1. Problem Statement: In 2003, the biggest challenge facing the In-N-Out Burger chain involved this questions: Should the company expand at its current rate, or should it slow or accelerate the current rate of retail store growth? This family owned company was concerned that expanding too quickly makes it impossible to maintain its high quality products and high customer service levels. Quality and service are often cited by outsiders as the two factors that give In-N-Out Burger a sustainable competitive advantage over its rivals including Burger King and McDonald's.
2. The Solution: The fact that this is a privately held and family run company has generated discussions and questions about the future of In-N-Out including these: Should the company remain family owned, or must it go public? Who should run the business after the family matriarch Esther Snyder retires or expires? Assuming the decision is made to allow the company to grow, how can this best be achieved without sacrificing quality and service? The answer to the questions facing In-N-Out is franchising. The advantages of franchising include:
The company can remain family owned. Ownership of the corporation does not pass to a franchisee.
The franchise agreement could describe in detail the company's quality and service requirements for franchisees. The agreement could establish specific metrics for food quality, service levels, cleanliness, appearance, and day-to-day operations.
The franchise agreement would indicate in clear and unambiguous language that any deviation from the written standards governing menu items, price, quality, appearance, cleanliness or employee compensation programs would result in the franchise agreement being revoked.
Esther Snyder could retain family control of the corporation and raise money for expansion and reward loyal employees of In-N-Out by creating an employee stock ownership program. The Snyder family wou
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