How In-N-Out Almost Became McDonald's

Note: The following is an excerpt from Service Failure: The Real Reasons Employees Struggle with Customer Service and What You Can Do About It.

I go to In-N-Out Burger a lot.

The law of averages suggests I should have had a bad experience at least once by now. Some visits have been better than others, but I’ve never had a bad experience. Not one.

I’m not alone in my admiration of In-N-Out. They’re consistently ranked among the top fast food chains in customer satisfaction. The chain only has locations in a handful of states, but people all over the country and even outside the United States have become fans, with some devoted followers even planning a business trip or vacation itinerary around a visit to an In-N-Out. 

What’s the secret to In-N-Out’s success? It may be easier to understand if you compare them to a similar restaurant that struggles with customer service: McDonald's. 

The two have a lot in common. While McDonald's has a more diverse menu, both are fundamentally fast-food burger joints. Both were founded in Southern California in 1948. Many fast-food service concepts in use today originated at either In-N-Out or McDonald's. The two companies even use the same three words as a foundation of their operating principles: quality, service, and cleanliness.

So why is the customer service experience at these two restaurants so different? In a word, culture. Culture defines everything these organizations do when it comes to customer service. 

In-N-Out founder Harry Snyder made sure the principles of “Quality, Cleanliness, and Service” were more than just platitudes. He instilled them in everything the company did – and these principles are still present in everything In-N-Out does today. Their food is fresh, not frozen. Their stores are clean, even during busy times. Their employees are friendly and well-trained. In-N-Out has maintained their remarkable consistency by steadfastly refusing to franchise their stores and resisting the urge to expand too quickly.

Culture also shapes many of their business practices, such as hiring employees. In-N-Out’s management believes a high-caliber employee is necessary to provide the service and quality they know their customers expect. They offer better wages and working conditions than their competitors which contributes to one of the lowest employee turnover rates in the fast food industry.

When Ray Kroc purchased the McDonald's concept from the McDonald brothers, he focused on rapidly expanding the business. The words quality, service, and cleanliness were clearly less important than a growth strategy based on volume, cost control, and franchising. For example, their frozen burger patties are cooked in approximately 42 seconds using a special clam-shell grill that cooks both sides of the patty at the same time. This is a remarkably fast and inexpensive way to cook burgers, but it may also be why McDonald's finished last in the 2010 Consumer Reports fast food burger rankings. (Yes, In-N-Out was rated #1.) 

While franchising allowed McDonald's to grow into a global giant, it also made it difficult for the company to control the quality of service delivered at its restaurants. Today, approximately 80 percent of their restaurants are run by franchisees and only 20 percent are run are by McDonald's, Which means the service customers receive from most of its establishments is determined by the management skills and customer service philosophy of an independent franchise owner rather than by the McDonald's organization. 

Of course, there are exceptions to every rule. Culture isn’t exclusively defined by an entire organization. Even at McDonald's, stores with managers who are good at engaging employees and motivating them to deliver outstanding service typically bring in 10 percent more revenue per year than the average.

Learning Point:

Values alone don’t define your culture. It’s what you do that counts. For another terrific example, read how Phone.com is operationalizing their values to turn them into action.