Still the Best Company I've Ever Seen

We're back from our summer vacation in California to visit friends, family, and In-N-Out Burger, the best company I've ever seen.

In some ways, In-N-Out was the highlight of our trip west. Yes, we spent time on the beach. Yes, we had fun catching up with relatives. There were days we went without the tasty comfort of a Double-Double and fries.

But on the days we visited, In-N-Out provided redemptive moments for our eldest son, who suffers from a combination of severe food allergies and, like my Foolish colleague John Rosevear, celiac disease. In-N-Out's naturally-cooked fries are perfectly safe for him. His face lights up every time we go.

Fries? That's all?
Maybe that sounds nonsensical. I guarantee it wouldn't if you were on a vegan diet and surrounded by kids whose parents treat them to top fast-food brands like McDonald's (NYSE: MCD  ) and Yum! Brands' (NYSE: YUM  ) Taco Bell. Even the not-as-heart-destructive snacks at Starbucks (Nasdaq: SBUX  ) are torture for our boy. Among fast-food options, In-N-Out is a rare safe haven.

Yet our son's semi-religious experience with In-N-Out fries isn't what makes this company special. What's astounding is that millions of people delight in their own semi-religious experiences when it comes to In-N-Out. Each is different, but the loyalty is the same.

In-N-Out has more than 190,000 fans on Facebook. Celebrities love it. Chef celebrities love it, too. "The hamburger is definitive, greasy but oddly clean-tasting at the same time and the sauce actually is 'special.' And the shake tastes the way shakes tasted back when I was a kid. It makes me tear up just thinkin' about it," said Alton Brown, host of Good Eats and Iron Chef America, in a recent Esquire interview.

Get your company "Animal Style"
If there's a problem with In-N-Out, it's that investors can't own a piece of the business -- it's private. The founding Snyder family doesn't even franchise. But investors should still give this company a close look. In-N-Out is the very model for what we should demand of the businesses we do own.

Last time I told you about In-N-Out, I mentioned four factors that make it truly great. To recap:

  • It's family-owned. Since 1948, when Harry and Esther Snyder founded the first drive-through in Baldwin Park, Calif., In-N-Out's owners have maintained control over the business.
  • It follows a disciplined growth strategy. In-N-Out insists on using fresh ingredients for its burgers and fries. All 200-plus locations are within trucking range of its Baldwin Park beef commissary. Expansion beyond southwest Utah would require freezing and, from management's view, damage the brand.
  • It attracts insanely loyal customers. Branded T-shirts from the restaurant are everywhere in southern California. Try to take mine, and you'll end up with a fistful of get-your-filthy-hands-off. Few companies short of Nike (NYSE: NKE  ) command similar brand loyalty.
  • It's different. In-N-Out attracts employees who stay. Managers average 14 years, and part-time associates tend to put in two years, writes BusinessWeek's Stacy Perman, author of a new book profiling In-N-Out's success story. Those are startling numbers. Industrywide, Perman reports, only about half of all fast-food workers stay beyond a year. As publicly traded success stories like Chipotle (NYSE: CMG  ) and Buffalo Wild Wings (Nasdaq: BWLD  ) understand, attracting and retaining quality managers is crucial.

Those four attributes alone would be enough to make any investor happy. Today, I want to add two more, gleaned from my observations during our latest trip. They are:

  • It's a proficient user of technology. Visit any of the busiest locations, like the In-N-Out off Sepulveda Boulevard near LAX airport, and you'll find employees carrying wireless handheld computers, ready to take your order. Apple (Nasdaq: AAPL  ) uses a similar concept for its retail stores, and, if you've been to one, you know that you get faster service as a result.
  • It creatively engages customers. Quite possibly the best part about In-N-Out is the not-so-secret "secret menu." Enter any store and you'll see just a few items on the menu -- the cheeseburger, the double cheeseburger ("Double-Double," as it's known), the hamburger, and fries. But there are several more options that devotees know about. Order "Animal Style" to get a mustard-cooked patty, extra pickles, and sauce. Order the "Flying Dutchman" if all you're interested in is meat and cheese, because that's all you'll get. Every one of these options is programmed into each store's computers, but the mystique remains. Knowing the "secret menu" is like being part of an exclusive club.

In short, In-N-Out is exactly the sort of rebellious winner we look for at Motley Fool Rule Breakers. We seek companies whose business practices shake the foundations of industries, and whose brands inspire not just loyalty but also desire -- and in the process, transform thousands into millions.

One such business, a brand found in every grocery store in America and singled out in our March issue, has seen its stock more than double since our original recommendation. Yet it shows no signs of slowing growth. This well-managed company could become its industry's version of In-N-Out Burger.

To find out more about this pick, and to see our full list of recommendations, click here. A 30-day guest pass is free.

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Fool contributor Tim Beyers wonders who he needs to talk to in order to get In-N-Out to Colorado. He had stock and options positions in Apple and a stock position in Chipotle's B shares at the time of publication. Apple and Starbucks are Stock Advisor selections. Starbucks is also an Inside Value pick. Chipotle is both a Rule Breakers and Motley Fool Hidden Gems pick. Hidden Gems also likes Buffalo Wild Wings -- the stock and the juicy, messy wings. The Motley Fool owns shares of Starbucks and Buffalo Wild Wings and has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (57)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 27, 2009, at 5:10 PM, MisterBruce wrote:

    Double Double with grilled onions. Ans as Banyan on Seinfeld says. . . The best Jerry, The best!!!

  • Report this Comment On August 27, 2009, at 5:35 PM, TMFMileHigh wrote:

    No doubt, MisterBruce. Better than Mendy's. (Grin.)

    Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On August 27, 2009, at 5:44 PM, baseballbill730 wrote:

    Sounds exactly like Five Guys out east . . . right down to the fact that it is privately held. Too bad, so sad.

  • Report this Comment On August 27, 2009, at 5:48 PM, Steve819 wrote:

    Tim,

    You may want to read this book.

    http://www.amazon.com/N-Out-Burger-Behind-Counter-Fast-Food/...

    It looks interesting.

  • Report this Comment On August 27, 2009, at 9:04 PM, whakojacko wrote:

    baseballbill730: IMO, In-N-Out is a easily superior experience than Five Guys. Five guys has good burgers (and great fries) but nothing touches In-N-Out

  • Report this Comment On August 27, 2009, at 11:03 PM, dhtang8 wrote:

    Don't forget the "4x4"...a staple of my college diet.

  • Report this Comment On August 28, 2009, at 1:43 AM, bs1934 wrote:

    I must say, I get a bit tired of reading this article and that article which are just come on's to subscribe to more of your paid services. Kind of aggravating, I don't guess I will be renewing when my present subscription runs out.

  • Report this Comment On August 28, 2009, at 9:14 AM, GerstnerUSA wrote:

    bs1934: Right-On, why should you have to pay to learn what someone else has worked hard to develop? Who do these people think they are trying to sell you this and that? They should be giving all their advice away for free, because it's the American Way!!! Gee... I wonder what your position is on Health Care...

    Sorry to everyone else... I had to get that off my chest...

    I am glad that food doesn't taste the way it looks, because In-N-Out burgers look nasty, but taste oh soo gooood..

  • Report this Comment On August 30, 2009, at 2:02 PM, kristm wrote:

    The company is what it is BECAUSE of being privately owned. Similar businesses that used to have the same levels of quality (Steak n Shake being an early example) went public and lost their edge because they had to place quality and pride issues aside in order to meet shareholder demand. Franchising, selling out, or dropping standards to raise profits are all part of what comes with making shareholders happy. The ideal public company can find a balance between happy customers, happy employees, and happy investors, but many are only able to hit two of those targets and most seem only to hit one.

  • Report this Comment On August 30, 2009, at 2:16 PM, FreeTruth wrote:

    I love In-N-Out! There are none here in my area, but I travel extensively and love going out west for the chance to eat at a fast food restaurant. About the only fast food burger that compares is Culver's.

  • Report this Comment On September 05, 2009, at 12:17 PM, bullardrr wrote:

    In and Out's best secret? What is their real carbon foot-print. I buy stuff based on it not killing me or my planet.

  • Report this Comment On November 12, 2009, at 10:59 PM, mikegranger wrote:

    Great article, i have to agree that they have a little something many don't have in the industry. The food is good and from what i read here and on other websites, the growth strategy is just great. That and loyal customers and you've got yourself a well working restaurant chain i guess.

    Mike at http://www.pastarecipes.org

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