beef situation still work out? Would they lose that mystique? But if they don’t, they would utilize the power of the distribution centers?

The article Attack of the Double Double by Nancy Luna in D Magazine is actually very interesting and gives good insight into In-N-Outs distribution strategy.

http://www.dmagazine.com/publications/d-magazine/2011/march/how-in-n-out-burger-will-change-dallas-fast-food

A Reason Behind In-N-Out Burger Success

One of the closet competitor to In-N-Out burger is Five Guys burger, even though, this comparison is not fair at some point because Five Guys stores are all over the nation, unlike In-N-Out, which is generally located in California, but with all that, it is known that In-N-Out is taking the lead on that success path, so why is that?
In-N-Out menu prices did not change much since their opening, and this is probably because of their limited expanding strategy. According to Rick Paulas from KCET channel, the price of the In-N-Out double double was $2.50 in 2001 and jumped to $3.45 in 2014(depends on location). 
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When comparing prices of similar products between In-N-Out and Five Guys, it makes us realize a bit why In-N-Out is so successful. They do not charge a lot and they provide the best burger quality as well as taste, as of what most people would say. 

Who cares what they have to eat its In-N Out!

Who cares what they have to eat its In-N Out! 

Were not sure yet, just what we would have as an elevator pitch for In-N-Out. I think that were getting extremely close to our answer. But after doing a little more digging. I think In-N-Out is...strange compared other firms in the reasons that you start/run a business....which may be what their advantage is. 

In recent posts we began fixating on where specifically In-N-Out locates there restaurants. It goes hand in hand with the quality they guarantee with their burgers. Its always fresh and never frozen. I think it is safe to state that fresh beef does in fact taste better than frozen. Given that fact, In-N-Out is already a cut above most fast food joints. The next most advantageous decision would be to expand operations all over the county, but they only stick to the west coast, and the south west section of the United States. Their President Lynsi Snyder established the reason they are not going public or expanding to the entire US in an interview with CBS "The only reason we would do that is for the money, and I wouldn’t do it". Yet Vice President of the company Carl Van Fleet stated during an interview with Business Insider that "Nothing is ever frozen. Our new restaurant locations are limited by the distance we can travel from our patty-making facilities and distribution centers".  

Wait....Hold on....that doesn't quite fit together. Lets do a little math. Take In-N-Out and Mcdonalds. Mcdonalds as an entity has an estimated maximum worth of 114 billion with over 36,000 locations. Thats 3.16 million per store. Then there is In-N-Out, this is hilarious to me. They have a net worth hovering right around 1 billion and only 304 stores. Putting their per store worth at 3.28 million. Pound for Pound In-N-Out has a 4% lead on Mcdonalds. If In-N-Out had 36,000 stores, they could potentially have a worth of some 4 billion dollars more! 

Oh...wait...there not in it for the money. And even if they were, there expansion is limited by the distance from their distribution centers. Bull crap! It would take time and allocation of finances, of course, but a company that has potential of over 114 billion dollars can put a distribution center wherever the hell they want! At least you would think that. But they have one problem. The hundreds of other fast food restaurants that are their competition. In-N-Out should not have to worry about that though because according to every best fast food burger joint, their the best. However I think that In-N-Out knows one little thing. They are no better than any of their competitors when it comes to food. Its not the best. They use (or so they say) higher quality food. I stated earlier that fresh is better than frozen. Who cares, Five guys isn't frozen, shake shack isn't frozen.

This is where I think I may have figured it out, how are they different. I was thinking in terms of who makes the most money is gonna be the best! Now I think its not who has the most money. Its who doesn't have to worry about not having enough money. Mcdonalds has to open new stores over and over so that it can keep making more cash to cover their expenses. But In-N-Out....starting off they put themselves smack dab in the middle of celebrity city. They invest a little extra money starting off for ingredients that taste just a little bit better than the Mcdonalds across the street....and then boom! Paris Hilton gets a DUI trying to get In-N-Out and everyone has to try it. The next thing to do was only put more stores in one section of the states so that you can only get the best food (that is no different than the second best) in one spot in the world only and you have made yourself intrinsically valuable. They are right where they need to be. Now I would wager they will literally do not ever have to worry about not breaking even ever again. The food is only a feature, the benefit is you got to go to In-N-Out. 

Here are some of sources I used. The next part that Im stuck on is figuring what In-N-Out should do next. 

https://ycharts.com/companies/MCD/enterprise_value

http://www.cbsnews.com/videos/behind-the-in-n-out-burger-dynasty/

http://www.businessinsider.com/why-in-n-out-burger-wont-expand-east-2015-9

To fast food eaters, In-N-Out burger is the premier fast food restaurant in the west that will provide you with the highest quality ingredients at an affordable price because of our local farms and distribution areas.

Why is In-N-Out burger so unbelievably awesome? Why is there a cult following of devoted burger consumers? How come celebrities rave about it?

These are some questions that have stumped our group for sometime, but I believe we have finally established somewhat of a reasonable explanation!

In-N-Out Burger’s first location was in Baldwin California, which is located “ABOUT” an hour and a half east of Hollywood California. As we all know the Hollywood/Los Angeles area is the heart of the entertainment industry. As In-N-Out burger gained popularity they were able to open more locations. They drifted closer and closer to the heart of the entertainment industry……………………………………………………………………………………………………………….(NEEDS MORE EXPLANATION) 

There are many celebrities who love In-N-Out burger, when celebrities talk everyone listens because of the platform they are on, and if your favorite celebrity says In-N-Out burger is the best place to get a burger, then that could draw you in and make you want togo try one. Celebrities have a captivated audience and there are cameras in front of them at all times so when they go to In-N-Out Burger there is probably a paparazzi snapping pictures of them and putting them on the internet. Other companies would have to pay a ridiculous amount of money to get that kind of advertising,  In-N-Out Burger doesn't need to pay anything for it. When michelin star chef Gordon Ramsay comes to your establishment to get food it kind of a big deal, but if he leaves and gets in his car and goes to the drive through and get it again, then he talks about it! "In-N-Out burgers were extraordinary. I was so bad, I sat in the restaurant, had my double cheeseburger then minutes later I drove back round and got the same thing again to take away." You cant pay enough to create that type of advertisement. And In-N-Outs gets it for free! ( was he really drunk? probably but who cares, thats free publicity for In-N-Out)

We still have some more research to do on In-N-Out Burger but we have our foundation…

PS

These burgers are so good they will make you cry