Chick-fil-A is the fast-food chain of the year, and things are only getting better

December 30, 2018

It is a little bit scary how well Chick-fil-A did in 2018.

The chicken chain is set to become the third-largest restaurant by sales by the end of this year, according to Kalinowski Equity Research. Doing so would mean catapulting up from No. 7, past competitors like Taco Bell, Subway, and Wendy’s.

To do so, Chick-fil-A’s system sales would need to grow the 12% to 15% that analyst Mark Kalinowski has predicted. That’s a massive figure, as most fast-food competitors would be thrilled to hit 8% growth in a year. Domino’s is the only chain that is even close, estimated to grow sales roughly 12% in 2018.

Chick-fil-A franchise

The past few years have seen Chick-fil-A go from a Southern cult favorite to one of the most dominant chains in America.

The chain is entering new markets at an unprecedented clip, including opening its first store outside the US. It is doing a delivery push. It rolled out a new app. New items are popping up on the menu. The chain even tested a meal kit this year.

Chick-fil-A is a private company, but according to industry estimates, things have never been better at the chain. The chain is still the most profitable fast-food chain in the country on a per-unit basis, with a single Chick-fil-A making an average of $4.1 million in annual sales, according to QSR Magazine. By comparison, the average unit volume at a KFC location is $1.2 million.

Yet some high-profile cases throughout 2018 hinted at the fact that, while Chick-fil-A is dominant, it could face some demons in 2019 that it has been able to dodge so far.

Chick-fil-A franchise

The chain has continued to experience backlash because of its perceived stance on LGBTQ rights.

A college in New Jersey banned Chick-fil-A as a dining-hall option. The chain’s expansion in Toronto sparked boycotts. And, Twitter CEO Jack Dorsey was slammed in June for eating Chick-fil-A during Pride Month.

Related: Fast Food Franchises in the UK – 10 Things Every Would-Be Franchisee Must Know

“Chick-fil-A is a restaurant company focused on food, service and hospitality, and our restaurants and licensed locations on college campuses welcome everyone,” Chick-fil-A said in a statement in November, after Rider University excluded the chain as a dining-hall option. “We have no policy of discrimination against any group, and we do not have a political or social agenda.”

Then, there are questions as to whether it can continue to maintain quality as the chain grows. Much of Chick-fil-A’s power is tied to its impeccable customer service and unique franchise model, which limits how many locations each franchisee can run. Often, as chains expand, they lose the control over the quality that made them beloved .

However, these potential issues haven’t hurt Chick-fil-A’s sales yet.

Maybe in 2019 Chick-fil-A will need to confront backlash and over-expansion fears head on. But in 2018 the chicken chain was dominating the industry.

Source: Business Insider

Less than 1 percent of people who apply get to open a Chick-fil-A – here’s what it takes

December 19, 2018

The first Chick-fil-A restaurant opened in 1967 in Atlanta’s Greenbriar Mall. The menu offered just a few classics, including the now-famous chicken sandwich, which sold for $0.59.

Today, the chain employs 120,000 people in 2,300 restaurants across 47 states. It first opened its doors to New Yorkers in October 2015, at the corner of 6th Avenue and 37th street in midtown Manhattan. This fall, I spent a day on the job with the team there to see what what it was like.

The owner and operator of this location, Oscar Fittipaldi, ran a Philadelphia-based Chick-fil-A for five years before being selected to open the first Manhattan-based franchise. He’s no longer affiliated with the Philly location, as Chick-fil-A prohibits most franchisees from opening multiple restaurants.

Related: Fast Food Franchises in the UK – 10 Things Every Would-Be Franchisee Must Know

Landing the gig was no easy task: Chick-fil-A receives about 60,000 franchise inquiries per year, the company tells CNBC Make It and, of those applicants, only 75 to 80 are selected to open new locations. That’s an acceptance rate of less than 1 percent.

“I don’t have a specific formula [for] why people are selected to become franchisees,” says Fittipaldi, who spent 21 years as a merchant marine and ship captain before changing careers. “But one of the things that I would look [for] typically is: character, chemistry and competency.

“We need to make sure that the Chick-fil-A franchisees, when they come to the organization, they have a perfect chemistry with our brand.”

You don’t need experience working at Chick-fil-A to be selected — or even in fast food, the company website notes: “While some Chick-fil-A operators come from the restaurant industry, most have entirely different backgrounds. … There’s no cookie-cutter previous experience among our selected operators.”

Nor do you need much cash: Operators pay an initial fee of $10,000, a fraction of what it costs to open most fast-food chains. McDonald’s, for example, requires that franchisees have at least $750,000 in liquid assets, the Fiscal Times reports.

It’s significantly cheaper because Chick-fil-A pays for all start-up costs, like real estate and equipment, and then leases everything to its operators for an ongoing fee.

Related: Chick-fil-A is the fast-food chain of the year, and things are only getting better

All operators have the same contractual agreement, the company tells Make It: Each month, the operator pays the company a percentage of gross sales for things like equipment and business services, plus a percentage of net profits as a franchise fee.

And operators don’t build equity in the business: Chick-fil-A owns every restaurant, meaning that operators can’t sell their location or pass it on to the next generation. Operators can’t open multiple locations, either. That’s arguably a key to the chain’s success: By limiting franchisees to one restaurant, the individuals can operate on a full-time, hands-on basis.

As Fittipaldi puts it, “We’re very unique in what we do. So the selection process is quite challenging for everyone.”

Source: Yahoo Finance UK

Getting a Chick-Fil-A franchise is harder than getting into Harvard

June 9, 2018

Three months into his new role as head of the Environmental Protection Agency, Scott Pruitt wanted to help his wife find a job, too. At Chick-Fil-A.

And so, as The Washington Post reported on Tuesday, June 5, Pruitt used his government position and the help of an agency aide to arrange a call, at first with the company’s chief executive, and ultimately with someone from its legal department, to discuss his wife’s prospects as a franchise owner.

Pruitt’s wife, Marlyn Pruitt, began but did not complete a franchisee application, the company told The Post, and Pruitt never opened a Chick-Fil-A location.

It was not the first time Pruitt has drawn scrutiny while in office. Other examples include asking an aide to help with personal tasks – including finding a used Trump hotel mattress – and calling on lobbyists to help arrange foreign trips.

And it also served as a reminder that, well, it’s really, really hard to open a Chick-Fil-A franchise, even without the pull of a government agency.

“I see a lot of situations in which you have franchise systems that get less and less selective because they really want to grow, and they’ll take anybody who comes along,” said Jonathan Maze, executive editor of the commercial food service industry outlet Restaurant Business. “Chick-Fil-A doesn’t have to do that.”

Carrie Kurlander, vice president of public relations for Chick-Fil-A, said the Georgia-based chain receives more than 40,000 inquires per year from people interested in becoming restaurant operators (the company’s term for “franchisee”). After filling out an initial “expression of interest” online, they complete a formal, written application. From there, the company conducts a series of recorded, live video and in-person interviews with applicants, taking past business experience and leadership skills into consideration.

Related: Fast Food Franchises in the UK – 10 Things Every Would-Be Franchisee Must Know

The chain opens 100 to 115 new restaurants a year, Kurlander said, and operators typically run one restaurant each. The company runs more than 2,200 restaurants in 47 states, and the average restaurant makes more than $4 million in annual sales.

Again: that’s 40,000 people who hope to become operators, and roughly 100 to 115 who make it through. To compare, of Harvard’s 42,749 applicants for the school’s incoming freshman class, it admitted 1,962.

“We are very intentional with our selection process as we believe this model is the key to ensuring our customers receive the best care and experience possible,” Kurlander said.

Operators pay an initial $10,000 fee to be “granted the rights necessary to operate a franchised Chick-fil-A,” according to the company website. That’s compared to other fast-food chains where franchisees can invest hundreds of thousands, even millions, of dollars to open a restaurant, industry experts said.

Still, when they’re approved, operators don’t have ownership over the land or restaurant itself. The company pays all startup costs including real estate, construction and equipment. Operators may not own other outside businesses.

“The reason why it’s only $10,000 is because Chick-Fil-A controls everything,” said Joel Libava, a consultant in franchises. “You can call yourself a franchisee, but you’re an operator.”

Still, a rigorous selection is part of the brand, and the brand comes in high regard. Maze described Chick-Fil-A as the “hottest big restaurant chain in the U.S. right now,” and noted that the company generated more than $9 billion in revenue in 2017. Operators are also guaranteed one day off per week – the restaurant is closed on Sundays, a practice that started in 1946 when the chain’s founder decided employees should have a day “to rest and worship if they choose,” Kurlander said.

And Libava said that with its reputation for high-quality food and strong customer service, Chick-Fil-A in many ways earned its standing.

“They are considered a highly profitable fast-food franchise operation, even though they’re not a franchise,” Libava said. “They are considered a good, profitable, well-run company.”

Maze said it wasn’t just the use of government strings that surprised him about Pruitt’s Chick-Fil-A rendezvous.

The job pays well, but only if operators are willing to grind it out in their physical restaurants six days per week.

“It’s not really the type of job where you would expect somebody to pull favors to get,” Maze said. “You still have to really, really like the restaurant business. That element is pretty shocking to be honest. Really, it’s not a cushy job.”

Source: WC Trib

Chick-fil-A’s secret weapon is helping it dominate chains like McDonald’s and KFC

May 16, 2018
  • Chick-fil-A is dominating the fast-food industry as other chains struggle to keep up.
  • One of Chick-fil-A’s advantages is that most franchisees aren’t allowed to have more than one location, according to John Hamburger, an industry expert.
  • In recent years, chains have increasingly relied on mega-franchisees who own up to hundreds of locations, which can mean they have less knowledge of the day-to-day happenings at them — a problem Chick-fil-A does not have. 

Chick-fil-A’s recent dominance in the fast-food industry can be tied to one behind-the-scenes secret, according to an industry expert.

Chick-fil-A has long topped rankings of food quality and customer service. It is one of the most profitable chains in the US, with average sales per restaurant reaching $4.4 million in 2016, QSR magazine reported. For comparison, KFC’s sales per restaurant were $1.1 million in the same period.

It’s less expensive to open a Chick-fil-A than it is to open a location of almost any other chain — Chick-fil-A charges franchisees only $10,000 to do so.

But unlike other franchises, Chick-fil-A prohibits franchisees from opening multiple locations.

That’s in stark contrast with the rest of the industry, as many fast-food franchisees own hundreds of locations. Four franchise groups make more than $1 billion a year, and 130 generate revenue of more than $100 million, according to the Restaurant Finance Monitor.

According to John Hamburger, the founder of the trade publication Franchise Times Corp., the reliance on franchisees is feeding into some major issues in the restaurant industry.

Related: Fast Food Franchises in the UK – 10 Things Every Would-Be Franchisee Must Know

The franchise model aims “to put somebody in the store that was close to the customer,” Hamburger told Business Insider. “They’re dealing with the customer. They’re in the community. They’re active in the community. And that’s what Chick-fil-A does.”

Chick-fil-A franchise owners are involved in hiring and firing employees. The company also encourages franchisees to get involved in the community through various local organizations.

According to Hamburger, that allows Chick-fil-A to get a leg up on the competition for quality and customer service.

From a purely financial standpoint, relying heavily on franchisees is helpful for fast-food chains. Franchisees bear the brunt of labor and food costs, allowing the corporate offices to avoid more volatile expenses — an extremely appealing position for investors.

But this strategy could be driving the chain-restaurant industry into a crisis.

Hamburger says some chains are seeing the negative impact of losing their community connections. For instance, Applebee’s, which has gone to a 100%-franchise model in recent years, closed 99 stores last year amid sinking sales.

“While we’re a big chain, we spend a lot of time trying to be part of the community,” Stephen Joyce, the CEO of Dine Brands, Applebee’s parent company, said in a recent interview with Business Insider.

Chick-fil-A’s success as a rapidly expanding private company could help convince more public companies to follow in its footsteps. As fast-food chains rely on mega-franchisees that compete with Chick-fil-A more directly, they may want to take a page out of the chicken chain’s playbook.

Source: Business Insider UK