It seems that a former California resident who grew tired of traveling back to California for a Double Double and Coke took matters into his own hands and opened up a new drive-through, called Chadder's, patterned on In-N-Out. Patterned may be an understatement. On opening day the decor, uniforms, and menu were exactly the same. Lines were out the door for hours and the restaurant ran out of food. Word spread very quickly that this was as close to In-N-Out as you could get outside of California.
That's when In-N-Out got wind of it and filed suit to protect its trade dress. In-N-Out won a restraining order and Chadder's has had to make changes to the restaurant and uniforms (more blue, less red). The food is still the same, but the "secret menu" is different. Animal style is stubby style. A double double is a stubby double. And so on.
A couple of (somewhat contradictory) thoughts:
1. While I can't (and don't) fault In-N-Out for filing a lawsuit to protect its brand image, I have to wonder if there isn't a better way to shut down Chadder's? Why not open an In-N-Out across the street? Let's face it, no one is going to Chadder's for the stubby double. They're going because they can get a taste of In-N-Out. My guess is that most of Chadder's customers would prefer the original, not the copy. And they don't want to wait years for the real thing to arrive.
2. In-N-Out uses its packaging brilliantly to reinforce their brand. Each wrapper is printed with information about the freshness of the meat and potatoes. Chadder's food is also fresh, but they don't do anything to drive that message home. In-N-Out understands the power of their brand. Today, Chadder's is little more than a knock-off (though this can and probably will change over time).
3. There is a massive demand for In-N-Out outside of California. But one of the things that drives the demand is scarcity. As In-N-Out expands, it becomes less unique. This is exactly what happened to Kripsy Kreme. Once you could purchase a (cold) Krispy Kreme in every gas station in town, the magic disappeared. (I'm not the first to write about this. See this too.) Few people think of McDonald's as special—partly because when you have more than 10,000 stores, you're common, not special. When In-N-Out becomes just another choice for lunch, will it still drive the passion that it does today?
4. Culture matters. In my experience the staff at In-N-Out love what they do—or they are very good at faking it. As of today, Chadder's staff appear to be just working a job. In fact, many look tired and overworked, due probably to the crowds. I can't imagine anyone working there for 20 years as In-N-Out claims to have working at their stores.
5. Nothing beats word of mouth. Chadder's hasn't done any advertising. But they've had great word of mouth and PR. They've got a great core idea: it's almost In-N-Out. And word has spread. Chadder's owner is now turning down requests for interviews because the word of mouth has brought more customers than they can handle. The Wendy's around the corner would kill for that kind of attention.