In-N-Out has long eschewed fast growth, even as competitors like McDonald’s peppered the world with their restaurants.
The company’s announcement that it would open restaurants in Tennessee would seem to suggest a change in philosophy. It is, as we’ve written, an unusually aggressive move for the chain. It is further away from its established beef production facility than previous restaurants it opened. It is also further away from existing locations.
In-N-Out has long insisted on a more methodical growth approach, which stands out in a restaurant world hellbent on building new restaurants and generating more sales.
This is especially true in the “better burger” segment, which has thrived over the past 15 years. Rival concepts like Habit, Freddy’s, Culver’s and Shake Shack have all grown much more quickly. The following graphic shows how the concepts compare when it comes to U.S. unit growth.
It’s the same with sales. Based on U.S. system sales, only Whataburger and the declining Steak n Shake have grown more slowly between 2016 and 2021.
Whataburger, incidentally, appears to be on a more aggressive growth path of its own. The company, which operates mostly in Texas, was sold to a Chicago-based private equity firm in 2019 and since then it has been eyeing markets well beyond the Lone Star State, such as Kansas City and Atlanta.
Perhaps this is a sign that In-N-Out is working toward a more aggressive growth trajectory. The Southeastern part of the U.S. is growing rapidly, making it a desirable place for chains of all kinds to build new units.
What’s more, Tennessee is not Texas. When In-N-Out opened in that state more than a decade ago, it went up directly against a hometown concept in Whataburger where the residents view it as one of them. Consider the reaction, for instance, when the aforementioned private equity firm bought the company.
While Tennessee is a rapidly growing market and has plenty of traditional fast-food burger chains, none of the crop of better burger concepts has a huge foothold in the state, outside of perhaps Five Guys, which operates 20 locations in the state, according to Technomic.
Incidentally, Hardee’s operates 138 locations in Tennessee. The company is owned by CKE Restaurants, which also owns Carl’s Jr., and which moved its entire headquarters from California to Franklin, Tenn., the same Nashville suburb where In-N-Out is opening its facility. Suddenly, CKE will have to compete for corporate staff with In-N-Out.
To be sure, In-N-Out is accustomed to competition. California is one of the toughest markets for burgers in the country and the chain has thrived. It works well in Texas despite Whataburger’s presence. And now it will take its services to Tennessee.
Still, while In-N-Out is going against type with an aggressive move out East, we doubt whether the chain will suddenly become Shake Shack and pepper the world with its drive-thrus. And now all these burger chains that could open units in Tennessee or Florida or the Carolinas have to worry about a potential new threat come 2026.