In this FDD Talk 2017 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 2017 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Chick-fil-A franchise, based on Items 5 and 6 of the company’s 2017 FDD
- Section IV – Presentation and analysis of Chick-fil-A’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
- 2016 average, high, and low sales for the 288 domestic Chick-fil-A Restaurants located in malls that were open for at least one year as of December 31, 2016
- percentage of domestic Chick-fil-A Restaurants located in malls that were open for at least one year as of December 31, 2016 and generated annual sales of less than $1,450,000; between $1,450,000 and $2,036,000; and over $2,036,000, respectively
- 2016 average, high, and low sales for the 1,373 domestic Chick-fil-A Restaurants located in non-malls that were open for at least one year as of December 31, 2016
- percentage of domestic Chick-fil-A Restaurants located in non-malls that were open for at least one year as of December 31, 2016 and generated annual sales of less than $4,425,000; between $4,425,000 and $5,350,000; and over $5,350,000, respectively
Section I – Background Information
15 Things You Need to Know About the Chick-fil-A Franchise
New Gluten-Free Bun
1. In early June, Chick-fil-A announced that it had added a gluten-free bun to its menu due to requests from customers for more gluten-free/sensitive options. Chick-fil-A is one of the few quick-serve restaurants to offer a gluten-free bun. The new bun is now available at all Chick-fil-A restaurants nationwide, comes individually packaged to avoid cross contamination, and can be ordered (for an additional cost of $1.15) with any Chick-fil-A sandwich.
2. Prior to the nationwide release, Chick-fil-A successfully tested the gluten-free bun in three cities in 2016. Leslie Neslage, senior consultant of menu development for Chick-fil-A, said that the restaurant “heard positive feedback in test markets that the bun tastes better than some other gluten-free breads” because Chick-fil-A uses “more premium ingredients like quinoa and amaranth” instead of rice flour like most gluten-free breads.
Testing Family Style Meals and New Sides
3. Chick-fil-A is testing out a solution to the growing customer demand for take out that the restaurant says affects nearly 40 percent of its dinner customers. In early July, Chick-fil-A rolled out family style meal kits, including new sides, in Greensboro, North Carolina; Phoenix, Arizona; and San Antonio, Texas.
4. According to Chick-fil-A, 36 percent of dinner customers take their meal to go and the chain says that customers have consistently asked for “an even more convenient way to share meals at home or on the go.”
5. Matt Abercrombie, manager of menu development at Chick-fil-A, said that the restaurant has been working directly with a group of parents to design every part of the new Family Style Meals including the cutlery caddy that features five unique conversation-starter questions to help customers connect over mealtime.
6. Chick-fil-A will run the tests on the Family Style Meals through November 18 and customer feedback will determine if menu items stick around. The Family Style Meals include one entrée, two sides, and eight mini rolls to serve four people, with the option to add additional entrées, sides, and beverages.
7. The chicken chain will also be testing two new sides, Bacon Baked Beans and Mac & Cheese, in the three cities.
13th Annual Cow Appreciation Day
8. On July 11, Chick-fil-A held its 13th annual Cow Appreciation Day event, where customers who dress up like cows receive free food at any of the nation’s Chick-fil-A restaurants. Adult customers who dressed up in any type of cow attire received a free Chick-fil-A entree and children dressed up for the event were awarded with a free kids meal.
9. Fans were encouraged to share their costumes on social media using the hashtag #CowAppreciationDay and all freestanding Chick-fil-A locations had an active Cow Appreciation Day Snapchat filter.
First Seasonal Entree of 2017
10. To start off the summer season, on May 15, Chick-fil-A introduced two new backyard barbecue-inspired menu items: the Smokehouse BBQ Bacon Sandwich and Watermelon Mint Lemonade, which will be available until August 19.
11. The Smokehouse BBQ Bacon Sandwich features Chick-fil-A’s signature grilled chicken along with bacon coated in a brown sugar pepper blend served on a new Hawaiian-style bun with Colby-Jack cheese, green leaf lettuce, and a zesty Smokehouse BBQ Sauce. David Famer, Chick-fil-A Vice President of Menu Strategy and Development, said the sandwich was incredibly popular in test markets and Chick-fil-A was excited to release it nationwide.
12. The Watermelon Mint Lemonade was created to compliment the Smokehouse BBQ Bacon Sandwich and is made with Chick-fil-A’s fresh-squeezed lemonade mixed with watermelon and mint flavors free from artificial colors or flavorings.
13. The first Chick-fil-A was opened in 1967 by S. Truett Cathy in a suburb of Atlanta, Georgia. Cathy registered the name Chick-fil-A, Inc. in 1961 after he found a pressure fryer that could cook a chicken sandwich in the same amount of time it took to make a fast food hamburger.
14. Throughout the 70s and early 80s, Cathy opened Chick-fil-A restaurants in the food courts of suburban malls. The first freestanding franchise was opened in 1986. Today, there are over 2,000 Chick-fil-A restaurants in the U.S.
Entrepreneur’s Franchise 500
15. Although Chick-fil-A has been franchising for over three decades, the company has never appeared on Entrepreneur’s annual Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Chick-fil-A franchise costs, based on Item 7 of the company’s 2017 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Chick-fil-A’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.
Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis
Domestic Chick-fil-A Restaurants Included in Sample
- As of December 31, 2016, there were approximately 2,085 domestic Chick-fil-A Restaurants and Licensed Units open and operating, including approximately 1,772 domestic Chick-fil-A Restaurants and 313 domestic Chick-fil-A Licensed Units.
- The domestic Chick-fil-A Licensed Units, which are operated by Chick-fil-A Licensees, and their annual sales volumes are not the subject of these financial performance representations.
- As of December 31, 2016, approximately 1,739 of the 1,772 domestic Chick-fil-A Restaurants were being operated by Operators and 33 of the 1,772 domestic Chick-fil-A Restaurants were being operated by Chick-fil-A or its affiliates.
- Approximately 1,668 of those 1,772 domestic Chick-fil-A Restaurants had been open for at least one full calendar year as of December 31, 2016.
- Of these 1,668 domestic Chick-fil-A Restaurants, 7 were “Satellite” locations, and their annual sales volumes are not the subject of these financial performance representations. The remaining 1,661 domestic Chick-fil-A Restaurants that had been open for at least one full calendar year as of December 31, 2016, and their annual sales volumes, are the subject of these financial performance representations.
- Approximately 288 of the 1,661 domestic Chick-fil-A Restaurants that had been open for at least one full calendar year as of December 31, 2016 were located in malls, and approximately 1,373 of the 1,661 domestic Chick-fil-A Restaurants that had been open for at least one full calendar year as of December 31, 2016 were located in non-mall environments (e.g. Free Standing Units (“FSUs”) and Drive-Thru Only Units (“DTOs”)).
Annual Sales Volume of Domestic Chick-fil-A Restaurants
- For purposes of the financial performance representations set forth below, the term “annual sales volume” includes a Chick-fil-A Restaurant’s entire gross receipts (excluding only sales taxes levied upon retail sales and payable over to the appropriate governmental authority) from sales at, from, or related to the Chick-fil-A Restaurant during the applicable calendar year, whether for cash or on a charge, credit, or time basis, including sales and services (i) where orders originate and/or are accepted at, in, or away from the Chick-fil-A Restaurant, or (ii) pursuant to telephone or other similar orders received or filled at or in the Chick-fil-A Restaurant.
- Both Chick-fil-A Restaurants located in malls and Chick-fil-A Restaurants located in non-mall environments are similar with respect to their operations and receive similar services from Chick-fil-A.
- Additionally, the financial performance representations set forth below have been derived from the financial reporting statements of both independent, franchised Operator and company-operated Chick-fil-A Restaurants in order to provide information relevant to a prospective Operator. Both company-operated Chick-fil-A Restaurants and Operator-operated Chick-fil-A Restaurants are similar with respect to their operations and financial performance from an annual sales volume perspective, and both receive similar services from Chick-fil-A.