Still the Best Company I've Ever Seen

My family and I spent our 2009 summer vacation in California, visiting friends, relations, 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 California Pizza Kitchen (Nasdaq: CPKI  ) and Sonic (Nasdaq: SONC  ) . 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 200,000 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,'" 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 Google (Nasdaq: GOOG  ) and Intuitive Surgical (Nasdaq: ISRG  ) .
  • 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 American International Group (NYSE: AIG  ) 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. Ford (NYSE: F  ) trucks and Disney (NYSE: DIS  ) have been known to 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 and a stock position in Google at the time of publication. Apple and Disney are Stock Advisor selections. Disney is also an Inside Value pick. Google and Intuitive Surgical are Rule Breakers recommendations. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (5)

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  • Report this Comment On December 02, 2009, at 7:09 AM, stockpower wrote:

    Ha! Love In and Out; Hate AIG. I was looking at stories on AIG and the headline of "Still The Best Company...." made my head spin. Glad to hear you don't like AIG....I thought you had lost it there for a minute!

  • Report this Comment On December 02, 2009, at 11:26 AM, RustyShackelford wrote:

    Ah my good people, you have AGAIN, Foolishly opened the door to the "Secret Indredient" a man named Phil Hoover and I tried and often successfully spread over our clients business sandwich when we were the head of Sales at a 3,000 Watt FM station in Marion, Oh. Simply put ::THEME PROGRAM COMMITMENT and you build TMA (Top of the Mind Awareness).. Add a big amount of Follow Through and keep associates involved, voila you end up with a great profit and a loyal fan (customer) base. There are more things to it than that , but you get the idea. So why are not more businesses this way? LOL They simply don't like to plan their work and work their plan

    W O R K is NOT a RADIO STATION. But , oh well, Phil and I , Reis & Trout (Positioning-The Battle for Your Mind)and Scott McKain (All Business Is Show Business) know , ahem THE REST of THE STORY. We are not going to give it away. Thanks, oh Brother and sister Fools.

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