by Stacy Perman
In-N-Out’s executive team had to view Guy Snyder’s installation as company chairman warily. Few had many interactions with him while Rich was in charge. They seemed “skeptical and a little fearful at the prospect,” said the friend. “Some of the management had been talking before Guy actually took over.” The conventional wisdom seemed to be “that Guy would probably get tired of running the company and would go back to his ranch in Northern California and let the others run the company.”
It may have been a case of wishful thinking, at least in the beginning. Guy’s chairmanship dovetailed with a relatively healthy stretch in his life; he seemed to have his chronic troubles under control. Beneath the fog of painkillers, many remarked that, actually, Guy was an incredible fellow. Lucid, he was a solid manager who displayed sound judgment. In particular, he was said to have a phenomenal sense about people. “He could read them really well,” said one. And he understood the product better than anyone. Ironically, in spite of his own issues, Guy seemed to be able to handle external problems fairly well. Moreover, he wasn’t cavalier when it came to the family business. He had a real understanding of the responsibility now placed on his shoulders. When Guy came on board, proclaimed the insider, “He didn’t make any blunders and was actually quite knowledgeable.”
One of the first acts of In-N-Out’s board was to raise Guy’s annual salary to approximately $2 million a year. One of the first things that Guy did was to run out and purchase some suits for his new job. It was a half-hearted gesture, however, and he quickly lapsed back into wearing his customary jeans and T-shirts. His casual attire notwithstanding, Guy seemed to be fairly clear-eyed in his view of In-N-Out Burger and its future. Still, he had lot to learn about the chain’s operations and management.
Rich had plotted out a growth plan that would continue to extend the chain’s reach. In principle, under his strategy, In-N-Out could have continued moving (slowly) toward becoming a national chain (the real question was whether that was his intention). Rich was a realist, and given the chain’s delivery of fresh product and management pipeline, he never thought In-N-Out Burger would move beyond the western United States during his lifetime.* The plan under way was to roll out ten to twelve new stores a year regionally while following the chain’s longtime strict quality guidelines and then review the situation before expanding further.
When Guy stepped in, the company was on the cusp of implementing one of Rich’s five-year growth schemes and In-N-Out was on a building binge, having recently established a foothold in Nevada and setting its sights on Arizona. During his first few months on the job, Guy went around visiting most of the ninety-three stores, checking up on their operations and meeting with the associates and managers.
Following his tour, Guy came to the conclusion that the five-year plan was too aggressive, and he wanted to scale back the planned rollout. In-N-Out Burger grew only as fast as its management strength would allow, and Guy didn’t see enough quality people who were ready become store managers. At the current pace, he believed that the managers would be stretched too thin. One of his first executive decisions was to slow down the chain’s expansion, capping new openings at eight or nine stores a year. In a rare public comment, Esther later validated her son’s judgment. “Guy believes we need to have the time to train people properly to run the new restaurants,” she had told a Los Angeles Times reporter, “and he’s probably right.”
In those first few weeks and months following Rich’s death, Guy did not exactly tread lightly. He moved into his brother’s corner office, the largest of the executive suites in Baldwin Park. The company didn’t abandon its planned transfer to Irvine, and a number of its executives moved to the Irvine University Tower. Guy had Rich’s Irvine office redecorated, but he only worked there when it was absolutely necessary; he much preferred to work out of the original headquarters. The commute from Glendora was a brutal one, and the Irvine headquarters represented his brother Rich. Guy felt more at home in Baldwin Park where he had grown up. The warehouse, processing, and distribution center remained in the original location—and that was exactly where Guy’s real strengths lay. He seemed to have a kind of sixth sense when it came to the smallest details of the warehouse operations and the product. Some marveled at how Guy could look at the sponge dough or the secret sauce or the milkshake mix and immediately tell that there was something off about the product even when most others could not.
Whether he was working out of the original Baldwin Park headquarters or down in Irvine, Guy was surrounded by executive managers and consultants who had been put in place by his brother. Perhaps it came as no surprise that he wanted to clean house to some degree. One of the first to go was Andrew Puzder. “As soon as Rich died I was out of the inner circle,” he explained. “I represented Esther and sided with Rich.” After Guy took over as chairman of In-N-Out Burger, he said, “I was kind of out of it.” In something of an ironic twist, Puzder went on to work for Carl’s Jr. founder Carl Karcher. After representing Karcher in an insider trading case (later settled with the SEC), Puzder became general counsel for Carl Karcher Enterprises. And in 2000, he was named the president and chairman of the company.
Apparently, Guy was singularly unhappy with the decision to put his brother’s widow, Christina, on In-N-Out’s board of directors. The two were said to have a rocky relationship. Guy had indicated to some that he didn’t regard her as really part of the Snyder family—after all, she had been married to Rich for less than two years. He began agitating for her removal. Esther had no problem with Christina as a board member, and the two remained close. Emotionally sustaining one another during the difficult first year after Rich’s death, Esther often stayed at Christina’s house overnight for comfort. However, exhausted, non-confrontational, and perhaps even a bit guilty, she did not oppose her son.
Within two years, arrangements were made and an undisclosed settlement was agreed upon. Christina Snyder resigned from the board. It was a situation that she later described as “painful and draining.” Christina headed up In-N-Out’s Child Abuse Fund, the charitable foundation that Esther and Rich Snyder had founded in 1984. (In 1997, she renamed it the Rich Snyder Foundation.) As a result, the chain ended up establishing a second corporate charity called the In-N-Out Burger Foundation.
After Christina Snyder left, Guy turned his attention to a group of the chain’s executive vice presidents whom he wanted gone. It was a thorny problem. Before Rich died, he set up a trust that gave a small percentage of In-N-Out shares to a handful of executives (including Phil West) in the event of his death. These particular shares came from the stock that Rich had inherited from Harry. Prophetically, the decision stemmed from Rich’s understanding that if something were to happen to him, he could ensure a consistent and smooth transition if his talented executive team stayed in place. The shares were offered as an incentive to keep them and set up to give the vice presidents a percentage if they remained for a certain period of time. Rich also arranged to give a few other close friends who were also longtime associates a small portion of shares. In the latter case, the shares were more of a reward for loyalty than motivation to stay put.
In a move that severely angered Guy, in the summer of 1996, four of the company’s executives filed suit against the Los Angeles law firm that had crafted the trust. They alleged breach of contract and malpractice and sought $1.5 million from the firm in damages. According to the Los Angeles Times, the four men claimed that “the law firm’s trust work resulted in ‘significant confusion, ambiguity and expense’ that has caused them ‘significant’ but unspecified monetary damages.”
The lawsuit kicked Guy’s ire into high gear. Not only did it air In-N-Out’s private business publicly, Guy didn’t feel that some of the executives were entitled to a piece of the company to begin with. Unlike Rich, Guy had a personal problem with this group of college-educated, professional managers who had joined the company only a handful of years earlier. In his mind, they hadn’t helped to build up In-N-Out over the
decades, and if anybody deserved a stake in the company, it was family or those that had started at the bottom picking up trash, working construction, or performing maintenance and worked their way up through the years.
In a fit of pique, Guy wanted to get rid of them. In the end, however, he was prevailed upon not to clean house. He was convinced that clearing the executive decks of such capable and dedicated managers would not be in the best interest of the company. In fact, it was likely to have a devastating effect. Denuding the chain’s organizational chart of its highest-ranking members would have been a shock to the smooth-running operations and would no doubt have jolted loyal associates down the ladder who had been with the company for years. In the end, the executives stayed put, as did the tension between Guy and In-N-Out’s top managers.
Perhaps to everyone’s great relief, Guy did not seek to remake In-N-Out Burger. For the most part, he was content to keep things running just as they had been. As a result of the infrastructure that 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. During his tenure, Rich created human resources departments, the university, and the accounting departments, and he enlarged and modernized the warehouse and commissary as well as the departments that supported their operations. He created a management system that could ensure quality even as it added new stores each year. It was not lost on close observers that In-N-Out continued to prosper without its most dynamic leader. All Guy had to do was follow the system already in place.
Rich’s own charismatic presence had created a very specific corporate culture. It seemed that his legacy was not the achievements of growth and profits but the simple fact that the company he built continued to succeed without him. Moreover, it was a company where people were happy to come to work every day.
CHAPTER 19
In 1994, Guy Snyder celebrated the opening of In-N-Out’s hundredth store in Gilroy, California. A town best known for its mushroom farms and its annual garlic festival, Gilroy was located in the Santa Clara Valley; by the time that In-N-Out unveiled its drive-through there, the chain was generating an estimated $133 million in sales. Store number one hundred had been an important cornerstone of Rich Snyder’s expansion plans. But for Guy, the milestone was—much like his chairmanship of In-N-Out Burger—inherited from his late brother Rich.
Under different circumstances, the opening would have been an exuberant affair. Rich was always one to go all out when it came to big events and celebrations of any stripe. But given the circumstances, aside from a cake and festive decorations, the grand opening of the hundredth In-N-Out Burger was a rather subdued occasion.
Guy arrived at the store on 641 Leavesley Road off of the 101 Freeway in the custom-built In-N-Out bus. Something akin to a rock band’s touring bus, the plush set of wheels was wired with telephone and computer hookups. It was one of Rich’s initiatives. With the chain’s expansion continuing full force, Rich thought it was a good idea to have a kind of rolling office that could allow his team to work as they traveled between stores.
Wearing a dark suit and tie and tinted sunglasses, Guy joined his mother, Esther, in the balloon-filled store. At seventy-four, she suffered from chronically bad knees and a heart condition, but Esther still loved to attend as many new store openings as she could. At the Gilroy opening, Esther and Guy cut a red ribbon that proclaimed “100th Store” with a pair of oversized prop scissors.
In-N-Out Burger entered the 1990s as if operating within an alternative fast-food universe. At least in terms of scale, the chain remained a small player in the vast $74.3 billion fast-food industrial complex dominated by a cabal of billion-dollar corporations. As Guy and Esther marked In-N-Out’s triumphant march toward Northern California, McDonald’s had swelled to thirteen thousand stores with a global push. As the Snyders cut the red ribbon in Gilroy, McDonald’s opened new stores in Kuwait and Egypt. Four years later, Burger King, which had opened its first international franchise in the Bahamas in 1966, marked the opening of store number ten thousand in Sydney, Australia.
Harry and Esther Snyder’s old friend Carl Karcher had also fueled his chain’s growth through expansion. He had taken his Southern California chain public in 1981, and in 1984 opened its first franchise. Six years later, of the 561 Carl’s Jr. restaurants, 133 of them were franchises, and the chain was earning $575 million annually. Having opened stores across the West, Karcher began his own global march, opening stores in Mexico and the Pacific Rim. “One of my favorite memories was going international,” he proudly exclaimed.
But Karcher took his company in another direction as well during the 1990s. He invested heavily in real estate in Anaheim and the Inland Empire, using his Carl Karcher Enterprises stock as collateral for his bank loans. It was a disastrous gamble. The investments left Karcher with $70 million of debt at the same time that the company’s stock was falling. His attempt to bolster sales by acquiring the Mexican restaurant chain the Green Burrito in 1993 was rejected by the company’s board, and the board in turn ejected Karcher from the company. Two months later, Karcher wangled his way back in, orchestrating a takeover through a series of intricate financial maneuvers. The turnaround was successful and in 1997, CKE acquired Hardee’s for $327 million, giving the onetime hot dog cart a national footprint. But in the process, Karcher nearly lost everything.
All the same, fast-food consumers had grown fickle. The industry found itself pulling new tricks out of an old hat on a constant basis. After Taco Bell introduced the concept of value pricing in 1988, every big chain followed suit. Each year saw some kind of price slashing battle. In 1996, Taco Bell launched its $1.99 Extreme Value Combos—a year later, McDonald’s announced the fifty-five-cent Big Mac (when purchased with a drink and fries), sparking an all-out fast-food price war. As the leading chains cut prices, they also began increasing portion sizes, ushering in the era of super-sizing.
By 1997, the fast-food industry reached $109.5 billion in revenues, closing in on the $114.3 billion in sales generated by sit-down restaurants. The business pages of newspapers across the country were filled with stories about every move the colossal and highly influential industry was making. “McDonald’s Still Finds There’s Still Plenty of Room to Grow,” the New York Times reported on January 9, 1994. “Bigger Portions Being Thrown as Global Fast-Food Fight Heats Up,” proclaimed the Press-Telegram of Long Beach on March 8, 1996.
The chains sought myriad ways of capturing a capricious market. One of the most ambitious efforts was also one of the most disastrous; in an attempt to cater to the adult market, in 1996 McDonald’s introduced the Arch Deluxe, a line of burgers and sandwiches with more sophisticated ingredients. The launch was accompanied with a staggering $100 million advertising campaign created by Peter McElligot and with the tagline “The Burger with the Grown-Up Taste.” The program was a grown-up debacle. The Arch Deluxe never caught on, and McDonald’s soon abandoned the costly enterprise.
Subtle changes were taking place at In-N-Out Burger as well. Around 1995, a raucous discussion broke out over the decision to add a fourth beverage size at the stores. The managers seemed to go back and forth over whether to move forward or not before they ultimately green-lighted the addition. The following year, the chain began serving Dr Pepper. And In-N-Out opened a new warehouse in Tracy, a kind of satellite distribution center for its fresh ingredients that allowed the chain to serve the growing number of drive-throughs in Northern California. By the end of 1996, there were 116 In-N-Out Burger drive-throughs generating about $159 million in sales.
Back in Baldwin Park, Guy was looking to make some further changes of his own. The friction between him and a handful of top managers had yet to dissipate. Guy seemed to lash out and then cool down—in the heat of the moment he often wanted to cut several team members loose before deci
ding on a different course of action. During this time, the chain’s CFO Steve Tanner* departed, later going on to hold similar positions at several restaurant chains including El Torito.
Like Harry, Guy was a zealot when it came to the chain’s “Quality, Cleanliness, and Service” scheme. Moreover, he expected In-N-Out’s associates and managers to aggressively handle workplace issues. In one episode when a longtime manager did not (in Guy’s estimation) step up to the plate, Guy dressed the man down: “You don’t have any balls,” he said.
Guy was said to be particularly unhappy with one of the chain’s regional managers who had many decades of service to In-N-Out under his belt. Initially, Guy wanted to remove him, but rather than let him go and cause uneasiness within the ranks, Guy was convinced to appoint Mark Taylor (his stepson-in-law) as general manager to supervise the chain’s two regional managers. In the organizational structure of In-N-Out Burger, regional managers were in charge of the divisional managers, who in turn supervised seven to eight stores each. It seemed a reasonable solution. Taylor was part of the family, so to speak, and his appointment gave Guy a way to manage the regional managers without making any drastic changes.
Taylor began working at In-N-Out Burger in 1984 when he was nineteen years old. A year later he married Traci Perkins, Guy’s step-daughter. The pair met when they were both students at Bonita High School (Guy and Rich Snyder’s alma mater). Rich found him to be hardworking, and Taylor moved up through the ranks, becoming the store manager of In-N-Out units in Pomona and West Covina.