Brand Research: In-N-Out’s Expansion to the East Coast
The much loved In-N-Out burger recently announced their plans to expand the brand east. Today, the majority of stores are in California and others are scattered throughout Texas and the West coast. Moving east is a big step outside of the company’s comfort zone.
We looked at the data to understand:
How the company thinks about markets and location selection
How they’ve grown geographically
The target customer and location profile
Why Tennessee was an attractive market to choose as a hub for east coast expansion
In-N-Out’s Location Footprint Today
Heatmap of all In-N-Out locations
In-N-Out operates ~358 stores primarily located in the West coast.
The company’s roots are in California and location growth has been primarily concentrated there as expansion slowly caught on in new states, starting with Nevada.
Recent growth outside of California has been driven by adding locations in Texas starting about a decade back while also incrementally adding across Arizona and Nevada, and most recently focusing on Colorado.
All locations are company owned - no franchises - and In-N-Out owns the distribution process by building hubs that serve locations no further than 500 miles (more on that later).
Customers are surprisingly loyal to the brand, a key part of their West coast success, and figuring out how (or if) that translates to the East coast will undoubtedly be on their mind over the coming years as they ramp up operations.
The In-N-Out Location Profile
The typical In-N-Out location is generally located in high population suburban areas with slightly above average income and a large surrounding working population.
More important than the population itself is a location’s proximity to major roads. The company’s location strategy revolves around locations convenient to car traffic with high street visibility.
The target customer is likely people that are on the move to or from work and home that want a quick, convenient place to get an affordable meal.
The median location is less than a quarter mile from the nearest highway stop
Take the below as two examples in California. The markers are In-N-Out locations, the red circles are the closest highway stop, and the blue lines are major roads. These locations’ primary value is their convenience - customers easily exit the highway, visit the location, and return to a trip.
Examples of In-N-Out Burger’s location convenience. Source of Highway Stops: Iggy Open Data
Other restaurant chains that are usually located near an In-N-Out include:
Subway
McDonalds
Taco Bell
Jack in the Box
About 3 in 4 In-N-Out locations has a Subway within one mile and over half have a Taco Bell or Jack in the Box.
Source: Analysis of Foursquare Places data
The data suggests that In-N-Out has grown thoughtfully in areas that have:
High commuting traffic
Convenience to major roads and highways
Locations with high street visibility
Large surrounding workforce
Average+ income
East Coast Expansion
Much excitement was made about In-N-Out’s announcement that they’re heading East with a new office and hub in or around Franklin, TN, just south of Nashville. That said, it will be many years until a location actually opens. This ties back to the company’s desire to build their own distribution centers for quality assurance purposes.
With so many markets available on the east coast, the question becomes - Why Franklin, TN?
In-N-Out won’t open a store more than 500 miles from a distribution hub. With this in mind, we pulled data for every city on the East coast and determined the population within 500 miles to look at how Franklin compared on the basis of population and market reach optimization.
Based on this and other factors, Franklin has 3 highly attractive characteristics:
Efficient geographic reach
Large surrounding population
Workforce access
Efficient Geographic Reach
With a 500-mile radius, locating too close to the coast would “waste” the radius on the ocean, as would being located too far north (pushing toward Canada) or south (the ocean again). Franklin is centrally located north-and-south while still reaching several coastal states.
There’s little missed coverage in Franklin compared to choosing, say, Charlotte NC or Atlanta where the radius would be far into the ocean.
Large Surrounding Population
Franklin’s - or Nashville’s - 500-mile radius unlocks access to several populous cities, including:
Atlanta, GA
Chicago, IL
Indianapolis, IN
St. Louis, MO
Charlotte and Raleigh, NC
This is in addition to many secondary markets like Pittsburgh, Louisville, Jacksonville, Tallahassee, and Milwaukee.
Some of these cities that are on the edge may not technically qualify for the radius (the difference between 500 miles “as the crow flies” vs. 500 roadway driving miles), but the cities that fit comfortably in the radius are more than representative of the market opportunity.
We estimate that the population contained in the circle above is over 100,000,000 people
One distribution hub can reach over 100,000,000 people, many of them new customers that can’t be serviced by current distribution centers.
Said another way, nearly 1 in 3 Americans can be reached by drawing a 500-mile radius around Franklin, TN.
Workforce Access
Other cities have better population reach, including several in Ohio and West Virginia (access to NYC, Philadelphia, and the DMV) - as much as 40% higher population reach - but In-N-Out needs to staff and recruit a multi-faceted workforce, and this is best served around a metro hub.
If they plan to open a fully operational office and stand up manufacturing/distribution, they’ll need drivers, manufacturing workers, and operations, in addition to roles in store development, customer service, and more. Being in or around an urban metro hub is a better location to find and attract talent, generally speaking.
Cost of living for workers will also be better in Franklin, TN than in Nashville proper, and much better than many other parts of the country, particularly moving toward the Mid-Atlantic and Northeast. Tennessee also has no state income tax, a strong benefit for workers.
There are, of course, more considerations than just the above when choosing a new market for distribution and operations. A few may include:
Economic incentives from the city or area
Initial market strategy (starting with states closer to that area)
Population growth and/or migration patterns
Given the target market, current footprint, and customer profile, choosing Franklin/Nashville as a hub makes good sense for the brand. Downtown urban cores are not their target market, so staying away from the NYC-Philadelphia-DMV core is reasonable for them compared to a brand that targets urban locations.
They get strong benefits logistically and wide reach to establish themselves across several eastern states.
It remains to be seen whether the brand can extend their strength from California to the east coast, but the data suggests Franklin/Nashville is a strong starting point and they should find ample market opportunity given their location strategy and target customer up and down the Eastern US.
The decision to grow is complex, and choosing where to go is oftentimes even harder. We work with businesses to bring relevant data and analytics to these decisions. Contact us to have a conversation or learn more about what we do.