In-N-Out Cheeseburger, Fries, and Chocolate Shake

Kennon-Green & Co. Fiduciary Financial Advisor, Wealth Management, Global Value Investing

We fly out tomorrow morning, so we decided to call it a trip, check into a hotel near the airport, and get up early so we can sit in the gate without having to rush or fight traffic.  I’m going to try and get some work done, maybe read a bit.  I bought 5-6 new books on the journey and already started plowing through two of them.

LAX Airport Hotel

As far as airport hotels go, the Marriott is decent … I’m just ready to be home at this point. I have enough data, I need to do some deep analysis and thinking.  I wouldn’t enjoy the life of a frequent corporate traveler, calling places like this home.  It’s exhausting.

Before that, though, there is business to which we must attend.  You know that old saying that a man is only two skipped meals away from anarchy?  I’m now passed my fourth skipped meal, approaching the fifth.  It’s been around 30+ hours since we ate due to quirks in schedule, fate, and temperament.

[mainbodyad]At first, I thought we’d go down and have lunch at one of the restaurants in The Langham Huntington but they opened only 30 minutes before checkout and neither of us wanted to have to deal with the hassle.  Then, we thought we’d find one of California’s famous In-N-Out burgers but it was almost exactly noon so the two we tracked down were so packed we didn’t want to bother (one had cars out to the street and we physically couldn’t get in the lot).  By the time we were settled into the airport hotel, unpacked, and realized how insanely hungry we were, another day had passed.  It was going on dinner time and the last meal we’d eaten was breakfast the prior day.

We decided to go ahead and find In-N-Out no matter how long the wait.  The nearest location was roughly a one-mile roundtrip journey on foot, so we decided to walk it.   We were done driving – the 1,000 miles thus far in so few days was more than enough for both of us – and the exercise would be nice.  We’d also get to pass under the landing planes and watch them screech down right over our heads.

When we arrived, the line reached the door and the drive-through was around the parking lot and down another parking lot.  It took 30 minutes or so but we finally go our food and, thank God, snagged a table.

In-N-Out Burger California LAX

I know the typical In-N-Out restaurant generates around $2,000,000 in per annum revenue, but I’m guessing this location near the airport does quite a bit more than that, pulling up the average.

In-N-Out Cheeseburger, Fries, and Chocolate Shake

A cheeseburger, french fries, and chocolate shake … This was the most glorious 1,650 calories I’ve consumed in years. You don’t realize how your body begins to demand your attention after a day-and-a-half of no food, plus several miles of on-foot exploration.  It’s been almost a week since we had the amazing pizza in Palm Springs so I’ll take the nutritional sacrifice.  At one point, Aaron started laughing at me because I had lost all self-control and was scarfing down french fries like a maniac.

Conclusion: In-N-Out is my second favorite cheeseburger joint in the world.  Both of us give Five Guys a slight edge on the burger and fries, plus they have the Coca-Cola Freestyle machine.

While we’re on the topic of cheeseburgers, we had wanted to see the oldest McDonald’s restaurant, located at 10207 Lakewood Boulevard, Downey, California, but that will have to wait for another trip.  They still have the Speedy mascot on the sign!  As McDonald’s Corporation stockholders, it would have been a thrill to see the origins of one of the companies that deposits dividends into our accounts but it gives us something to which we can look forward.

[mainbodyad]If any of you are in the mood for an investment case study, do some research on In-N-Out.  It’s interesting.  It’s still family owned as a private company, yet it has lost leaders to a plane crash, a pain killer overdose, and old age.  The entire empire was put into trust for Lynsi Torres, who inherited it in her early twenties.  On her 30th birthday two years ago, she was able to take control of a big part of the equity.  In a few years, when she turns 35, she’ll get the rest of it, making her the controlling owner.  She is the youngest female billionaire in the United States, mostly because she was the only grandchild of the original founders so the fortune was able to remain concentrated down the genetic line instead of branching out as it does in most families.

There was a lot of speculation about what she would do with the business, but so far, from the outside, it appears as if she’s handling things well.  She reportedly insists In-N-Out will still refuse to franchise, won’t go public, and that she’ll leave the shares to her own kids one day.  Given that the ownership is still concentrated in her hands, she might just pull it off without having to turn to the capital markets.  Normally, by the third or fourth generation, you have countless cousins, aunts, uncles, ex-spouses, step-children, mistresses, pool boys, and everyone else imaginable with a piece of the equity pie, some wanting to cash out, some wanting higher dividends, some wanting to fund expansion, some thinking they are capable of running the place, others using it as a way to exact revenge over a fight that has nothing to do with the enterprise.  This leads to chaos in the boardroom and, in situations like the Pritzkers up in Chicago, a flurry of lawsuits.  Torres doesn’t have to worry about that.  In a real sense, as the last woman standing, it’s as if she were the founder herself.

An IPO could still be smart for In-N-Out given it would infuse enough money to roll them out across the country in a few short years, but there really isn’t a reason.  When you’re that rich – her business is generating at least $54,000,000 in cash revenue per month – control matters more than additional dollars since you can already buy whatever you want.  It’s a rational way to behave.  Were I in that situation, I doubt I’d go public.  I’d use the dividends to fund whatever other projects I wanted in a separate company which remained hidden from sight.