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
Great post. It's been great watching your thought process progress throughout the semester. You are indeed getting closer to grasping the key drivers of In-N-Out's success.
ReplyDeleteI think you've picked up on some critical things here. First, what a company publicly says is not necessarily the truth...or in this case, the truth that matters. They could likely expand, but they are not. Why?
They could likely add menu items, but they do not. Why?
They could likely run all sorts of promos and offer prizes and their own version of the happy meal, but they do not. Why?
These decisions are critical. You've notes that they did a few key things just a little bit better than their competition and then the Paris Hilton thing happened. Perhaps,. but they were iconic and special long before Paris. Why?
Think about their laser focus on brand. A simple menu, with simple ingredients and simple logistics and no other distractions. Their brand is very simple and utterly consistent over time - better (nay, the BEST) fast food. People who don't eat fast food eat In-n-Out. That's important.
They've build a brand over time and it has not been done by accident. You've identified many of the key factors that have fueled this and are very close to putting it all together.
Nice job!