Here’s why In-N-Out is never coming to Australia

US burger joint In-N-Out has a cult following in Australia so it seems like a business no brainer. Still, it won’t be coming Down Under.

Stock In-n-Out Burgers image. Picture: Flickr / photoskate

SORRY, Australia. It isn’t happening.

Despite the ridiculous scenes in Sydney yesterday of hundreds of foodies lining up around the block for a taste of a legendary In-N-Out burger, we shouldn’t expect to see the wildly popular chain Down Under.

The family-run business, founded in California in 1948, has developed a cult following for its simple but tasty burgers. In-N-Out has teased Aussies before with pop-ups in Darlinghurst and Parramatta, but despite repeated calls for a permanent presence, is happy to keep us at arms length.

Australia shouldn’t feel too left out. Americans have been campaigning for the West Coast chain to expand eastwards for years, to no avail. If In-N-Out won’t even go national, there’s little chance it will go international.

“We do these pop-ups in various countries to get our name out there and familiarise people with the brand so they know about us when they visit the US,” a spokeswoman told Nine News.

“This pop up is no indication that we are going to open a store in Australia. We are a family owned business and we only operate in six (US) states right now and all the produce we use needs to be delivered fresh from our distributors.

“We have been approached by other areas regarding franchises but it’s just not something we would do.”

In 2012, the company made a similar statement on Facebook after another Sydney pop-up: “We have done events like this before in other countries and they are just one part of our efforts to promote and expand our brand as well as determine the best way to continue reaching out to customers around the world,” it said.

“We do not have any immediate plans to open a permanent restaurant there but this special event will help us make future decisions.”

PMasaya Arellano and Haris Kruskic enjoying the In 'n' Out Burger Pop Up at Dead Ringer in Surry Hills yesterday.

In-N-Out has 305 stores across California, Nevada, Arizona, Utah, Texas and Oregon. The slow-growth strategy has paid off, with new restaurants opening to massive crowds and fanfare.

In a rare interview with CBS last year, In-N-Out president Lynsi Snyder, the billionaire granddaughter of the burger chain’s founders, Esther and Harry Snyder, ruled out ever franchising its restaurants or going public.

“The only reason we would do that is for the money, and I wouldn’t do it,” Snyder said. “My heart is totally connected to this company because of my family, and the fact that they are not here — I have a strong tie to keep this the way they would want it.”

Speaking to Business Insider, In-N-Out vice president of planning and development Carl Van Fleet explained that the biggest reason, understandably, is quality control. “At In-N-Out Burger, we make all of our hamburger patties ourselves and deliver them fresh to all of our restaurants with our own delivery vehicles,” he said.

“Nothing is ever frozen. Our new restaurant locations are limited by the distance we can travel from our patty-making facilities and distribution centres.”

But it’s not just In-N-Out snubbing Australia. While the California chain is content to simply run pop-ups to drum up awareness, fellow hipster favourites such as Shake Shack and Five Guys have expanded beyond their shores — but not here.

Shake Shack: East Coast USA’s favourite burgers.

Shake Shack, which has grown from a single kiosk in New York’s Madison Square Park to a $1.6 billion company with locations in more than a dozen major cities including Tokyo, London, Moscow and Beirut, has resolutely kept away from Australia.

Five Guys, which also does burgers and fries, has franchises seemingly everywhere but here — the US, UK, Canada, Saudi Arabia, United Arab Emirates, Ireland and France.

Chicken specialist Chick-fil-A, which was recently named America’s favourite fast food restaurant, is also staying away. Asked whether an Australian expansion was on the cards, chief operating officer Dan Cathy told news.com.au: “Not at this time, but someday we will come to your rescue!”

So what gives?

According to Margaret Zabel, who until recently was vice president of marketing at McDonald’s Australia, to be successful in a new country you need scale in the long term to warrant the investment.

Although Australia’s early adopters can be highly influential, there is also a risk that they lose interest and move to the next new thing - and you need a critical mass of customers and offer ongoing value and a point of difference to be sustainable

“It’s hard to keep brands really edgy,” she said. “Some people will keep moving onto the next thing. Fast-food is very competitive in Australia and you need to strategically evaluate the local market opportunity.”

According to market research firm IBISWorld, the Australian fast food industry pulls in $14.8 billion a year, and despite annual growth of 2.4 per cent between 2011 and 2016, that is expected to slow to 0.6 per cent between 2016 and 2021.

McDonald’s remains the undisputed king with a 16 per cent market share, while KFC owner Yum! Restaurants sits in second with 9.7 per cent and Subway just behind on 9.5 per cent.

Ms Zabel said the scale of the Australian market compared to the US was also important to keep in mind. “A niche market in the US, can be bigger than the market in Australia. And whilst sustainable there, it may not work here given the market dynamics.”

Remember these? Now available in 7-Eleven stores. Picture: Campbell Brodie.

One probably doesn’t need to look any further than the ill-fated Krispy Kreme to understand why a cult favourite, American restaurant might look at the Australian market with trepidation — no matter how many Surry Hills hipsters it can lure out of bed at 6am.

Many will remember the fanfare associated with the launch of the doughnut chain’s Penrith outlet in 2003. As Steve Sammartino from advertising agency Grey Group wrote in 2010, it was “not uncommon to see people returning on aeroplanes at Melbourne airport with big bags of Krispy Kreme doughnuts”.

Scenes “reminiscent of McDonald’s in Moscow in the mid 1980s [with] cars lined up down the street” suggested the brand had strong novelty value in Australia, Mr Sammartino wrote. “But it really should have led management to ask some important questions about how sustainable this level of demand really was.

“Selling them by the dozen also drives the consumption occasion strongly into sharing and special events and so doesn’t lend itself to individual and regular patronage.”

In 2010, Krispy Kreme went into administration, citing poor sales at its 50 stores across the country. As Mr Sammartino pointed out, 50 stores serving a population of 21 million works out to one store per 420,000 people.

The US operation had 224 stores serving a population of 311 million, or one store per 1.4 million people. “Sometimes the best decision any specialty retail concept can make is to limit distribution, maintain exclusivity and keep the brand hype alive,” he wrote.

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Originally published as Here’s why In-N-Out is never coming to Australia