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Texans don’t think much of the Whataburger deal

Reaction to the sale in the burger chain’s home state demonstrates why the company is so successful there, says RB’s The Bottom Line.
Photograph: Shutterstock

the bottom line

The marquee sign outside of El Arroyo, a Tex-Mex restaurant in Austin, Tex., has become famous for its puns over the past 32 years, particularly in the Internet era.

There was no pun this week, however.

“Dear Chicago: If you hurt her, I’ll kill you.”

“Her,” apparently, is Whataburger, the Texas-based burger chain, at least according to El Arroyo’s Instagram post on the sign. The founding Dobson family last week sold controlling interest in the chain to BDT Capital Partners, a merchant bank that specializes in family-run businesses. BDT is based in Chicago.

It wasn’t the only such reaction. JJ Watt, who plays for the NFL’s Houston Texans, wasn’t entirely thrilled with the sale, either, according to his Twitter account.

Ok, I say we all chip in and buy Whataburger back. Make honey butter chicken biscuits available all day, add kolaches to the menu and change nothing else. Especially not the ketchup. https://t.co/HadutHXJ9l

— JJ Watt (@JJWatt) June 14, 2019

That tweet generated 108,000 likes and 28,000 retweets, and thousands of responses from the chain’s fans.

The company’s Facebook post on the sale generated thousands of comments, many of them from Texans disappointed at the sale.

That led to a post from Whataburger declaring its love for its Texas roots.

The reaction to the sale is an indication of the type of regional customer loyalty that has given Whataburger a cult status in its home state akin to what In-N-Out enjoys in California—only on a larger scale.

As we noted last month in writing about the potential sale, the burger chain is a high-performing company that has grown by 52% over the past five years and is more than twice the size of its West Coast rival.

It’s notable that the Dobson family will still be major investors in the chain. In addition, rare is the family-owned business that stays family owned forever—though many of Whataburger’s competitors are family owned, such as the aforementioned In-N-Out, Chick-fil-A, and White Castle.

Customers are understandably concerned about what could happen to its chain following the sale, particularly as the company eyes expansion outside of its Texas market. People don’t like change, after all.

When Burger King bought Tim Hortons in 2014, creating Restaurant Brands International, government regulators in its home country of Canada demanded all sorts of concessions to keep Tim’s Canadian heritage. Tim Hortons is very much a regional brand.

And in the Tim Hortons lesson we have another risk: The ability for regional brands to maintain that same level of success outside of their home markets.

Regional brands can struggle as the expand to other parts of the country, where they don’t have the same loyalty, and so the track record for such expansions can be mixed. And in the burger business there are many competitors with regional love themselves, even if they don’t have the same loyalty that Whataburger enjoys.

Chicago, for instance, has its own well-loved regional brand in Portillo’s. That brand was sold to an outside investor in Berkshire Partners in 2014 but remains well loved in its home town even as it expands nationwide under those new owners.

BDT likely paid a massive multiple for its investment in Whataburger and would be colossally stupid to do anything that would alter what made it work so well in the first place. In other words: It won’t take the Texas out of Whataburger.

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