Franchise Costs: Detailed Estimates of Chick-fil-A Franchise Costs (2020 FDD)

Updated August 17, 2020.

Detailed Estimates of Chick-fil-A Franchise Costs Based on Item 7 (Estimated Initial Investment) of Chick-fil-A’s 2020 Franchise Disclosure Document

Chick-fil-A Franchise

• Chick-fil-A’s principal business is the development of a chain of retail quick-service restaurants specializing in a boneless breast of chicken sandwich. Most of these restaurants are operated by franchised operators who are independent contractors.

• Chick-fil-A also operates various Chick-fil-A and other restaurants itself from time to time and may do so in the future directly or through its affiliates and subsidiaries.

• Chick-fil-A also licenses and continues to offer licenses to prospective Chick-fil-A licensees who have access to locations such as schools, workplaces, universities, airports, hospitals, and other similar locations to sell Chick-fil-A brand products at such locations. Chick-fil-A offers its licenses under a separate Disclosure Document.

• Chick-fil-A Restaurants are established in free-standing locations as well as in non-free-standing locations, including mall and in-line units, non-traditional locations (“satellite units”) and locations which are drive-thru only.

• Mall units are generally located in shopping malls and shopping centers.

• In-line units are generally located in shopping centers, office buildings, and downtown areas.

• Satellite units are generally located in office buildings, big box stores, and downtown areas, and may feature and serve only a limited number of menu items and may be (but are not necessarily) established in connection with an existing Chick-fil-A Restaurant.

• Although Chick-fil-A and its franchised operators market Chick-fil-A brand products broadly, the franchisor finds that the typical Chick-fil-A customer is in the 18-44 age group.

Chick-fil-A Franchise Costs

Initial Expenditure

• The following describes the costs of initial investment for a Chick-fil-A Restaurant, whether a free-standing unit, mall unit, in-line unit, drive-thru only unit, or satellite unit. There are some differences between the estimated initial investment for certain costs depending on the type of unit, which are noted in the following notes.

• The initial investment for satellite units vary in particular from other types of units due to unique factors such as seasonal operations, unique operating hours, and limited access to sell to the public as a result of being located in spaces with ticketed/captive audiences.

• The initial investment for a satellite unit is estimated to fit under the high range of certain of the estimated costs and is estimated to be less than the low range for certain of the estimated costs.

1.  Initial Franchise Fee:  $10,000

• Once you have paid the $10,000 initial franchise fee for your initial franchised Chick-fil-A Restaurant business (which must be in a traditional location), if you are offered the opportunity to operate an additional franchised Chick-fil-A Restaurant business, whether a traditional location or a satellite unit, you will pay an additional franchise fee in the amount of $5,000 for each Additional Business.

• The initial franchise fee is considered fully earned and non-refundable upon payment, except that the $5,000 portion of the initial franchise fee that is maintained by Chick-fil-A as the working capital deposit is refundable as described in Item 5. The additional franchise fee is considered fully earned and non-refundable upon payment.

• Although the $10,000 initial franchise fee (or the $5,000 additional franchise fee, if applicable) is the only initial out-of-pocket investment you will be required to make to begin operation of the franchised Chick-fil-A Restaurant business (or Additional Business under your Franchise Agreement), the other expenditures will reduce the actual profits of your franchised Chick-fil-A Restaurant business and will affect the amount of your income.

Additional Expenditures

• These amounts are deducted from the Gross Receipts of your franchised Chick-fil-A Restaurant business as expenses.

• Although calculated and due on a monthly basis, these fees and expenses are paid from Gross Receipts as expenses of your franchised Chick-fil-A Restaurant business to Chick-fil-A on either a monthly or pro rata/month to date daily basis, except for the insurance premiums for worker’s compensation and general liability coverages.

1.  Opening Inventory:  $17,830 to $57,860

2.  First Month’s Rental of Equipment:  $750 to $5,000

3.  First Month’s Lease/Sublease of Premises:  $1,900 to $67,200

• These amounts depend on where your franchised Chick-fil-A Restaurant business will be located, the size of the premises, traditional location or satellite unit, and other factors. The amount could be higher, for example, if your franchised Chick-fil-A Restaurant business will be located in a flagship-type, urban facility in a large metropolitan market.

• If you operate a satellite unit as an additional franchised Chick-fil-A Restaurant business in a non-traditional location, you will pay an occupancy charge instead of rent. Chick-fil-A currently estimates the occupancy charge will range between 8% to 50% of Gross Receipts.

• The equipment rental for a satellite unit could be less than the amount stated above for a satellite unit, including if the owner or manager of the premises provides certain equipment; or more, including if the venue is large.

4.  First Month’s Insurance Expense:  $255 to $8,950

• As applicable you must obtain certain of the insurance coverages elected by you or designated by Chick-fil-A, from Chick-fil-A, or through Chick-fil-A acting as administrator.

• With regard to the worker’s compensation and general liability insurance program, (i) you will obtain these coverages from the designated insurance carrier, (ii) will get billed by and will pay the insurance carrier, and (iii) as each month’s premium payment, will pay 1/12th of the premium cost for the calendar year.

• These amounts will not be due until after your franchised Chick-fil-A Restaurant business opens.

5.  Additional Funds:  $552,125 to $1,876,390

• This amount reflects the costs you can expect to pay in your first three months of operation and includes your expenses, as well as the cost of repairs, maintenance, and utilities, but does not include any draws, disbursements, or other distributions taken by you.

• In formulating these figures, Chick-fil-A has relied on its over 50 years of experience in the Chick-fil-A Restaurant business and on the financial performance of franchised Chick-fil-A Restaurants and company-operated Chick-fil-A Restaurant opened during the fiscal year ended December 31, 2019.

• The exact amount required for additional funds will vary from operation to operation and cannot be estimated with certainty for your franchised Chick-fil-A Restaurant business.

6.  Total Estimate of Initial Investment:  $582,360 to $2,025,400