Secretive In-N-Out Burgers Inc. came out of the shadows for the second time in a year when matriarch Esther Snyder died a week ago.
Snyder’s death capped a tumultuous year for the burger chain, which has battled through a nasty boardroom brawl.
Now the company said it plans to move forward as it has in the past,a steady pace of 10 or so restaurant openings a year, all in California, Arizona and Nevada.
But the chain has several options, a product of its cult status and profitable operations.
In-N-Out could shed the private life for an initial public offering. The company could seek a private equity investment and use it for expansion. Or it could do nothing.
“They’ve probably already had 25 calls from private equity companies,” said Ron Paul, chief executive of Chicago-based researcher Technomic Inc. “They’ve been hovering around this chain for a long time. It’s recognized as a little jewel from the outside, and it could surely be expanded.”
Many observers expect the chain’s management to tread water.
“I’d imagine they’d leave it alone for awhile and see what happens,” said Bob Sandelman, a San Clemente analyst who tracks the fast-food industry for Sandelman & Associates Inc.
Company officials are offering few details other than to say it’s business-as-usual.
“Because of this family, we remain committed to keeping In-N-Out Burgers on the course that was laid out for us by our founders,” said Mark Taylor, company vice president, in a statement. “As such, we will continue to grow on a moderate and deliberate pace of adding 10 to 12 stores per year.”
Snyder’s granddaughter, Lynsi Martinez, is the main heir to the In-N-Out fortune. The 24-year-old Martinez is set to get one-third of the trusts valued at $450 million when she reaches the age of 25, one half at 30 and the rest by 35.
Snyder, who was 86 when she died, stayed active in the company’s affairs.
“She was a pretty major force even to the end,” Sandelman said.
Now Martinez and Taylor, her brother-in-law, are running the company.
The normally low-profile chain had a boardroom brawl during the past year that drew plenty of headlines.
Former In-N-Out executive Richard Boyd filed a lawsuit last year alleging that Martinez was trying to speed her ascension to the head of the company by ousting him. He said Martinez wanted to pick up the chain’s expansion pace, according to court documents.
In-N-Out countersued, accusing Boyd of embezzlement and fraud. The sides settled the case for undisclosed terms.
The chain, which was founded in 1948 in Baldwin Park by Esther and her husband Harry Snyder, has 202 locations.
Technomic pegged In-N-Out’s sales at $350 million in 2005. Paul believes the company, which has about 11,000 workers, grew sales at a 7.8% pace last year. Profit before taxes was estimated at $40 million, Paul said.
Private Equity Play?
“If the chain was worth $300 million to $400 million, it could sell roughly $100 million to $150 million to a private equity company with the family keeping control of the rest,” Paul said.
A private equity infusion could provide funds for expansion. Moving into new territories can be risky, though.
Paul pointed to Carl’s Jr.’s failed expansion in the Southwest. The parent of the Carpinteria-based chain, CKE Restaurants Inc., recently announced the sale of 38 Carl’s Jr. restaurants in Texas and Oklahoma.
“No matter what happens, the future is very bright for In-N-Out,” Sandelman said. “I don’t see anything but a positive outlook for the chain.”
