Whatabusiness!

How did a single portable stand in Corpus Christi grow into one of the nation’s most successful fast-food chains? For the founders of Whataburger, it all began fifty years ago with the right ingredients.

July 2000By Comments

New Year’s Day, 1950, Harmon Dobson, a sometime bush pilot, diamond courier, and automobile dealer, wrote in his journal:

Jan 1, 1950—I think this will be an eventful year for me.

Two weeks later he sold his dealership in Arkansas and set out to make his fortune as a wildcatter.

Jan 14, 1950—Left today for Texas & God only knows where.

Things didn’t go as planned.

Late May, 1950—Landed back in Midland April 21 to find that my oil partner had had over 5000 dollars invested in a drilling deal in Loving County, Texas, and on May 18 almost lost the whole thing by fouling up a deal only two days before the money would have been forfeited… . Am now interested in financing Paul Burton, a hamburger expert, in some small specialized hamburger joints somewhere in Texas. This, I believe, will turn out to be a very profitable investment, which is something up until May 1, I was very unaccustomed.

For Dobson, the investment in “hamburger joints” proved profitable indeed. On August 8, 1950, he sold his first Whataburger out of a tiny portable stand across the street from Del Mar College, in Corpus Christi. He charged a then-pricey 25 cents, believing that people would not mind paying a little extra for better quality. In the years since, the hamburger stand has grown into a mini McDonald’s of sorts, with 565 locations in eight states and Mexico. Unlike the Golden Arches, Whataburger can’t brag about billions and billions served, but the Flying W is celebrating its fiftieth anniversary this summer at the top of its game: After emerging from a five-year slump, sales have skyrocketed of late, from $366 million in 1993 to $527 million in 1999. During the same period, the number of Whataburger restaurants earning $1 million or more a year nearly tripled, from 73 to 212. In the past five years the chain’s “same store sales”—the benchmark of the fast-food industry—have jumped a whopping 40 percent.

Yet the numbers tell only part of the tale. Over time, Whataburger has evolved into a true Texas icon. The A-frames with orange-and-white-striped roofs can be found in the state’s smallest towns, often where national franchises fear to tread. Talk to anyone who grew up in Texas, and he can rattle off Whataburger stories, from middle-of-the-night visits to morning coffee klatches. A few lucky souls have had life-changing experiences: On Valentine’s Day, 1996, twenty-four couples got married in a Whataburger in Dallas.

August 12, 1950—Big Day—$141.80—Christ What a workhouse—551 hamburgers.

The components of the original Whata-burger quarter-pounder were the same half a century ago as they are today: beef, lettuce, four dill pickles, three slices of tomatoes, chopped onions, and mus- tard. The burgers were also bigger than what the competition served, so Dobson had to contract with a local bread company to manufacture special baking pans that could accommodate five-inch buns. When he wasn’t focused on making the product, he was out promoting it: He would regularly take to the skies over Corpus Christi, dropping coupons from a Piper Super Cub plane that towed a bright red Whataburger banner.

Whataburger is still headquartered in Corpus, and more important, it remains in the hands of the Dobson family. Paying no mind to overtures from prospective buyers or the siren call of a Wall Street IPO, the Dobsons have been firmly in charge since Harmon first fired the grills. After he was killed in a plane crash in 1967, his wife, Grace, took over; although she no longer handles the day-to-day operations, she is still thought of as the “first lady” of Whataburger. “Mother” might be more apt. Even today, Grace Dobson has a maternal presence that is felt in every office and hallway at Whataburger headquarters, where executives are reluctant to boast about the company’s success, as if they’re afraid of being reprimanded. While she stays out of the limelight—characteristically, she declined to be interviewed for this story—she attends nearly every company event; she even shows up at picnics attended by the fry cooks and the drive-through operators. As one Whataburger official explains, “When she shows up at these events, it’s like Elvis has just arrived.”

And yet her lifestyle is nowhere near as opulent as the King’s. Her ownership interest in Whataburger has made her fabulously wealthy—though how wealthy is anyone’s guess, since the company is privately held—yet she still lives in the same modest house in which she and Harmon raised their three children. Her daughter, Lynne, attributes her mother’s frugality to her dirt-poor Depression-era childhood in Arkansas. “Grace is a loving, caring person, just like my wife, except my wife shops at Neiman Marcus and Grace shops at Kmart,” says longtime franchisee Larry Gates, who has worked for or with Whata-burger for almost thirty years.

Not that the Dobsons are cheap. They’ve always preached the gospel of corporate involvement in every community with a Whataburger, and they’ve led by example. There is scarcely a public building or a charity in Corpus Christi, from the Texas State Aquarium to the local chapter of the United Way, that hasn’t benefited from Whataburger’s munificence. “No one even bats an eyelash when it comes to giving,” says Bill Boller, an area manager for Austin Whataburgers.

April 28-29, 1951—Had little episode with the boys … about wearing caps. I’ll have to change my method with the boys. I can see that now.

When you spend time with Whataburger employees, the same question pops into your head as when you fly on Southwest Airlines: Why are these people so happy? Around the corporate office and the fryer, they talk about the passion they have for their jobs and of the legacy they feel a responsibility to uphold. They say they “bleed mustard.” They speak reverently about the Dobsons. They get misty-eyed when discussing the “Whataburger difference.” You almost forget they’re talking about burgers and breakfast tacos.

Customers are equally devoted. According to the Whataburger publicity department, the average Whataburger customer eats at the restaurant more times a month than the average person eats at other fast-food chains. It helps that Whataburgers are open around the clock: Particularly in rural parts of the Southwest,they’re the preferred place for friends to hook up, for business meetings, for coffee clubs, for drunken revelry. Whataburgers near airports are among the busiest, company officials theorize, because when people leave Texas, the thing they miss most is a Whataburger, so they immediately visit one when they return home.

There’s a forgivable amount of hype in that explanation, but it’s true that the company receives lovesick letters from former Texans. One expatriate, homesick and marooned in Northern California, wrote in 1997, “Yeah, you guessed it, I need a Whataburger here. My taste buds are withering from tofu, bean sprouts, and seaweed sandwiches! I would absolutely thank you. I would even sell my Texas pickup for a Whataburger with cheese and extra mustard! Excuse me while I swallow my watering mouth and wipe away my tears… .”

For such members of the Whataburger diaspora living in deprived parts of the country, the Internet provides partial relief. The Whataburger Web site (www.whataburger.com) hawks hats and T-shirts, but as yet there is no way to order a chicken sandwich online. Devotees also bid for Whataburger paraphernalia on eBay, everything from the company’s limited edition Nolan Ryan baseball cards to long-discontinued caramel-colored glass coffee mugs.

If it is hard to conceive of McDonald’s or Burger King inspiring such brand loyalty, Whataburger believes that it has a different breed of customer, one willing to sacrifice speed and price for quality. Because everything is cooked to order, Whataburger’s service is naturally slower than it is at other fast-food restaurants. For instance, there are no timers on the cash registers as there are at McDonald’s. But there are also no heat lamps; the beef doesn’t hit the grill until the order is placed and thus never suffers a radioactive fate in a microwave. Whataburger prides itself on being slow, even promoting it as a virtue in company advertising. One of its billboards reads: “You could get a faster burger, but then you’d have to eat it.”

Perhaps recognizing the success of this business model, other fast-food chains are trying to convert to a made-to-order system, but nobody at Whataburger is buying it. Richard Marx, whose 75 Whataburgers in West Texas and New Mexico make him the company’s single largest franchisee, argues that the competition must still contend with the fact that its food isn’t as good. “If they lose speed of service,” he says, “what else do they have?”

October 9, 1951—Position at 38 [years old] good—income—$25,000 yearly—one year ago—rapidly going broke “Whataburgers” will probably turn out to be my “life work.” I’m beginning to like & appreciate the business.

Like any family, Whataburger’s has had its dysfunctional moments. The midlife crisis came in the decade before Harmon Dobson’s son Tom took over as CEO and president at the end of 1993. Most in the company agree that during this time, Whataburger lost its way; some top executives refer to it as “the dead zone.” Profits declined and extraneous items like popcorn shrimp salads and steak sandwiches were added to the menu. “The focus was not on the thing that got us here: the Whataburger,” says chief operating officer Tim Taft. “We were trying to be all things to all people.” Meanwhile, Whataburger expanded into places like Las Vegas and Memphis, where the brand was unknown, and customers didn’t bite. “We got spread too thin,” explains director of marketing services Todd Coerver. “People didn’t know who we were. We didn’t have that Texas heritage and Texas tradition to play off of.”

What was most troublesome was the strain in the relationship between Whataburger’s corporate office and its franchisees. The franchisees believed that top executives, especially then-CEO Jim Peterson, tried to dictate strategy without soliciting input from the field. “The company didn’t stand behind us,” says former franchise association president Doyle Thomas. “We were two separate entities.” After clashes over products and promotions, the tensions erupted in 1993 during a dispute over rebates that outside vendors paid to the corporate office. The franchisees argued that they ought to receive a portion of the rebates, given that the money came in part from products they had purchased. Peterson resigned shortly after the quarrel began, and if not for a last-minute settlement, the matter surely would have gone to court.

The ascension of Tom Dobson to the top job at Whataburger went a long way toward healing the wounds. With a scion of the Whataburger dynasty in charge, the company pulled together, simplified its message, shuttered some of its less profitable locations, and put the emphasis back on the burgers that made the chain famous in the first place. The new management team hired by Dobson—particularly Taft, whom Whataburger veterans praise to the hilt—also devoted more resources to remodeling many restaurants that had become rundown over the years.

September 23, 1952—Sold & gave away 950 burgers. I never expected anything like this. So proud & so tired.

This past May, employees from all over the Whataburger empire converged on San Antonio to mark the company’s first fifty years. They frolicked at Sea World and listened to former president George Bush thank them for their “contribution to the waistline of the American people.” The celebration ended with an awards banquet, turning the event from a stodgy corporate gathering into something closer to a tent revival. Recipients of the Harmon Dobson Award and the Franchisee of the Year Award took the stage and fought back tears as they gave testimonials to what Whataburger meant to them. A video montage on the life of Grace Dobson brought the entire room to its feet, as cheers drowned out the sounds of blowing noses.

For all the back patting, however, the mood of the room was more grateful than self-congratulatory. The assembled knew that half a century of success comes not from boardroom strategy, not from burgers and buns, not even from Harmon Dobson, but from the millions of loyal customers who come through the doors and come back. “You feel this responsibility to grow the brand, and not mess it up,” says Todd Coerver. “You quickly learn that this brand means something to people. They grew up with it.”

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