At a time when California’s economic and political foundation appears to be in tatters, it is easy to overlook how the state has often been on the leading edge of cultural changes in American society.  Californians need no introduction to the success of In-N-Out Burger, a relatively small and privately held fast food chain that until recently had a presence mainly in Southern California.  In-N-Out Burger’s founder invented the fast food drive through, a cultural milestone that changed the landscape of America.

Stacy Perman has written a new book entitled In-N-Out Burger: A Behind-the-Counter Look at the Fast-Food Chain That Breaks All the Rules and she speaks about the book and the company in the video embedded at the bottom of this article.  I plan to read the book and provide a review on this site in the near future.

Why should investors really care about the business success of a small and privately held fast food company on the west coast?  Primarily because the patterns and practices demonstrated in this business have resulted in the development of a formidable moat.  Since the development of an enduring moat is a rare accomplishment, it is useful to examine whether there are any patterns  that can predict the potential for moat creation in advance.

Anyone who has been to an In-N-Out location knows that the restaurants are spotlessly clean, always busy, and staffed by friendly employees serving simple and fresh food.  The only comparable business that I know of within the fast food industry is Chick-Fil-A which is also privately owned and appears to have a similar operating philosophy and devotion to simple food served by friendly employees in spotless restaurants.  These concepts seem so simple, yet they are powerful differentiating factors for two restaurant chains that have developed almost cult-like followings among their customers.

The video below shows the first ten minutes of the fifty minute video.  Be sure to click the “Watch Full Program” button at the bottom right of the video to view the rest of the program.

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