In-N-Out Burger (22 page)

Rich's widow, Christina Snyder, took to the podium along with the widows of Phil West and Jack Sims. Looking out into the crowd with incredible composure she said, “Right now, as our hearts are grieving, and we feel empty inside, the only hope is to know that Jesus is with us. He's our strength right now.”

Guy Snyder's relationship with his younger brother had been complicated. By turns they were at odds and often on the outs. The two men lived almost entirely different lives. The brothers did, however, share a history, and that history included a strong pride in In-N-Out and what their parents had built.

At the time of Rich's death, the two brothers were barely on speaking terms—but when Guy received the news, he was absolutely stricken. He dissolved into tears. “I'll never forget the night he called me and told me that Rich had died,” recalled a close friend. “He was just hysterical. He went down to Newport Beach and set things up in a hotel and took over. He stayed there until the funeral.”

Facing the packed church, Guy shrugged off his shyness. In a rambling eulogy, he alluded to the accident and spoke of “God's work.” Touching on their pronounced troubles, Guy confessed, “I thought I might be bitter.” Then, focusing on the positive, Guy praised his younger brother. “Richie and I sometimes couldn't even sit down and talk about things,” he said. “Richie always stuck up for me. I always did everything first…. This one time, Richie went first. What happened has changed a lot of people's lives.” He added, “If I can follow in his footsteps, I will be the happiest person in the world.”

 

Under Rich, In-N-Out had solidified its position as a player in the industry, and it enjoyed an enviable cult status among its customers. It had come to personify the Los Angeles lifestyle with its humble blend of fast food and car culture. Rich imbued the family firm with his effusive personality and nimbly transformed the restaurants into a big business without damaging the integrity of the small burger chain that
his parents had built. Seemingly gifted with both the Midas touch and the common touch, under his guidance, In-N-Out was in good hands. He was that rare family scion who was not only capable of running the business but was able to carry it to greater heights. His death left not a power vacuum but was a real blow. As Esther later confided, “When Richard was killed…my world had ended, almost. I had never had to worry about anything as long as he was here. He was a happy soul.”

 

A ripple of uneasiness spread within the company. The sudden loss of such a charismatic and forceful leader left longtime associates concerned about what would happen next. At seventy-three years old, Esther Snyder did not appear a likely candidate to run In-N-Out despite her enthusiasm, energy, and love for the company that she had helped to build. She still worked in accounting five days a week and attended numerous company events and store openings, but at her advanced age she did not appear to be the first choice to take over.

And the chain's second choice, Guy Snyder, had a big question mark hovering over him. During the past seventeen years, as his younger brother ran In-N-Out Burger, Guy had been kept at arm's length. The tension between the Snyder brothers was legendary, and in the years of major expansion and transition at In-N-Out, Guy was largely out of the picture. As the years passed, he had less and less to do with the operations of In-N-Out Burger. His efforts notwithstanding, Guy still suffered from his crippling addictions and bouts of depression. Without Rich in charge, many questioned whether the family would go ahead and sell off In-N-Out Burger.

In the days and weeks following the memorial service, company officials indicated only that out of respect for the family, any decision about succession would be “delayed indefinitely.” For the moment, the company remained in a state of mourning. The considerable management vacuum created by the catastrophic deaths of Rich Snyder and Phil West left a gaping hole. Since Baldwin Park maintained its silence, numerous outsiders stepped in, all too happy to speculate on what would happen next.

A gaggle of business consultants and others with little to no inside knowledge offered their insights on whether Rich had a succession plan in place or not, and what that might mean for the future. The most popular theory was that In-N-Out Burger would be sold.

In those days following Rich's death, the phone at corporate headquarters in Baldwin Park rang incessantly with calls from prospective buyers who wanted nothing more than to pounce on what they perceived to be the vulnerable carcass of the Snyder family. A number of interested parties approached In-N-Out Burger, testing the waters. Reportedly, one of them was PepsiCo, which had for years been snapping up fast-food chains across the country.

A cacophony of thinly informed speculation emanating from analysts, bankers, and lawyers proclaimed that an announcement was imminent. Whispers turned to loud rumors; In-N-Out was on the block. In truth, any company would have been happy to get its hands on In-N-Out. Well-run and flush with profits, In-N-Out had not only managed to grow and develop with its unblemished reputation intact; In-N-Out was an unassailable brand name.

In reality, In-N-Out Burger was never on the market. There was never any suggestion that it would be sold—at least not inside the Baldwin Park headquarters. For all of the talk among industry watchers, the one thing they had no understanding of was the will of Esther Snyder. Those closest to her said that her devotion to the company and her loyalty to its associates trumped any possible consideration of a sale. She was primarily concerned with what would happen to them if In-N-Out were sold or made part of a larger company. Besides, Esther knew that Rich would never have sold the company. Despite the incessant murmurings on the outside, inside the lavishly appointed executive offices on the second floor of the Baldwin Park headquarters, the company never entertained any kind of serious offer.

In early January 1994, In-N-Out Burger had come to a decision. At seventy-three, Esther Snyder stepped in as president, assuming a larger role in the chain's day-to-day operations; Guy Snyder returned to the company as well. He was named chairman, a newly created title. Christina Snyder, Rich's widow, joined the firm's board
of directors. Corporate conglomerates and investment bankers had once again been given the cold shoulder. The family chain stayed in family hands. In the minds of In-N-Out's legion of fans, their Double-Doubles were safe from external meddling.

 

Inside In-N-Out Burger's Baldwin Park headquarters, the news had a slightly different flavor. Among immediate family, close associates, and the top management, Guy Snyder's appointment was viewed with something less than exuberance or even relief and more along the lines of cautious trepidation. Quite simply, his return to Baldwin Park was not seen as that of a wunderkind in the mold of Rich Snyder, but rather as the triumph of the prodigal son after long years spent in the shadow of his younger brother.

Rich had been actively negotiating over the course of the previous year to buy out his brother's outstanding In-N-Out shares in order to assume full control of the family business. He had strongly urged Guy to retire from the company on his own. “He wanted him out of his hair,” was how one observer put it. Rich spent the year before he died pursuing a legal framework that would keep Guy permanently out of the company—but despite his own recurrent troubles, Guy was not one to be shunted aside so easily. As for Esther, she just wanted peace between her sons.

During this time, Andrew Puzder was Esther's attorney. The role put him in a position where he observed, as did many others, the complicated rhythms of the Snyder brothers' relationship. A former trial lawyer, he recalled that in the year before the crash, Esther and Rich “were trying to work out an arrangement between Guy and Rich about how to go forward with the business.” Esther still owned the majority of the company, but Rich was looking to formalize his role in running In-N-Out Burger in a way that would leave Guy out. “I represented Esther's interests and was trying to help her,” explained Puzder. “She didn't want to alienate either son, and wanted the process to go smoothly.”

The situation added another layer of strain to an already tense relationship. Although Guy had been on the outside, he still had
an emotional as well as financial interest in the burger chain. Since childhood, the brothers had been fiercely competitive with each other. Whatever the circumstances, neither of them wanted to be shown up. “Both of them wanted to be treated fairly and honorably,” explained Puzder. “They were both concerned with protecting the company and protecting their interests. Both wanted to walk away without losing face”—although it seemed that the latter was more of a concern for Guy than his brother. As Puzder noted, In-N-Out Burger “had really become Rich's brand.”

As it turned out, on December 14, Rich had traveled up north along with his wife and Esther to see Lynsi perform in her school's Christmas pageant. Rich was crazy about his eleven-year-old niece. Every year since she was two years old, he had made a special date for the two of them to spend a day at Disneyland. While in Shingletown, he had hoped to talk to his brother. It was an awkward visit that also happened to fall on the anniversary of Harry's death. The relationship between the two brothers, already filled with resentment and jealousy, was at the breaking point over the buyout. The legal documents to buy out Guy's shares of In-N-Out and remove him as a trustee from the family trusts were in the process of being finalized.

Rich already had a much larger stake in the company than his brother, and in three years, the majority of In-N-Out shares would be transferred to Rich; Guy had little choice but to sign on the dotted line. Although the deal ensured his financial security for life, the sting of the situation left him feeling like the victim of a great injustice.

The year-long buyout proceedings had left a bitter taste in Snyder mouths, and the aftermath promised more of the same. Family relations were already badly damaged, and the fear was that once Guy signed, those ties might be irrevocably severed. For that very reason, Esther had asked that the documents not be signed until after Christmas.

During Lynsi's pageant, Rich pulled Guy aside. “We might not see each other again,” he told him. “You're my brother, and I love you.” Rich, Christina, and Esther Snyder flew back to Southern California. Less than twenty-four hours later, Rich was dead.

Without a legal arrangement in place removing Guy Snyder or naming an alternate successor, the terms of the irrevocable Esther L. Snyder Trust remained in effect—and the terms were unambiguous. In the event that Rich died without any living descendants, the majority shares of the trust—in effect the majority of In-N-Out—were to be transferred to Guy Snyder. Rich and Christina did not have any children of their own, and Rich had not adopted his wife's daughter, Siobhan.

Among the many tragedies and pieces of unfinished business that resulted from the crash was the fact that Phil West was onboard the Westwind that day; that was the crucial event that turned control of the company over to Guy. The matrix of trusts and estate planning instruments created to protect In-N-Out and ensure its succession through Rich unraveled. West was named as the successor trustee of the Esther L. Snyder Trust after Rich, as well as a cotrustee of Rich's own trust. Had he not died on the plane, West would have administered the majority of the company shares that comprised the core of that trust, set to roll over in three years. Regardless of the buyout, the move would have prevented Guy from gaining control over the company.

With West gone, Guy's place as trustee was secured. By an act of cruel fate, Guy, who had only recently been on the outside looking in, was now the man holding the keys to the kingdom.

Legally, Guy Snyder was in control. On the surface, In-N-Out seemed destined to implode. Guy's newly minted leadership remained a great unknown. Even apart from his long catalog of turbulent personal problems, Guy was viewed as something of an uncertain successor. In part, this was because Rich had proved such an exceptional leader; a vibrant, charismatic president, Rich had led In-N-Out Burger to great success largely on the basis of his personality. He had quintupled the size of the chain, increasing profits handily. He managed do so without diluting the unique character that had
turned the burger chain into a cult phenomenon. “When Rich took it on, it was a nice little place with a '50s style,” was how Andrew Puzder described it. “He really marketed it and played it up.” During her younger son's time at the top, Esther had played a largely supporting role, leaving the final operational decisions to Rich.

While Guy stood at the company's edge, he had done little to assert himself or insinuate himself into a greater role. Those who knew Guy Snyder uniformly commented on the fact that he always seemed happiest on his ranch or at the racetrack. He loved nothing more than to put on a pair of overalls and work the land in one of his tractors or old farm equipment. His ultimate dream was to live up on the five-thousand-acre company-owned ranch in Arroyo Grande near San Luis Obispo and raise cattle.

Despite the anger and resentment that pricked under his skin, when Guy was named chairman, it was as much of a shock to him as to anyone else. “He'd been pushed out of everything, pushed out in Shingletown,” was how one of his friends described the situation. “He was a little pissed off, but after a while he wound up on the ranch with Lynda and Lynsi, and he had adjusted to that lifestyle.” Although he hadn't signed away his rights to the company, Guy had been on the periphery for so long that he wasn't too sure he wanted it, and certainly not under these circumstances. “When Guy came back, the company was drop-kicked into his lap,” said the friend. As Guy told the mourners at his brother's memorial, “My life has changed quite a bit. I never thought things would go down like this.”

In-N-Out's executive team had to view Guy Snyder's installation as company chairman warily. Few had many interactions with him while Rich was in charge. They seemed “skeptical and a little fearful at the prospect,” said the friend. “Some of the management had been talking before Guy actually took over.” The conventional wisdom seemed to be “that Guy would probably get tired of running the company and would go back to his ranch in Northern California and let the others run the company.”

It may have been a case of wishful thinking, at least in the beginning. Guy's chairmanship dovetailed with a relatively healthy stretch
in his life; he seemed to have his chronic troubles under control. Beneath the fog of painkillers, many remarked that, actually, Guy was an incredible fellow. Lucid, he was a solid manager who displayed sound judgment. In particular, he was said to have a phenomenal sense about people. “He could read them really well,” said one. And he understood the product better than anyone. Ironically, in spite of his own issues, Guy seemed to be able to handle external problems fairly well. Moreover, he wasn't cavalier when it came to the family business. He had a real understanding of the responsibility now placed on his shoulders. When Guy came on board, proclaimed the insider, “He didn't make any blunders and was actually quite knowledgeable.”

One of the first acts of In-N-Out's board was to raise Guy's annual salary to approximately $2 million a year. One of the first things that Guy did was to run out and purchase some suits for his new job. It was a half-hearted gesture, however, and he quickly lapsed back into wearing his customary jeans and T-shirts. His casual attire notwithstanding, Guy seemed to be fairly clear-eyed in his view of In-N-Out Burger and its future. Still, he had lot to learn about the chain's operations and management.

Rich had plotted out a growth plan that would continue to extend the chain's reach. In principle, under his strategy, In-N-Out could have continued moving (slowly) toward becoming a national chain (the real question was whether that was his intention). Rich was a realist, and given the chain's delivery of fresh product and management pipeline, he never thought In-N-Out Burger would move beyond the western United States during his lifetime.
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The plan under way was to roll out ten to twelve new stores a year regionally while following the chain's longtime strict quality guidelines and then review the situation before expanding further.

When Guy stepped in, the company was on the cusp of implementing one of Rich's five-year growth schemes and In-N-Out was
on a building binge, having recently established a foothold in Nevada and setting its sights on Arizona. During his first few months on the job, Guy went around visiting most of the ninety-three stores, checking up on their operations and meeting with the associates and managers.

Following his tour, Guy came to the conclusion that the five-year plan was too aggressive, and he wanted to scale back the planned rollout. In-N-Out Burger grew only as fast as its management strength would allow, and Guy didn't see enough quality people who were ready become store managers. At the current pace, he believed that the managers would be stretched too thin. One of his first executive decisions was to slow down the chain's expansion, capping new openings at eight or nine stores a year. In a rare public comment, Esther later validated her son's judgment. “Guy believes we need to have the time to train people properly to run the new restaurants,” she had told a
Los Angeles Times
reporter, “and he's probably right.”

 

In those first few weeks and months following Rich's death, Guy did not exactly tread lightly. He moved into his brother's corner office, the largest of the executive suites in Baldwin Park. The company didn't abandon its planned transfer to Irvine, and a number of its executives moved to the Irvine University Tower. Guy had Rich's Irvine office redecorated, but he only worked there when it was absolutely necessary; he much preferred to work out of the original headquarters. The commute from Glendora was a brutal one, and the Irvine headquarters represented his brother Rich. Guy felt more at home in Baldwin Park where he had grown up. The warehouse, processing, and distribution center remained in the original location—and that was exactly where Guy's real strengths lay. He seemed to have a kind of sixth sense when it came to the smallest details of the warehouse operations and the product. Some marveled at how Guy could look at the sponge dough or the secret sauce or the milkshake mix and immediately tell that there was something off about the product even when most others could not.

Whether he was working out of the original Baldwin Park headquarters or down in Irvine, Guy was surrounded by executive managers and consultants who had been put in place by his brother. Perhaps it came as no surprise that he wanted to clean house to some degree. One of the first to go was Andrew Puzder. “As soon as Rich died I was out of the inner circle,” he explained. “I represented Esther and sided with Rich.” After Guy took over as chairman of In-N-Out Burger, he said, “I was kind of out of it.” In something of an ironic twist, Puzder went on to work for Carl's Jr. founder Carl Karcher. After representing Karcher in an insider trading case (later settled with the SEC), Puzder became general counsel for Carl Karcher Enterprises. And in 2000, he was named the president and chairman of the company.

Apparently, Guy was singularly unhappy with the decision to put his brother's widow, Christina, on In-N-Out's board of directors. The two were said to have a rocky relationship. Guy had indicated to some that he didn't regard her as really part of the Snyder family—after all, she had been married to Rich for less than two years. He began agitating for her removal. Esther had no problem with Christina as a board member, and the two remained close. Emotionally sustaining one another during the difficult first year after Rich's death, Esther often stayed at Christina's house overnight for comfort. However, exhausted, non-confrontational, and perhaps even a bit guilty, she did not oppose her son.

Within two years, arrangements were made and an undisclosed settlement was agreed upon. Christina Snyder resigned from the board. It was a situation that she later described as “painful and draining.” Christina headed up In-N-Out's Child Abuse Fund, the charitable foundation that Esther and Rich Snyder had founded in 1984. (In 1997, she renamed it the Rich Snyder Foundation.) As a result, the chain ended up establishing a second corporate charity called the In-N-Out Burger Foundation.

After Christina Snyder left, Guy turned his attention to a group of the chain's executive vice presidents whom he wanted gone. It was a thorny problem. Before Rich died, he set up a trust that gave a small
percentage of In-N-Out shares to a handful of executives (including Phil West) in the event of his death. These particular shares came from the stock that Rich had inherited from Harry. Prophetically, the decision stemmed from Rich's understanding that if something were to happen to him, he could ensure a consistent and smooth transition if his talented executive team stayed in place. The shares were offered as an incentive to keep them and set up to give the vice presidents a percentage if they remained for a certain period of time. Rich also arranged to give a few other close friends who were also longtime associates a small portion of shares. In the latter case, the shares were more of a reward for loyalty than motivation to stay put.

In a move that severely angered Guy, in the summer of 1996, four of the company's executives filed suit against the Los Angeles law firm that had crafted the trust. They alleged breach of contract and malpractice and sought $1.5 million from the firm in damages. According to the
Los Angeles Times
, the four men claimed that “the law firm's trust work resulted in ‘significant confusion, ambiguity and expense' that has caused them ‘significant' but unspecified monetary damages.”

The lawsuit kicked Guy's ire into high gear. Not only did it air In-N-Out's private business publicly, Guy didn't feel that some of the executives were entitled to a piece of the company to begin with. Unlike Rich, Guy had a personal problem with this group of college-educated, professional managers who had joined the company only a handful of years earlier. In his mind, they hadn't helped to build up In-N-Out over the decades, and if anybody deserved a stake in the company, it was family or those that had started at the bottom picking up trash, working construction, or performing maintenance and worked their way up through the years.

In a fit of pique, Guy wanted to get rid of them. In the end, however, he was prevailed upon not to clean house. He was convinced that clearing the executive decks of such capable and dedicated managers would not be in the best interest of the company. In fact, it was likely to have a devastating effect. Denuding the chain's organizational chart of its highest-ranking members would have been a shock to the
smooth-running operations and would no doubt have jolted loyal associates down the ladder who had been with the company for years. In the end, the executives stayed put, as did the tension between Guy and In-N-Out's top managers.