Traditional In-N-Out Burger Faces an Uncertain Future

When Chuck Papez sought work at In-N-Out Burger in 1954, owner Harry Snyder offered the teenager a dollar an hour and the opportunity to build a career. He wasn’t kidding.

Like Snyder and his wife, Esther, and every other employee, Papez started in the kitchen, peeling potatoes at In-N-Out’s first drive-thru restaurant in Baldwin Park. Within five years, Papez had moved up to management, earning enough to get married, buy a house and start a family. Soon he was taking trips to the Caribbean, Europe and Mexico--bonuses awarded to managers for meeting goals.

“It’s been a great career, I’ll tell you,” says Papez, who figures to retire comfortably from a company in which even part-time counter workers get 401(k) savings plan benefits.

In-N-Out is an anomaly in fast-food corporate America, a family-owned chain that clings to the values of a bygone era when loyalty meant something to both employer and employee. In-N-Out’s hourly workers stay an average of two years, versus less than 10 months industrywide. That difference shows up in In-N-Out’s service--and in the chain’s cult-like following among customers.

But these days, many people inside and outside the company are wondering whether In-N-Out’s special culture and values can endure. The company has thrived for 52 years as an independent, but it has come to a crossroads.

The drug-overdose death in December of Guy Snyder, Esther and Harry’s eldest son, has left the company without a chief executive. And potential buyers have been breathing down In-N-Out’s neck, sensing that the 143-store chain may finally be ripe for the picking.

Some fear that the family firm will be swallowed up by a big corporation or taken over by faceless investors, as have so many other successful mom-and-pop businesses, and lose its endearing traditions.

Whether that happens to In-N-Out depends largely on Esther Snyder, the family’s 80-year-old matriarch. She moved from bookkeeping to the boardroom after Harry died in 1976. And through tragedies that have claimed her two sons--Guy’s younger brother, Richard, died in a plane crash in 1993--she has reassumed day-to-day control.

But for nearly a year, Esther Snyder has been conspicuously absent from the company’s headquarters in Irvine and her health has been a growing concern. During a visit to Redding last year for the opening of a new store, her chronically bad knees gave out and she fell, breaking her hip. She has since had two operations and is now undergoing therapy.

Too weak to attend the company’s annual black-tie dinner in February, Snyder addressed the gathering at the Disneyland Hotel by speakerphone. The crowd rose to give her a roaring ovation, as it has every year.

“She’s wonderful. She’s so into the people of the company,” said Caroline Haley, a 15-year employee who sees Snyder as the firm’s guiding beacon. “It really goes back to her and her husband’s commitment: to take care of the people.”

In a rare interview, Esther Snyder said she expects to return to work soon, although she looks frail and must use a walker. She said she is committed to keeping the company independent and preserving its heritage. She has a succession plan but would not give details, except to say that she hoped certain key employees will someday run the company, including her only granddaughter, Lyndsey, 18, who stands to inherit full ownership of In-N-Out upon Snyder’s death.

“I imagine it will stay in the family,” Snyder said. “My granddaughter seems to like [the company], but I told her she has to go to college and she may have some other vocation. I told her to do whatever she liked.”

Another possible scenario is the sale of the company to employees. “I think, if the time were to come, the associates should buy it--a group of them,” Snyder said, using the company term for its 6,200 workers.

At a time when employers struggle to find and keep good help, turnover at In-N-Out remains abnormally low. Its managers average 12 years on the job, contrasted with just one year for the overall retail food industry, according to the California Restaurant Assn. The chain’s store managers earn at least $80,000 a year.

“The long tenure of the managers helps In-N-Out carry on its very distinct culture,” said Randall Hiatt, an Irvine-based restaurant industry consultant. “The more you inject new people into it, the more you’re increasing the chances of disruption.”

Analysts estimate that In-N-Out’s annual sales approach $150 million--or about $1 million per restaurant. That is about double the fast-food industry average.

Mutual Loyalties

Employees stay longer because they are paid well. Part-time servers and counter help start at $8 an hour--well above the federal minimum wage of $5.15 and more than is commonly paid by other fast-food or retail establishments. And In-N-Out’s pay scale is the same all across the chain. When it opened its newest restaurant this year in Lake Havasu, its relatively high pay rate created quite a stir among employers in that Arizona retirement community. Workers and retailers there had long been accustomed to minimum wages.

Haley, who manages the In-N-Out near Los Angeles International Airport, remembers her parents’ disappointment when she told them she was going to quit college to pursue a career at the restaurant. Soon, she says, “my parents started to see the opportunities the company provided and the financial stability. They could see that I was treated very well.”

From the beginning, Harry and Esther Snyder have paid at least a little more than minimum wage. The first restaurant, on Francisquito Avenue in Baldwin Park, was barely 250 square feet. There were no seats, no carhops, as was common in those days. Instead, the Snyders attached a speaker box and launched what many believe was California’s first drive-thru hamburger place.

The Snyders sold 47 burgers that first night, and it wasn’t long before they began sharing their profits with workers.

Rhoda Winter, 70, who worked at Bank of America’s Baldwin Park branch in the early 1960s, remembered Harry Snyder. She recalled how every Christmas he would give her a list of savings bonds to type up: $100 bonds for managers and $25 bonds for their spouses and children; and $25 bonds for all other employees.

“He was very generous,” Winter said.

Harry Snyder, who grew up in Santa Monica, met Esther after World War II. He had served in the Army and she was a nurse working for the Navy in San Diego. Esther said Harry never went to college but knew what it took to run a business. “Harry always felt that if you paid them well, they would work well and would want to stay,” she said. “And it was true.”

The Snyders expanded slowly at first. But as they grew, the $10 employee bonuses of the early ‘50s grew too. This year, 50 managers and their spouses will be treated to a 10-day trip to Sydney, Australia. Such perks are rare in the fast-food industry. But the Snyders didn’t operate like the others. For decades, they spurned just about every tenet that the industry holds dear.

In-N-Out’s advertising and marketing efforts are minuscule. The company prefers radio spots and bumper stickers to splashy television commercials.

Its basic menu of burgers, fries, shakes and sodas hasn’t changed.

And for customers in the drive-thru lines, the wait can often stretch to 10 or 15 minutes. In-N-Out doesn’t seem as obsessed with super-speedy service as bigger chains.

Universal Appeal

But the customers keep coming back. In-N-Out consistently scores high in independent customer studies. It ranked at the top among 70 chains in a recent nationwide survey of 87,600 fast-food customers by Sandelman & Associates, a retail specialty firm.

The chain’s appeal spans generations, from teenagers and their parents to the likes of Bessy Austin, who says she’s been visiting In-N-Out for four decades. And at the age of 105, Austin still comes in for a cheeseburger and chocolate shake in Costa Mesa after her monthly doctor’s visit. “I eat what I want,” she says.

Devoted followers have even posted unofficial Web sites where fans list off-the-menu items: “Animal style” (burger fried in mustard) and “flying Dutchman” (two meat patties and two slices of cheese--nothing more).

Remember Andrew Ramirez, the U.S. Army sergeant who was held captive for 32 days last year by Serbian forces in Yugoslavia? After his release, his mother, Baldwin Park resident Vivian Ramirez, went to visit her son in Germany and took along his favorite food--two Double-Double burgers from In-N-Out.

“Everyone in the fast-food industry envies In-N-Out,” said Carl Karcher, 83-year-old founder of the Carl’s Jr. restaurant chain. “We’re working on new products every year and In-N-Out keeps the same menu and knocks ‘em dead.”

“It’s a great business,” said Hiatt, the restaurant consultant.

As for the future, it is now a “gigantic step more complex” than it was just a few years ago, Hiatt said. “I would expect that, before too long, just like all private companies that go through generations, some of the investors or family members are going to want some kind of liquidity.”

Karcher also wonders about In-N-Out’s future. A longtime acquaintance of the Snyders, Karcher knows about Esther’s indomitable spirit. But, “Esther is very, very tired. She’s really had her ups and downs,” he said.

Harry’s death 24 years ago, at the age of 63, devastated Snyder. But when her younger son died in a plane crash at just 41, Snyder said, “my world had almost ended.”

She and Richard had shared a common religious devotion. It was Richard who selected the biblical citations that appear on the underside of the chain’s drinking cups, hoping they might make a difference in someone’s life. Under Richard, In-N-Out had expanded from 18 restaurants to 93 as it pushed into Nevada.

Esther’s relationship with Guy was different. Guy, seven years older, was often at odds with Richard.

“When Richie started putting [the Bible references] on the cups, Guy had just got done making up these T-shirts with a girl sitting on top of a Double-Double [burger],” says Jake Jefferson, a close friend of Guy’s. “But he didn’t want to bring them out because of the thing with Richie. They are in still boxes somewhere. They never came out.”

Guy assumed the top post at In-N-Out after Richard’s death and kept the company growing. But Guy had long battled with drugs and, in early December, he was found dead in bed at his mobile home in Lancaster. An autopsy determined that he had died of an overdose of a painkiller.

Preserving the Culture

Esther Snyder refuses to talk about Guy, but the pain is still visible in her face.

As for now, Snyder said, she plans to slow In-N-Out’s rate of expansion a bit. Beyond that, she said, she hopes the company’s way of operating will endure, just as it has for more than half a century.

The employees share that hope.

“Rich passed away; Guy passed away. But what they stood for and what their father stood for and what Esther stands for really hasn’t changed,” said Carl Van Fleet, the chain’s vice president of operations. “We have a team of people out in our stores that are all similarly committed, and I think that goes a real, real long way and speaks to how we have gotten through the tragedies.”

Chuck Papez, looking back on his 46 years with In-N-Out, said he hopes that his brother, two children and a nephew--all of whom work for the company--will have the same kind of opportunity he had.

He said he knew after a few days on the job that this was the company he would bond with for life.

“It was special right from the beginning. It was family.”

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Made to Order

For five decades, In-N-Out Burger has run its business like few others in the fast-food world. Here’s how the Irvine-based chain stacks up in a few industry measures: