Last week I finished the book, In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules. I remember the first time I ate at an In-N-Out Burger. I was driving my 1974 VW Bug (no air conditioning!) through Southern California on my way from Sacramento to Phoenix the summer after I completed law school. I was determined to experience the mystique of this, at that time, exclusively Southern California icon and bring home an In-N-Out Burger t-shirt. I remember being impressed how friendly the employees were. Although I was a starving law school graduate, I bought the t-shirt and wore it for years.

I could dedicate a year of weekly blog posts to all the business and estate planning lessons learned from the In-N-Out Burger story. This week’s post and the next two will focus on three of the most important lessons we can learn from In-N-Out Burger:

Lesson 1: The Business System Is Stronger Than The Individual

In-N-Out is one of the largest family owned restaurant chains in the country. It has never solicited investors or gone public and it’s stock has always been owned by or for the benefit of the founders, Harry & Esther Snyder, or their bloodline heirs. Consider the fate of each of these Snyder family members and the ironic correlating success of In-n-Out:

Harry Snyder – Died of lung cancer in 1976 at the age of only 63.

Harry (and his wife Esther) Opened the first In-N-Out location in 1948 and developed the systems built around a simple philosophy: “Quality, Cleanliness, and Service.”

Rich Snyder (youngest son of Harry & Esther) – Took over the company in 1976 at the young age of 24. Died in a plane crash in 1993. He had no children.

During his leadership, despite a policy of very conservative growth in the limited geographic area of Southern California in order to fulfill the “Quality, Cleanliness, Service” promise, expanded from 18 to 93 locations. More importantly, annual revenues grew 15% a year to $133 million with margins exceeding those of McDonald’s.

Guy Snyder (oldest son of Harry & Esther) – Passed over to lead the company on Harry’s death because of drug abuse problems, took over the company as Chairman, President, and majority stock holder on Rich’s death in 1993. At times during his tenure, lived a vagrant’s life, disappearing for weeks at a time and living out of a travel trailer. Died in 1999 of a drug overdose.

Perhaps most impressive of all given Guy’s struggles with substance abuse during this time period, the chain grew from 93 to 140 stores and revenue grew 83% to $212 million a year.

Esther Snyder – Was 79 years old and recovering from an infected broken hip when she took over the company in 1999 after losing her husband and her only two children under tragic circumstances. Lead the company as President until her death in 2006.

During her time as President following Guy’s death, In-N-Out grew from 140 to over 200 locations in California, Nevada, and Arizona and was worth an estimated $300 – $400 million at the time of her death.

Lynsi Martinez – Guy’s daughter and the only grandchild of Harry & Esther Snyder. Only 24 years old at the time she became the sole heir of In-N-Out. Became President in January, 2010 at the age of 27.

Since Esther Snyder’s death in 2006, In-N-Out has grown to approximately 250 locations and the focus on delivering “Quality, Cleanliness, and Service” continues, as is evident to anyone who frequents In-N-Out today.

The following quote from the book, relating the state of the company at the time of Rich’s death is telling: “As a result of the infrastructures Rich Snyder had put into place, the leadership transition – at least in terms of operations – was practically seamless. The company could still grow and expand and increase its sales volume by following the chain’s philosophy of “Quality, Cleanliness, and Service” and the systems put in place to achieve it…He created a management system that could ensure quality even as it added new stores each year…All Guy had to do was follow the system already in place.”

If you want your business to survive you, your heirs, (or your and your heirs’ personal issues), a critical element of a comprehensive, integrated estate and business succession plan is to create and implement business systems – systems that will survive cancer, plane crashes, drug addictions, the infirmities of old age, and the indiscretions of youth.

Kent Phelps

If you are a business owner or own real estate, ask for a complimentary consultation with an attorney to review your current estate plan and business structure. Call 480.324.8000.

Website: www.durfeephelps.com