| GUARDIAN AN­GEL

At 36, bil­lion­aire heiress Lynsi Sny­der has al­ready strug­gled through her fa­ther’s tragic death, three failed mar­riages and a bat­tle with al­co­hol and mar­i­juana. The de­vout Chris­tian even­tu­ally found sta­bil­ity run­ning In-N-Out, her fam­ily’s quin­tes­sen­tial

Forbes - - CONTENTS - By chloe sorvino

At 36, bil­lion­aire heiress Lynsi Sny­der has al­ready strug­gled through her fa­ther’s tragic death, three failed mar­riages and a bat­tle with al­co­hol and mar­i­juana. The de­vout Chris­tian even­tu­ally found sta­bil­ity run­ning In-N-Out, her fam­ily’s quin­tes­sen­tial West Coast burger chain, and now she’s de­ter­mined to pro­tect it at all costs.

Ham­burger Lane is a quar­ter­mile, palm-lined stretch of Bald­win Park, Cal­i­for­nia, 30 min­utes east of Los An­ge­les. Half­way down the block, a low-slung build­ing cov­ered in gray sid­ing sits be­hind a se­cu­rity fence. Know­ing what’s in­side the lit­tle struc­ture helps ex­plain the street’s un­usual name. It’s the topse­cret cor­po­rate test kitchen for InN-Out Burger, the iconic West Coast chain.

Lynsi Sny­der, the com­pany’s bil­lion­aire pres­i­dent, hov­ers over a set of dou­ble fry­ers and stove-top grid­dles. “To be hon­est, I don’t come here a whole lot,” she says. Given the clean coun­ters and neatly tucked-away cook­ing uten­sils, it doesn’t look like any­one comes here of­ten.

Which is prob­a­bly not far off the mark. While McDon­ald’s and Burger King serve well over 80 dif­fer­ent items, InN-Out fa­mously serves fewer than 15: burg­ers, cheese­burg­ers, fries, soda, milk shakes and the sig­na­ture two-patty Dou­ble-Dou­ble. Sny­der has added just one thing: hot choco­late in 2018. The com­pany will make tweaks from time to time, like switch­ing to a pre­mium Kona cof­fee and health­ier sun­flower oil for cook­ing fries.

But Sny­der, who at 36 de­buts on this year’s Forbes 400 as its youngest woman, with a net worth of $3 bil­lion, fiercely em­braces an im­per­vi­ous­ness to change. “It’s not [about] adding new prod­ucts. Or think­ing of the next ba­con-wrapped this or that. We’re mak­ing the same burger, the same fry,” says Sny­der, wear­ing black lace-up com­bat boots and stacks of sil­ver bracelets on both arms. “We’re re­ally picky and strate­gic. We’re not go­ing to com­pro­mise.”

In-N-Out is a culi­nary anachro­nism. It hasn’t evolved much since Sny­der’s grand­par­ents founded it in 1948. Buns are baked with slow-ris­ing dough each morn­ing. Three cen­tral fa­cil­i­ties grind all the (never-frozen) meat, de­liv­er­ing daily to the 333 restau­rants. Nearly all its lo­ca­tions are in Cal­i­for­nia, and all are com­pany owned. (In-N-Out does not fran­chise.) Heat lamps, mi­crowaves and freez­ers are banned from the premises. The recipes for its burg­ers and fries have re­mained es­sen­tially the same for 70 years.

Con­sis­tency has earned it a pas­sion­ate fol­low­ing. In-NOut has be­come a fix­ture at Os­cars af­ter-par­ties. Its se­cret menu, like the op­tion to or­der a burger “pro­tein style”—let­tuce leaves, no bun—is the least well-kept se­cret since the Wik­iLeaks ca­bles. Top chefs like Gor­don Ram­say, David Chang and Thomas Keller are all en­thu­si­as­tic fans. The ac­tor-cum-rap­per Don­ald Glover has rhap­sodized about InN-Out in his lyrics. And in 2006 Paris Hilton got a DUI be- cause, as she later ex­plained, “I was just re­ally hun­gry, and I wanted to have an In-N-Out burger.”

“They have a loy­alty and an en­thu­si­asm for the brand that very, very few restau­rants can ever ob­tain,” says Robert Wool­way, who han­dles restau­rant deals for the L.A.-based in­vest­ment bank Fo­calPoint Part­ners.

That loy­alty is lu­cra­tive. An In-N-Out store out­sells a typ­i­cal McDon­ald’s nearly twice over, bring­ing in an es­ti­mated $4.5 mil­lion in gross an­nual sales ver­sus McDon­ald’s $2.6 mil­lion. (In-N-Out, which is pri­vate, won’t com­ment on its fi­nan­cials.) In-N-Out’s profit mar­gin (mea­sured by earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion) is an es­ti­mated 20%. That’s higher than In-NOut’s East Coast ri­val Shake Shack (16%) and other restau­rant chains that typ­i­cally own their lo­ca­tions, like Chipo­tle (10.5%). Rev­enue should sur­pass $1 bil­lion this year, roughly dou­bling in eight years, and the busi­ness is debt-free, ac­cord­ing to the com­pany. In-N-Out is con­ser­va­tively worth $3 bil­lion, and Sny­der now owns vir­tu­ally all of it af­ter re­ceiv­ing chunks on her 25th, 30th and 35th birth­days (she got the last slice in 2017).

Sny­der is an un­likely shep­herd of her fam­ily’s busi­ness. By all rights, her un­cle should be run­ning In-N-Out, if not for his un­timely death. She never grad­u­ated from col­lege and lost her fa­ther to drug abuse. As a young woman, she bat­tled through a pe­riod of al­co­hol and drug use and three divorces. Sny­der, a de­vout Chris­tian who sports tat­toos of Bi­ble verses, came out of those ex­pe­ri­ences drawn to In-N-Out’s long­stand­ing sta­bil­ity—de­ter­mined to change the com­pany as lit­tle

as pos­si­ble, par­tic­u­larly the brand’s im­age of 1950s whole­some­ness. Af­ter tak­ing over in 2010, she em­barked on a slow, steady ex­pan­sion across the West, open­ing more than 80 stores in the same pe­riod that Five Guys, a close com­peti­tor, added more than 500 across Amer­ica.

“I felt a deep call to make sure that I pre­serve those things that [my fam­ily] would want. That we didn’t ever look to the left and the right to see what ev­ery­one else is do­ing, cut cor­ners or change things dras­ti­cally or com­pro­mise,” says Sny­der, who has spo­ken with the me­dia only a hand­ful of times.

“It’s not about addIng new prod­ucts. or thInk­Ing of the next ba­con-wrapped thIs or that,” says sny­der. “we’re re­ally pIcky and strate­gIc. we’re not go­Ing to com­pro­mIse.”

“I re­ally wanted to make sure that we stayed true to what we started with. That re­quired me to be­come a pro­tec­tor. A guardian.” In 1948, Harry and es­tHer sny­der, Lynsi’s grand­par­ents, opened the first In-N-Out, in Bald­win Park. It had no in­door seat­ing, so Harry in­stalled a two-way speaker box con­nected to the kitchen, cre­at­ing an early drive-thru win­dow. As Amer­i­cans flooded the new U.S. high­way sys­tem, In-N-Out, which was plac­ing its restau­rants along­side the new roads, took off. In south­ern Cal­i­for­nia, In-N-Outs be­came a hang­out for hot rod rac­ers. From the early days, Harry and Es­ther were keen to keep as many as­pects of the busi­ness in­house as they could. They butchered their own meat, started a whole­sal­ing firm to stock up on pa­per sup­plies and used their own con­struc­tion crew to build new stores.

In-N-Out grew grad­u­ally, reach­ing 18 lo­ca­tions, all in Cal­i­for­nia, by the time Harry died in 1976. His younger son, Rich, took his spot; the elder son, Guy,

Lynsi’s fa­ther, had been passed over.

He had an on­go­ing prob­lem with opi­oids af­ter a mo­tor­cy­cle ac­ci­dent left him with chronic pain.

He spent his days away from the com­pany, drag rac­ing or on his 115-acre ranch in the Sierra

Ne­vada Moun­tains, where Lynsi grew up.

In De­cem­ber

1993, Rich flew to see his niece Lynsi in a play at a pri­vate

Chris­tian school and then con­tin­ued on to the open­ing of store No. 93 in Fres- no, Cal­i­for­nia. On the way home, the ten-pas­sen­ger plane crashed, leav­ing no sur­vivors. Af­ter his death, Es­ther be­came pres­i­dent, and Guy, who had sep­a­rated from Lynsi’s mother ear­lier that year, took over as ex­ec­u­tive vice pres­i­dent and chair­man.

Dur­ing Guy’s six years as chair­man, In-N-Out grew to 140 stores, with over $200 mil­lion in rev­enue. Yet he strug­gled per­son­ally. On Christ­mas Day 1995 he was ar­rested for pub­lic in­tox­i­ca­tion and il­le­gally car­ry­ing a loaded firearm, which he had along with a switch­blade knife and mar­i­juana. Over the next few years he sur­vived a drug-re­lated heart at­tack and three drug over­doses be­fore dying of heart fail­ure (with hy­drocodone in his sys­tem) in De­cem­ber 1999, at age 48.

“When he was sober, he was the best dad in the world. We had our time cut short,” says Lynsi, who has a scroll with the words “Daddy’s Girl” tat­tooed on her right shoul­der.

Be­fore her fa­ther died, Lynsi had worked for a few months at an In-N-Out in Red­ding, Cal­i­for­nia, sep­a­rat­ing leaves of let­tuce and work­ing the reg­is­ter. Soon af­ter, the 18-year-old mar­ried and moved close to the com­pany’s head­quar­ters in Bald­win Park to take a job at In-N-Out’s cor­po­rate mer­chan­dis­ing de­part­ment, ap­prov­ing projects like T-shirt de­signs. Lynsi fell into a year-long stretch of al­co­hol and mar­i­juana use, and she and her hus­band di­vorced af­ter a few years. A sec­ond short-lived mar­riage fol­lowed.

“It was like a black-sheep era of my life,” she says. “By the time I hit 22, it was pretty much over.”

Lynsi ro­tated through de­part­ments at In-N-Out to learn the busi­ness. As Lynsi ed­u­cated her­self on how it worked, Es­ther, then in her 80s, ran day-to-day op­er­a­tions. Then Es­ther died too, in 2006.

Mark Tay­lor, a long­time In-N-Out ex­ec­u­tive (who is also Lynsi’s brother-in-law), be­came com­pany pres­i­dent, turn­ing over the role to Lynsi in 2010. At age 27, Lynsi was run­ning In-N-Out, which was gen­er­at­ing an es­ti­mated $550 mil­lion in sales at 251 lo­ca­tions.

Her third mar­riage came soon af­ter, this time to a race car

“I get calls all the tIme on In-n-out,” says da­mon chandIk, a pIper Jaf­fray In­vest­ment banker. “It would be the hottest Ipo out there.”

(It’s in the blood: Lynsi also drag races com­pet­i­tively.) They di­vorced in 2014, fol­lowed by her fourth mar­riage. “The things that I’ve been through forced me to be stronger,” she says. “When you per­se­vere, you end up de­vel­op­ing more strength.”

an in-n-Out restau­rant is a time cap­sule. The red-and­white color scheme hasn’t changed since the 1950s, and the chrome ta­bles and vinyl chairs are poo­dle-skirt-era throw­backs. Palm trees are a fre­quent mo­tif—printed on the com­pany’s plates, painted onto restau­rant walls—a nod both to In-N-Out’s Cal­i­for­nia roots and to Grandpa Sny­der’s fa­vorite movie, It’s a Mad, Mad, Mad, Mad World, from 1963. Bi­ble verse num­bers have ap­peared on burger wrap­pers and cups since 1985, and Sny­der has added two more: Proverbs 24:16 (for those un­fa­mil­iar: “... the wicked shall fall into mis­chief ”) to the fries con­tainer and Luke 6:35 (“But love ye your en­e­mies, and do good”) to cof­fee cups.

Over the past 30 years, the price of the Dou­ble­Dou­ble hasn’t even kept up with in­fla­tion. In 1989 the sand­wich cost $2.15, or about $4.40 in cur­rent dol­lars. It costs $3.85 to­day. A combo meal (Dou­ble­Dou­ble, fries, drink) goes for $7.30, com­pared with $10.94 for Shake Shack’s stan­dard dou­ble-burger patty and fries.

So how does In-N-Out main­tain its mar­gins? To start, the lim­ited menu means re­duced costs for raw in­gre­di­ents. The com­pany also saves money by buy­ing whole­sale and grind­ing the beef in­house. By do­ing its own sourc­ing and dis­tri­bu­tion, it likely saves 3% to 5% in food costs a year. It cuts out an es­ti­mated 6% to 10% of to­tal costs by own­ing most of its prop­er­ties— many bought years ago—and not pay­ing rent. In-N-Out picks its lo­ca­tions care­fully, clus­ter­ing them near one an­other and close to high­ways to lower de­liv­ery costs while also avoid­ing pricey ur­ban cores. It has just one lo­ca­tion within the city lim­its of Los An­ge­les and one in San Fran­cisco, while many Shake Shacks are smack in the cen­ter of town.

While much has stayed the same at In-N-Out, Sny­der has made some changes. She moved the com­pany into Texas for the first time in 2011 and into Ore­gon four years later. Last Novem­ber, In-N-Out an­nounced it would ex­pand to Col- orado—once it fin­ishes build­ing a new re­gional head­quar­ters and a patty-mak­ing fa­cil­ity there, likely by 2020. New Mex­ico may be next, a few years af­ter Colorado, Sny­der says, since the new sup­ply cen­ter is nearby. Sny­der still abides by the long-stand­ing In-N-Out rule that all new restau­rants fall within a day’s drive from the near­est ware­house, so meat and other in­gre­di­ents stay fresh.

“I don’t see us stretched across the whole U.S. I don’t see us in ev­ery state. Take Texas—draw a line up and just stick to the left. That’s in my life­time,” Sny­der says. “I like that we’re sought af­ter when some­one’s com­ing into town. I like that we’re unique. That we’re not on ev­ery cor­ner. You put us in ev­ery state and it takes away some of its lus­ter.”

No mat­ter where In-N-Out goes, it has to deal with com­peti­tors with en­trenched po­si­tions. In Texas it faces 68-year-old Whataburger. The $2-bil­lion-in-rev­enue com­pany has 674 lo­ca­tions in the Lone Star State—In-N-Out has just 36 there—af­ter open­ing 116 more in Texas since In-N-Out came in. “Cer­tainly we’d love for them to go some­where else. But they’re wel­come to com­pete,” says Pre­ston Atkin­son, Whataburger’s CEO. “They’re do­ing some­thing dif­fer­ent than we are. In-NOut has got a lim­ited menu.” But InN-Out is bet­ting that its small num­ber of of­fer­ings and higher-qual­ity food will help win over Whataburger cus­tomers. It has launched a high­way bill­board cam­paign out­side Dal­las— where Whataburger has 20% of its stores—with the tagline “No Mi­cro­driver.

“I re­ally wanted to make sure that we stayed true to what we started wIth. that re­quIred me to be­come a pro­tec­tor. a guardIan,” says sny­der.

waves, No Freez­ers, No Heat Lamps.”

On its Cal­i­for­nia home turf, In-N-Out must de­fend against in­cur­sions. Shake Shack, the pop­u­lar $359-mil­lionin-sales burger chain founded by the New York restau­ra­teur Danny Meyer, has come west, open­ing nine lo­ca­tions in south­ern Cal­i­for­nia dur­ing the last two years, with plans to open three in the Bay Area start­ing this fall. Shake Shack burg­ers, made with meat from the fa­mous high-end butcher Pat LaFrieda and served on potato-bread buns from Martin’s, have their own loyal fol­low­ing. “We wanted to bring our own spin to Cal­i­for­nia,” says An­drew McCaughan, Shake Shack’s vice pres­i­dent of de­vel­op­ment. “It’s ab­so­lutely a key mar­ket for us, and we con­tinue to re­ally want to in­vest deeper and deeper in the mar­ket.”

At In-N-Out, Sny­der’s “goals are not for us to be the big­gest,” says ex­ec­u­tive vice pres­i­dent Bob Lang, a 45-year InN-Out vet­eran. “Re­ally, it’s about main­tain­ing the legacy of her fam­ily and a fam­ily en­vi­ron­ment.”

Sny­der is pop­u­lar with her 26,000 em­ploy­ees. She has a 99% ap­proval rat­ing on Glass­door.com, the job-re­views site, and is ranked No. 4. on a 2018 Glass­door list of top bosses at large com­pa­nies, ahead of CEOs like

LinkedIn’s Jeff Weiner, Sales­force’s Marc

Be­nioff and Mi­crosoft’s Satya Nadella.

In-N-Out and

Sny­der get high marks for a rea­son: good pay and ca­reer de­vel­op­ment. Restau­rant work­ers, or

“as­so­ci­ates” in InN-Out speak, make

$13 an hour, ver­sus the $9 to $10 or so that’s typ­i­cal at most na­tional com­peti­tors, in­clud­ing McDon­ald’s and Burger

King. Part- and full- time restau­rant work­ers can en­roll in den­tal, vi­sion and life in­surance plans through the com­pany, and full-timers get can get health in­surance and paid va­ca­tion, ac­cru­ing time off af­ter two weeks of em­ploy­ment.

The av­er­age In-N-Out man­ager has been with the com­pany for 17 years and makes $163,000, more than the typ­i­cal Cal­i­for­nia den­tist, ac­coun­tant or fi­nan­cial ad­vi­sor. Man­agers get profit-shar­ing, too. “They’re sim­u­lat­ing an own­er­ship men­tal­ity at the restau­rant,” says John Glass, a restau­rant-in­dus­try eq­uity an­a­lyst at Mor­gan Stan­ley. “That man­ager now has skin in the game.”

One idea Has been firmLy HeLd in the minds of the Sny­ders. It might as well be the fam­ily motto: The com­pany isn’t for sale.

Back when he was chair­man, Rich Sny­der summed up the thought of sell­ing In-N-Out this way: “I would be pros­ti­tut­ing what my par­ents made by do­ing that,” he told Forbes in 1989. “There is money to be made by do­ing those things, but you lose some­thing, and I don’t want to lose what I was raised with all my life.”

Over the course of a month, Lynsi Sny­der rou­tinely gets of­fers to take In-N-Out pub­lic or sell. “We’ve had some pretty crazy of­fers,” says Sny­der. “There’s been, like, princes and dif­fer­ent peo­ple throw­ing some big num­bers at us where I’m like, ‘Re­ally?’ ” The plan never changes. “We will con­tinue to po­litely say no to Wall Street or to the Saudi princes. Who­ever will come,” says Arnie Wensinger, In-N-Out’s long­time gen­eral coun­sel.

The idea of an In-N-Out IPO leaves bankers like Da­mon Chandik, the head of Piper Jaf­fray’s restau­rant M&A team, sali­vat­ing. “I get calls all the time on In-N-Out. It would be the hottest IPO out there,” he says. “I ad­mire her and the whole com­pany for not go­ing down the path. You do have that risk of ul­ti­mately chang­ing the cul­ture of the busi­ness.”

Given the in­vestor ap­petite for Shake Shack, whose stock trades at al­most 100 times earn­ings, a pub­lic of­fer­ing would un­doubt­edly hand In-N-Out tens, if not hun­dreds, of mil­lions of dol­lars in work­ing cap­i­tal—and give Sny­der a way to cash out part of her stake in the busi­ness.

“It’s not about the money for us,” she says. “Un­less God sends a light­ning bolt down and changes my heart mirac­u­lously, I would not ever sell.”

Harry Sny­der, the co­founder of In-N-Out; the orig­i­nal In-N-Out in Bald­win Park, Cal­i­for­nia, had no in­side seat­ing. On Day One, it sold 57 ham­burg­ers.

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