In this FDD Talk 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 2018 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 2018 FDD
- Section IV – Number of franchised and company-owned Chick-fil-A outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Chick-fil-A’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average, median, high, and low sales for the 238 domestic non-Satellite franchised Operator Chick-fil-A Restaurants located in malls that had been open and operated by Operators for at least one full calendar year as of December 31, 2017
- percentage of domestic non-Satellite franchised Operator Chick-fil-A Restaurants located in malls that had been open and operated by Operators for at least one full calendar year as of December 31, 2017 and generated annual sales of less than $1,500,000; between $1,500,000 and $2,100,000; and over $2,100,000, respectively
- 2017 average, median, high, and low sales for the 1,429 domestic non-Satellite franchised Operator Chick-fil-A Restaurants located in non-malls that had been open and operated by Operators for at least one full calendar year as of December 31, 2017
- percentage of domestic non-Satellite franchised Operator Chick-fil-A Restaurants located in non-malls that had been open and operated by Operators for at least one full calendar year as of December 31, 2017 and generated annual sales of less than $4,750,000; between $4,750,000 and $5,680,000; and over $5,680,000, respectively
Section I – Background Information
20 Things You Need to Know About the Chick-fil-A Franchise
Selects Toronto for First International Franchisee-Owned Restaurants Outside U.S.
1. At the end of July 2018, Chick-fil-A announced that it will be opening its first restaurants in Toronto, Canada in 2019. These will be the company’s first franchisee-owned restaurants outside of the United States. Chick-fil-A is focused on expansion in the Greater Toronto Area, with plans to open at least 15 restaurants in the next five years, creating 50 to 75 new jobs per location. The company has made a commitment to build long-standing partnerships with local suppliers and to find the perfect neighborhoods in which to grow.
2. Tim Tassopoulos, president and CEO of Chick-fil-A said, “Toronto is a great city – with diverse and caring people, a vibrant restaurant culture and a deep talent pool. These characteristics align perfectly with Chick-fil-A’s focus on community giving, delivering a premium restaurant experience and working with passionate people who can grow with our company.”
Testing New Meal Kit Concept
3. Near the end of July 2018, Chick-fil-A announced that it would start testing a new concept for the brand, Mealtime Kits, in the company’s hometown of Atlanta, Georgia. On August 27, Chick-fil-A launched the Mealtime Kits at 150 restaurants across Atlanta. The kits are designed to make it easy for customers to cook their own meals at home using fresh, pre-measured ingredients they can pick up in the drive-thru, at the front counter, or via the Chick-fil-A One app.
4. Chick-fil-A chef and Atlanta restaurateur Stuart Tracy helped develop five different kit recipes, which are easy to follow, simple to make, and include the quality Chick-fil-A chicken used in the brand’s famous chicken sandwiches. Chick-fil-A will be the first in the quick service industry to offer a full meal kit offering, and customer feedback on the test will help the restaurant company decide whether to roll out the concept nationwide.
5. Michael Patrick, an innovation program lead at Chick-fil-A who is leading the Mealtime Kits effort, said, “We know our guests are busier than ever and need a variety of convenient dinner options. We’re excited to offer Mealtime Kits as a new way for us to serve our guests by providing fresh ingredients to enjoy a delicious meal at home. We designed our offering so our guests don’t have to order ahead, subscribe to a service, or make an extra stop at the grocery store. They simply pick up a Mealtime Kit at one of our restaurants at their convenience – for example, when they’re already at a Chick-fil-A restaurant grabbing breakfast or lunch, or in the drive-thru on their way home.”
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6. The initial test of the Mealtime Kits will be a limited-time offer and will be available to customers in Atlanta until November 17, but customers nationwide can express their interest in trying the kits by filling out an online form on Chick-fil-A’s website. During the test period, Chick-fil-A will rotate five meal kit recipes: Chicken Parmesan, Chicken Enchiladas, Dijon Chicken, Pan Roasted Chicken, and Chicken Flatbread. The Restaurants will offer two recipes at a given time.
7. Each Mealtime Kit serves two people, and costs $15.89. Each kit has a “use-by” date, and they can be refrigerated at home for several days, depending on when they are purchased. All the chicken used in the Mealtime Kit recipes is No Antibiotics Ever. Chick-fil-A was the first in the quick service industry to commit to using only No Antibiotics Ever chicken in all its restaurants by 2019. The chicken in the kits is also trimmed and marinated, so customers can prepare a quick meal using only a few simple steps.
Launches New Seasonal Drinks and Tests New Menu Items in Select Markets
8. At the end of May 2018, to kick off the summer season, Chick-fil-A debuted a new limited-time item nationwide: the White Peach Tea Lemonade. The new White Peach Tea Lemonade combines Chick-fil-A’s classic iced tea and lemonade (or diet lemonade) with the flavor of fresh, white peaches. The beverage launched in all restaurants following a successful test in South Carolina last spring. Also returning to the menu in time for summer is a customer favorite, the Peach Milkshake.
9. Amanda Norris, senior director of menu development for Chick-fil-A, said, “Customers often order a tea/lemonade combination at our restaurants. This is the first time we’re officially adding the popular flavor combo to the menu, with the extra twist of an essential summer taste. The White Peach Tea Lemonade combines all the flavors of summer for a refreshing beverage we think our customers will love.”
10. In addition to the summer drinks, customers at participating Chick-fil-A restaurants in Charlotte, North Carolina and Albuquerque, New Mexico can order a new snack from the Chick-fil-A menu: Chick-n-Sliders. Available for a limited time through the summer, Chick-n-Sliders are made with Chick-fil-A’s signature chicken filet served on a warm roll and topped with honey butter spread. Chick-n-Sliders are available in the test markets during the lunch, snack, and dinner hours.
11. Starting June 4, customers at participating restaurants in Tampa, Fla., Little Rock, Ark., and Indianapolis were able to order breakfast favorite Chick-n-Minis throughout the day for a limited time during summer. Chick-n-Minis were available in 4-count, 10-count, and catering tray options.
12. Norris added, “Both Chick-n-Sliders and Chick-n-Minis are delicious snack options for guests to enjoy throughout the day, and feedback from customers in these test markets will help determine if they are added to the menu nationwide.”
13. Chick-fil-A began in 1946 when S. Truett Cathy and his brother Ben opened a diner called Dwarf Grill (later renamed as Dwarf House) in Hapeville, Georgia. The restaurant was located near the now defunct Ford Motor Company Atlanta Assembly Plant, whose workers frequently ate at Dwarf Grill. After serving traditional diner food for several years, Cathy created the recipe for Chick-fil-A’s iconic original chicken sandwich in 1964.
14. The popularity of Cathy’s chicken sandwich led him to establish Chick-fil-A. He opened the first restaurant using the new company name in 1967 in the Greenbriar Mall in a suburb of Atlanta, Georgia. During the 1970s and early 1980s, Chick-fil-A grew rapidly by opening new locations primarily in suburban mall food courts.
15. To support the company’s new growth, Chick-fil-A opened its corporate headquarters in 1984 just outside of downtown Atlanta. The first freestanding franchised location was opened in 1986 and Chick-fil-A began to focus on opening restaurants outside of mall food courts.
16. In 1995, Chick-fil-A debuted its “Eat Mor Chikin” advertising campaign, which features Holstein cows. The cows and the slogan have been used by Chick-fil-A continually since then. Over the next decade, Chick-fil-A continued to grow and by 2006 the company surpassed $2 billion in system-wide sales.
17. Although Chick-fil-A has kept its growth in the U.S., the company opened its first international location in 2014 at the Calgary International Airport in Canada. Chick-fil-A continues to grow across the U.S. and has become one of the leading fast food franchises in the country.
18. Cathy, who led a life centered on biblical principles and family, brought this attitude to his business. This has helped Chick-fil-A earn a reputation for quality customer service and is the reason why every location (including the one in Canada) is closed on Sundays to allow employees to attend church.
19. In 2011, Chick-fil-A came under fire when it was discovered that the company has donated millions of dollars to Christian organizations that oppose same-sex marriage. This resulted in widespread media coverage and public backlash, protests, and boycotts. In late 2012, The Civil Rights Agenda (TCRA) announced that Chick-fil-A had “ceased donating to organizations that promote discrimination, specifically against LGBT civil rights.”
Entrepreneur’s Franchise 500
20. Chick-fil-A did not rank on Entrepreneur’s 2018 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 2018 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 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 1,553
- Outlets at the End of the Year: 1,646
- Net Change: +93
- Outlets at the Start of the Year: 1,643
- Outlets at the End of the Year: 1,730
- Net Change: +87
- Outlets at the Start of the Year: 1,741
- Outlets at the End of the Year: 1,853
- Net Change: +112
- Outlets at the Start of the Year: 42
- Outlets at the End of the Year: 31
- Net Change: -11
- Outlets at the Start of the Year: 34
- Outlets at the End of the Year: 42
- Net Change: +8
- Outlets at the Start of the Year: 31
- Outlets at the End of the Year: 29
- Net Change: -2
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
Domestic Chick-fil-A Restaurants Included in Sample
- As of December 31, 2017, there were approximately 2,225 domestic Chick-fil-A Restaurants and Licensed Units open and operating, including approximately 1,882 domestic Chick-fil-A Restaurants and 343 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, 2017, approximately 1,853 of the 1,882 domestic Chick-fil-A Restaurants were being operated by Operators and 29 of the 1,882 domestic Chick-fil-A Restaurants were being operated by Chick-fil-A or its affiliates.
- The domestic Chick-fil-A Restaurants that are operated or were operated at any time during calendar year 2017 by Chick-fil-A or its affiliates, and their annual sales volumes, are not the subject of these financial performance representations.
- Approximately 1,674 of those 1,853 domestic Chick-fil-A Restaurants being operated by Operators had been open and operated by Operators for at least one full calendar year as of December 31, 2017 and had been operated by Operators during the entire year.
- Of these 1,674 domestic Chick-fil-A Restaurants operated by Operators, 7 were “Satellite” locations, and their annual sales volumes are not the subject of these financial performance representations. The remaining 1,667 non-satellite domestic Chick-fil-A Restaurants that had been open and operated by Operators for at least one full calendar year as of December 31, 2017, and their annual sales volumes, are the subject of these financial performance representations and discussed below.
- Approximately 238 of the 1,667 domestic non-Satellite franchised Operator Chick-fil-A Restaurants that had been open and operated by Operators for at least one full calendar year as of December 31, 2017 were located in malls, and approximately 1,429 of the 1,667 domestic non-Satellite franchised Operator Chick-fil-A Restaurants that had been open and operated by Operators for at least one full calendar year as of December 31, 2017 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 franchised Operator 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 franchised Operator 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 franchised Operator Chick-fil-A Restaurant, or (ii) pursuant to telephone or other similar orders received or filled at or in the franchised Operator Chick-fil-A Restaurant.
- Both non-Satellite franchised Operator Chick-fil-A Restaurants located in malls and non-Satellite franchised Operator Chick-fil-A Restaurants located in non-mall environments are similar with respect to their operations and receive similar services from Chick-fil-A.
- Some franchised Operator Chick-fil-A Restaurants have sold this amount. Your individual results may differ. There is no assurance that you’ll sell as much.