White Castle's Successful Recipe: Burger, Burger, Burger, Fries
STEPHANIE N. MEHTA
Jul. 25, 1995
In the fast-changing world of fast food, White Castle has found success by being square.
While some competitors have wooed customers with expanded menus, White Castle System Inc. has dished up a limited, no-frills menu built around a palm-sized, square hamburger. The chain, based in Columbus, Ohio, owns and operates 292 fast-food restaurants, some of them in gritty urban locales, and sells about 500 million hamburgers a year.
``It's an amazing story of a company that has refused to change in the face of an industry that has changed tremendously,'' says Jack Trout, a marketing consultant in Greenwich, Conn.
Founded by E.W. ``Billy'' Ingram in 1921, White Castle opened its first restaurant in Wichita, Kan., selling five-cent hamburgers, coffee and soft drinks. Mr. Ingram encouraged his customers to buy the little sandwiches by the ``sack'' _ a nickname still used for a bag of 10 burgers.
E.W. Ingram III, the founder's grandson, is now president and chief executive of White Castle, which operates in 14 metropolitan areas in the South, East and Midwest. Over the years, the chain has made relatively few revisions in its original menu. The eateries added french fries in the 1940s, ice-cream shakes in 1956 and cheeseburgers in 1962.
``We try to constantly remind ourselves that we're in the hamburger business,'' says Jack L. Trador, the company's chief administrative officer. ``We think we should stick to what we do best.'' Though some White Castle outlets occasionally experiment with new items, such as breakfast sandwiches or fried clams, hamburgers remain the chain's top seller on a dozen-item menu.
White Castle has managed to withstand the fast-food price wars because its hamburger product is unique, food analysts say. ``With Burger King and Checkers, there's a kind of sameness about those products,'' says Mr. Trout, the consultant. ``But with that little square burger, I mean, where else are you going to get those things?''
Indeed, fast-food aficionados say people either love or hate White Castle sandwiches. Each one contains a square of beef with five holes punched in it for faster frying, a pickle and a dollop of grilled onions wrapped in a plain, white-bread bun.
The tiny burgers have developed a cult-like following. Singer Frank Sinatra once had White Castle ship him frozen hamburgers at a concert site. The Smithereens, a New Jersey pop-rock group, included a song called ``White Castle Blues'' on their first album in 1986. White Castle fans in the Midwest affectionately refer to the burgers as ``sliders.''
Many fast-food business executives say that White Castle's avoidance of franchising and its regional focus have prevented the company from becoming as big as younger burger chains like McDonald's and Burger King Corp., a unit of Grand Metropolitan PLC. But Mr. Trador insists that ``we never wanted to be another McDonald's or Burger King.'' He maintains that White Castle prefers controlled expansion.
White Castle's simple approach also happens to be pretty efficient, he adds. Items such as salad bars, everything-on-it hamburgers and specialty foods mean additional labor and training costs, Mr. Trador says. Consultants note that enlarged menus can also cause customers to deliberate too long, creating long lines and impairing a restaurant's ability to serve large numbers of customers quickly.
A few other burger chains have adopted a similar pared-down approach. Checkers Drive-In Restaurants Inc. and Rally's Hamburgers Inc. feature simple menus, low-cost meals and fast service. But both companies posted losses in their most recent fiscal years because of aggressive discount pricing by the biggest burger chains.
Analysts say White Castle has sales of more than $1.1 million a restaurant, second in the fast-food hamburger business to McDonald's Corp. Though its 1994 sales of $350 million were flat, White Castle says it expects the addition of 10 locations to propel growth this year. Profit rose briskly in 1994 and should climb again this year, the family-owned company reports.
The company's conservative strategy extends to its expansion plans. White Castle plans to open 150 restaurants over the next 10 years without taking on additional debt, officials say.
Meanwhile, the company continues to open or revamp stores in hard-scrabble communities like Chicago's South Side. White Castle generally appeals to budget-conscious consumers, Mr. Trador says. The average price of its burgers is 38 cents.
In 1987, White Castle launched a frozen sandwich division, which ships sliders _ hold the pickle _ to convenience stores and grocery outlets nationwide. The strategy successfully undercut clever entrepreneurs' efforts to freeze and resell sacks of White Castle burgers for nearly double the retail price.
Of course, the chain's menu of hamburgers, fries, onion rings and shakes holds little appeal for diet-conscious consumers. A single sandwich, with about an ounce of beef, contains about eight grams of fat. By comparison, a 1.6-ounce McDonald's hamburger contains about nine grams of fat.
Slider fans remain loyal, though. ``I've been eating here for 50 years,'' says Frank Omilian, a 77-year-old New Yorker who frequents a White Castle that has been in the same location in Queens since 1937. ``I'm still alive,'' he adds, ``so the food can't be that detrimental to your health.''