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August 10, 2006 » 3:45 pm

The In-N-Out Test

Esther Snyder, the founder of In-N-Out Burger, passed away last Friday. (See the Los Angeles Times obit.) For those of you who haven’t heard of In-N-Out, it’s a legendary burger joint that originated in California, but that’s now all over the western United States. I’m from Los Angeles, so In-N-Out is part of my blood (literally — I’ve eaten tons of their burgers), but it also served as an interesting business thought experiment when I was founding Blue Oxen Associates.    (L1I)

On August 14, 2002, The New York Times published an article on In-N-Out, one that had me asking several colleagues, “Would you rather have founded In-N-Out or McDonald’s?”    (L1J)

Here’s the tale of the tape:    (L1K)

  • They were both founded in Los Angeles in 1948.    (L1L)
  • In-N-Out remains privately owned. McDonald’s is a public company with franchises world-wide.    (L1M)
  • In-N-Out did an estimated $160 million in sales in 2001, meaning it has grown in revenues 10 percent a year. McDonald’s did $40.6 billion in sales in 2001.    (L1N)
  • According to a Fast Company article last year, In-N-Out is now a $310 million company. In-N-Out does very little advertising. McDonald’s spent $1.5 billion on branding in 2004, yet its per-store revenues are only slightly higher than In-N-Out’s.    (L1O)
  • In-N-Out’s menu is largely unchanged over the past 50 years.    (L1P)
  • Even Eric Schlosser of Fast Food Nation fame endorses In-N-Out.    (L1Q)

I started asking a bunch of my colleagues this question, and the responses were interesting. The most interesting response in favor of McDonald’s was that McDonald’s has had a positive systemic effect on society by giving millions of people their first introduction to the working world and management skills.    (L1R)

Can you guess my answer to the question? What’s yours?    (L1S)

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