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 fast food from all the top brands, including Wendy's (NYSE: WEN  ) and Burger King (NYSE: BKC  ) . Even the not-as-heart-destructive offerings from Darden Restaurants' (NYSE: DRI  ) Olive Garden 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. So do celebrity chefs. "The hamburger is definitive, greasy but oddly clean-tasting at the same time, and the sauce actually is 'special,'" said Alton Brown, host of Good Eats and Iron Chef America, in a recent Esquire interview. "And the shake tastes the way shakes tasted back when I was a kid. It makes me tear up just thinkin' about it."

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 from last year's article:

  • 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. Having committed founders can lead to great returns, as has been the case with Costco (Nasdaq: COST  ) and Netflix (Nasdaq: NFLX  ) .
  • 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. I agree. Fools only need look at Crocs (Nasdaq: CROX  ) to understand how undisciplined growth can cost you as an investor.
  • 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 Coca-Cola (NYSE: KO  ) 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.

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 of Sepulveda Boulevard near LAX airport, and you'll find employees carrying wireless handheld computers ready to take your order. Apple has since copied this 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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This article was first published on Aug. 27, 2009. It has been updated.

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 at the time of publication. Apple, Costco, and Netflix are Motley Fool Stock Advisor selections. Costco and Coca-Cola are Inside Value picks. Coca-Cola is also an Income Investor recommendation. The Motley Fool owns shares of Costco and has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (8)

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 October 08, 2009, at 7:35 PM, mcbowler78 wrote:

    "I dont know why Crocs is not suing you for libel ..."

    Because they are in on it. When the stock went from 3 to 6 when I made 50% they were constantly knocking Crocs. Buy again if it makes it past 7.50

  • Report this Comment On October 08, 2009, at 7:57 PM, ArgusPanoptes wrote:

    In&Out - I second that. If they [B]could[B]

  • Report this Comment On October 08, 2009, at 7:58 PM, ArgusPanoptes wrote:

    [B]woops[/B]

  • Report this Comment On October 08, 2009, at 8:05 PM, ArgusPanoptes wrote:

    Ok no HTML....

    If In&Out wanted to - it could threaten MCD within the US. It would take a while, especially with the quality that In&Out demands.

    Family owned since 1948. No microwaves, no heat lamps, no freezers, the inventory is fresh and moves fast.

    Folks, you have to graduate from In and Out University to make burgers at In and Out. I kid you not. It is the fast food phenomenon from the 50's recaptured and improved upon. McDonalds before Ray Croc... no, better.

    If they ever ipo'd - i'd be all over that. animal style.

  • Report this Comment On October 09, 2009, at 1:27 PM, ShortPlaya wrote:

    Would Warren Buffet invest in this company?? Start off your story with a quote from him then I may be interested in reading it. Hamburgers are hamburgers and shoes are just shoes right?

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