White Castle System, Inc.

FOUNDED: 1921

Contact Information:

HEADQUARTERS: 555 West Goodale Street
Columbus, Ohio 43215
PHONE: (614)228-5781
FAX: 614)464-0596
TOLL FREE: (800)843-2728
URL: http://www.whitecastle.com

OVERVIEW

White Castle first sold hamburgers for a nickel in 1921 in Wichita, Kansas. Today, the company claims, its sells 500 million hamburgers a year and has sold more than 7 billion in total. That's not bad for a company that is essentially a regional operation that has never franchised any of its units. White Castle remains a family-owned company with a chain of restaurants. The company operates 348 restaurants in 12 states and 17 cities in the Midwest and Northeast. White Castle System Inc.'s signature product is its distinctively shaped and flavored burger, which measures a mere 2.5 inches, has 5 holes, and is served on a steamed bun. The burger's unique flavor results from the patty being grilled on a bed of onions and having the bun placed on top of the burger while its cooking. In this process, the bun absorbs the onion flavor (as well as a good deal of grease). It has been said that consumers either love or hate the White Castle burger.

Long before McDonald's, White Castle became the first-ever hamburger chain in the country. However, it would later become supplanted by McDonald's in the collective American consciousness, as the Ingram family chose to keep the business a regional and family-operated enterprise. Despite this seemingly non-aggressive approach, White Castle is a highly profitable business.

The White Castle hamburger, a bite-sized square served on a soft and steamy bun (some would call it "soggy") often has been called a "cult" food item. It has even been judged an acquired taste and is subject to frequent put-downs. The company itself is deemed an also-ran in the American hamburger sweepstakes. The somewhat demeaning terms cannot erase the fact that, from its inception, the company has demonstrated steady growth. True, it is a slow growth. McDonald's, founded in 1954 and expanded by the franchise route, had 25,000 restaurants across the world by 2001. By comparison, White Castle, which was founded in 1921 and never franchised, had only 351 stores in 2001. Indeed, a slow and conservative approach is the creed the owners live by. New restaurants only open when profits make it possible. The owners have never borrowed to expand; the only time borrowing was ever involved was when founder Edgar Ingram borrowed $700 to start the operation. As a result, White Castle only opens about 10 to 20 new restaurants a year. Still, this approach has kept the company, which consistently posts __BODY__.2 million in daily sales, in business for 80 years.

COMPANY FINANCES

Because it is a privately owned company, detailed financial data about White Castle is unavailable. However, this much is known: the business brings in about __BODY__.2 million a day in sales. In 1999 annual sales reached the $420 million mark. That same year, it posted a one-year sales growth of 5.0 percent.

HISTORY

Before White Castle came along, ground beef-or hamburger meat-was regarded as the lowest of meat products. That started to change in 1916, when short-order cook J. Walter Anderson essentially invented the hamburger. It was Anderson's idea to cook ground beef as a flat patty and serve it on a bun. This approach proved popular enough that Anderson opened three hamburger stands in Wichita, Kansas, between 1916 and 1920.

In 1921 Anderson and Edgar Waldo "Billy" Ingram, a real estate and insurance agent, became partners and opened a fourth location, this one called White Castle. Ingram reportedly had to borrow $700 to go into the hamburger business. With the founding of White Castle, the hamburger was well on its way to becoming the quintessential American sandwich. In 1924 the company was incorporated as the White Castle System of Eating Houses.

That same year, Anderson and Ingram opened another hamburger stand in Kansas City. At first, expansion happened rapidly as throughout the rest of the decade the partners opened up restaurants in 12 major cities in the eastern region of the country, serving its small, square, and inexpensive burgers from five-stool hamburger stands.

In 1931, to assure the quality of its product, White Castle began using frozen beef patties and developed crush-resistant cardboard carton specially lined to keep the burgers hot. The following year, with a campaign first used in St. Louis, Missouri, White Castle became the first fast-food enterprise to promote its product through coupon advertising.(The deal offered five hamburgers for the price of two.)

In 1933 Ingram bought out Anderson's share of the company. A year later, with the business now his alone, Ingram established a company headquarters in Columbus, Ohio. That same year, White Castle Systems founded its PSB subsidiary.

The company's expansion came to a standstill during the 1940s, due to World War II and the rationing of food products such as meat and sugar. Expansion resumed after the war but never at its previous pace. By the end of the decade, in 1949, the company added the distinctive, trademark five holes to its patties. The holes helped the hamburgers cook faster as the patties were cooked within the bun. (Five years later, the company would even patent its five-holed burger, which it called the "Slyder.")

During the next two decades, the company initiated several significant changes including curb-side service, more menu items, larger buildings in more suburban locations, and drive-through service. In 1950, as if anticipating the emergence of frozen food products, White Castle began freezing hamburgers for sale to customers to eat whenever they wished. In 1956 White Castle added milk shakes to its menu. By 1961 White Castle reached the one-billion-hamburgers-sold plateau. At that time, no other hamburger chain had sold as many. A year later, the restaurants began serving cheeseburgers. In 1968 White Castle hit the two-billion-burger mark. In 1982 White Castle established its own frozen food distribution company. It publicized this move by sending its hamburgers to marines stationed in Beirut. During this period, White Castle became a 24-hour, quick-service restaurant.

In 1992 the company built a hamburger plant in Covington, Kentucky, that produced 200,000 hamburgers a day. These sandwiches were frozen and sold in convenience stores. In 1993 White Castle even began selling its hamburgers and cheeseburgers in vending machines. A year later, the first White Castle hamburgers were exported to Mexico. In 1999 White Castle went online with a Web site at www.Whatyoucrave.com. In 2001 the company celebrated its eightieth anniversary.

STRATEGY

Through the years, White Castle's strategy has involved adhering to its stated mission, which is to serve the finest products, for the least cost, in the cleanest surroundings, with the most courteous personnel. Facility hygiene is extremely important to the company, who says that the two elements of its name—"White" and "Castle"—were selected to suggest to customers that they were eating in a clean and safe environment. To advance the idea of cleanliness, the company moved its kitchens from the back of its restaurants to the front, so that customers could actually see how their food was being prepared.

At the same time, White Castle has always been savvy in the ways of marketing and promotion. All efforts toward safety and purity of product were publicized. It openly claimed that fresh raw hamburger was delivered to its restaurants twice a day. Also, the company once hired a scientist from the University of Michigan to evaluate the nutritional value of its hamburgers. In a somewhat dubious test, the scientist fed a student nothing but White Castle hamburgers and water for three months. At the end, the student was examined and pronounced healthy. Though the methodology—and especially the rationale—behind such a test seems highly questionable, it made for great press.

Other marketing ideas were innovative and successful. White Castle was the first fast food restaurant to package its products in a take-out style. It was also the first restaurant to promote its business via coupons. The campaign was an overwhelming success, and it helped the company introduce its hamburger to a larger market. As far back as 1932, the company implemented a program that allowed consumers to tour restaurants and receive free samples of food products. Such goodwill gestures had a positive impact on consumers' perceptions about the organization. Other marketing innovations included publishing menu books and printing up free hand-outs (such as score pads for bridge, golf, and bowling) that advertised all of its products and locations.

Such promotional strategies proved to be far ahead of their time and would be later employed, with variations, by fast-food chains that would come after World War II. The company also proved to be forward thinking when establishing its organizational policies. Essentially the first-ever fast-food franchise, White Castle established a written set of standards for its restaurant operations, food preparations, and employee conduct. These policies formed the basis of the company's expansion, as White Castle replicated all of the elements that made the company so successful in the first place. The familiar White Castle restaurant faÁade came to represent a recognizable commodity in the eyes of the consumers (just as the golden arches would later do for the McDonald's chain).

INFLUENCES

White Castle's influence of the huge fast-food industry cannot be underestimated. Large chains that established themselves after World War II employed White Castle's strategies and innovations. Ironically, these companies would surpass in size and success the company that served as their business model.

That's not to say that White Castle became a dinosaur that couldn't survive in the emerging new world of mega fast-food franchises. Rather, White Castle has demonstrated continued growth and success. It just chooses to move at a slower pace and won't allow itself to be consumed by any over-ambitious stratagems. White Castle has retained a loyal clientele through the years, and it has attracted new devotees of its cult product, while other, larger fast-food franchises—such as Gino's and Jack in the Box—have come and gone.

In order to maintain its level of success and its modest but effective growth rate, the company continues to implement technical and organizational improvements. In 1993 Ingram issued a mandate to all of its stores to speed up its service while maintaining the highest level of food quality. In 1996 the company opened a computerized meat processing plant in Indiana that produces 16 million pounds of beef a year.

CURRENT TRENDS

At the start of the new century, White Castle envisioned opening 150 more restaurants in a ten-year period. Expansion includes new locations in Illinois, Ohio, Michigan, Indiana, Kansas, Kentucky, Minnesota, Tennessee, New Jersey, New York, Pennsylvania, and Missouri.

In 2001 White Castle started experimenting with a new design and logo for its restaurants. All locations would retain the trademark castle motif. However, the new design will be brighter, more colorful, and easier to read, and it is aimed at making the restaurants more "warm and appealing."

PRODUCTS

White Castle's best-known product is, of course, its square burgers with five holes served on a steamed bun. The inexpensive, bite-sized burgers (nicknamed "Slyders") can be bought singly or in packaging promotions such as the "Sack of Ten."

However, just like other purveyors of fast food, the company has expanded its offerings throughout the years. Menu items include cheeseburgers, jalapeño burgers, fish sandwiches, chicken sandwiches, chili, French fries, onion chips, cheese sticks, soft drinks, milk shakes, coffee, hot chocolate, frozen Coke and cherry drinks, and a limited breakfast menu. A recent addition to its menu is its Chicken Rings, a variation on the popular onion ring, and created, no doubt, in response to competitors' similar offerings such as Chicken McNuggets.

CORPORATE CITIZENSHIP

Company founder Billy Ingram firmly believed in treating people fairly, sharing his success with the community, and investing in the future of others. Accordingly, in 1949, the Ingram family established the Ingram-White Castle Foundation. In 1999, to celebrate its fiftieth year, Mary and E. W. Ingram, Jr. gifted $11 million to the foundation to provide financial resources for grants. Over the years, the Ingram family has donated $35 million to the foundation. The grants funded by the Ingram generosity support arts, education, health and human services, primarily in Ohio communities. The foundation has awarded more than $8 million in grants to support scholarships to college students and awards to outstanding teachers, as well as to increase community support of education.

GLOBAL PRESENCE

As a regional operation, White Castle System, Inc. has little interest in global expansion. However, it does have restaurants in Japan and Malaysia.

EMPLOYMENT

White Castle adheres to a "hire from within" employment policy, and it has committed itself to providing substantial growth opportunities for its workers. It points out that many people now employed at the upper levels of the organization got their start by working at restaurant counters or on factory floors. The community also actively seeks input from its employees, and it provides them with open communication through a toll-free employee hot line. According to the company, more than 15 percent of its employees have been with the organization for more than ten years. With an envisioned expansion of 150 stores over a ten-year period, the company expects its management ranks to grow by 50 percent, and it intends to fill the new positions with current employees.

The company offers both full- and part-time positions. Benefits and incentives include paid pension and profit sharing, health and life insurance, sickness and vision benefits, dental plan, free meals while working, uniforms, flexible hours, on-the-job training, performance appraisals, paid holidays and vacations, competitive salaries, and sales bonuses.

SOURCES OF INFORMATION

Bibliography

American Business Journals Inc. "White Castle Testing New Look." Columbia Business First, 10 August 2001. Available at http://columbus.bizjournals.com

BBCi.co.uk. "White Castle Hamburgers," h2g2, 5 February 2002. Available at http://www.bbc.co.uk.

Chenoweth, Doral. "White Castle Still a Cult Hit in 80th Year." The Columbia Dispatch," 12 September 2000. Available at http://www.dispatch.com.

The Greater Greenfield Chamber of Commerce. "Chamber Profiles." Greenfield Chamber, 2002. Available at http://www.green-fieldcc.org

Hoover's Capsule Profiles. "White Castle Systems Inc." Hoover's Online, 2002. Available at http://www.hoovers.com.

Ohio Historical Society. "MSS 991-White Castle System, Inc. Records, 1921-1991," 2002. Available at http://www.ohiohistory.org.

"White Castle Opens Plant in Indiana." Central Ohio Source, 30 August 1996. Available at http://centralohio.thesource.net.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. White Castle System Inc.'s primary SICs are:

2599 Furniture Fixtures, Not Elsewhere Classified

5812 Eating Places

Also investigate companies by their North American Industry Classification System codes, also known as NAICS codes. White Castle System Inc.'s primary NAICS codes are:

337127 Istitutional Furniture Manufacturing

722110 Full Service Restaurants