FDD Talk 2015: The Chick-fil-A Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

In this FDD Talk 2015 post, you’ll learn the following:

• Section I – Background information on the Chick-fil-A franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Chick-fil-A franchise, based on Item 7 of the company’s 2015 FDD

• Section III – Presentation and analysis of Chick-fil-A’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:

• 2014 average, high, and low sales for the 296 domestic Chick-fil-A Restaurants located in malls that were open for at least one year as of December 31, 2014

• percentage of domestic Chick-fil-A Restaurants located in malls that were open for at least one year as of December 31, 2014 and generated annual sales of less than $1,200,000; between $1,200,000 and $1,700,000; and over $1,700,000, respectively

• 2014 average, high, and low sales for the 1,195 domestic Chick-fil-A Restaurants located in non-malls that were open for at least one year as of December 31, 2014

• percentage of domestic Chick-fil-A Restaurants located in non-malls that were open for at least one year as of December 31, 2014 and generated annual sales of less than $3,600,000; between $3,600,000 and $4,400,000; and over $4,400,000, respectively

Section I – Background Information

Chick-fil-A founder Samuel Truett Cathy died in his home on Sept. 8, 2014, at the age of 93. Cathy, who grew up during the Great Depression, was chairman emeritus at the time of his death.

Cathy opened a diner in Atlanta in 1946 that was originally named the Dwarf Grill and later The Dwarf House. He opened the first Chick-fil-A restaurant in 1967 in Atlanta. Chick-fil-A now has more than 1,900 restaurants in 42 states and Washington, D.C.

The chain, still family-owned, has surpassed KFC as the United States’ largest quick-service chicken restaurant chain. It had nearly $6 billion in systemwide sales in 2014.

Chick-fil-A restaurants still close on Sundays, part of the Cathy family’s Southern Baptist beliefs. The chain drew national attention in 2012 for comments opposing same-sex marriage. Then-chief operating officer and president, Dan Cathy, the founder’s son who became CEO in November 2013 (while retaining the position of president), publicly opposed same-sex marriage and stated that proponents of gay marriage are “inviting God’s judgment on our nation.”

Chick-fil-A later backed off that stance, saying it would not take stands on political or social issues. It also changed its charitable giving practices, eliminating most donations to anti-LGBT organizations.

‘Eat More Kale’ Trademark OK’d

Chick-fil-A failed to block Bo Muller-Moore’s trademark claim for the “Eat More Kale” phrase the Vermont man has been printing on T-shirts for more than a decade. The application was approved in December 2014 by the U.S. Trademark and Patent Office.

The chicken chain’s objection was based on its slogan, “EAT MOR CHIKIN,” which is a “quote” from a fictional cow to steer people away from beef and toward chicken.

Phasing Out Antibiotics

Chick-fil-A announced in February 2014 that it would phase out antibiotics (including the ionophores that are used to prevent animal intestinal illnesses) from its chicken supply over the next five years.

The chain said the choice was based on the wishes of 70 percent of its customers, shown in market research.

Iconic Chicken Sandwich Turns 50

The chain’s most popular offering is the Chick-fil-A Chicken Sandwich, which turned 50 years old in 2014. The sandwich, made with boneless chicken breast, has changed only minimally in 50 years. Cooked in its secret coating for 4 minutes, it is still served with two pickles in a foil bag. More than 3 billion Chick-fil-A Chicken Sandwiches have been sold since 1964.

Waffle Potato Fries are also one of the top-selling menu items for the chain.

Specialty Coffee Added

Chick-fil-A in August 2014 added a specialty-grade coffee, partnering with Thrive Farmers Coffee for the medium-roast custom blend.

Mobile Ordering, Payments Added

Mobile ordering and mobile payments were added in December 2014. The features are offered through the Chick-fil-A Mobile App.

New CFO Named

Brent Ragsdale, formerly vice president and chief accounting officer, was named chief financial officer in January 2015. He replaced Buck McCabe, who will have an advisory role on the executive committee until the end of the year, when he will retire.

Jon Bridges was promoted to chief marketing officer, replacing the retiring Steve Robinson, who held the position for three decades. Bridges was vice president of customer experience for five years before his promotion.

In other promotions within the company, Andrew Cathy, son of Dan Cathy, was promoted to senior vice president and the new position of chief people officer; Lynn Chastain was promoted to senior vice president and general counsel; and Cliff Robinson was named senior vice president of field operations.

Section II – Estimated Costs

• Please click here for detailed estimates of Chick-fil-A franchise costs, based on Item 7 of the company’s 2015 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis