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 2021 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 2021 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 2018, 2019, and 2020, based on Item 20 of the company’s 2021 FDD
- Section V – Presentation and analysis of Chick-fil-A’s financial performance representations, based on Item 19 of the company’s 2021 FDD, including information on the:
- 2020 average, median, high, and low sales for the 241 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, 2020
- 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, 2020 and generated annual sales of less than $1,300,000; between $1,300,000 and $2,000,000; and over $2,000,000, respectively
- 2020 average, median, high, and low sales for the 1,735 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, 2020
- 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, 2020 and generated annual sales of less than $6,245,000; between $6,245,000 and $7,625,000; and over $7,625,000, respectively
Section I – Background Information
20 Things You Need to Know About the Chick-fil-A Franchise
Rolls Out Online Ordering
1. In mid-November 2020, Chick-fil-A launched online ordering through its website, offering customers another way to place and pick up orders outside of the Chick-fil-A app. Whether through chick-fil-a.com or the app, customers nationwide now have two convenient options to order ahead for drive-thru, carry-out, or curbside, depending on the options available at their local Chick-fil-A restaurant.
2. Emily Thomson with the customer digital experience team at Chick-fil-A, Inc., said, “The ability to order online from Chick-fil-A’s full menu is one more way for us to show care to our customers by making the ordering process as seamless as possible. Traditionally, customers have only been able to order catering on chick-fil-a.com. Online ordering now changes the game by providing the full menu for everyday purchases.”
Opens First Modular Construction Location
3. In October 2020, Chick-fil-A opened a location that could reimagine its construction for years to come. The company’s restaurant development team spent the past several years looking into modular growth as it explored ways to improve Chick-fil-A’s remodeling and rebuilding plans. The first location rebuilt using modular construction opened outside of Atlanta in Roswell, Georgia.
4. With this approach, portions of restaurants are built offsite and shipped to the locations, where they’re pieced together upon arrival. Chick-fil-A said it’s able to reduce construction schedules for rebuilds and remodels by 6-10 weeks. The benefits are straightforward. But the most notable one might be getting operators and employees back to work. Industrywide, long wait times on redesign projects can lead to turnover and renewed recruitment efforts, which get costly.
5. Also, recouping sales and collecting ROI from design improvements sooner than later isn’t a bad lure, either. The design style, Chick-fil-A said, also allows for more consistent quality, as well as a reduction in construction waste. The brand plans to bring additional modular building projects to life in the coming months.
6. Gregg Lollis, senior director of restaurant design for Chick-fil-A, Inc., said, “At Chick-fil-A, we’re constantly looking for ways to innovate and improve how we build our restaurants. Our team at Chick-fil-A has been researching this type of construction for several years, and we expect to introduce additional modular building projects in the coming months.”
7. Because restaurants are created off-site in a controlled environment, weather conditions like rain, snow, wind, and extreme temperatures will play less of a factor in development schedules, the brand added. “When it comes to rebuilding or remodeling a restaurant, this is a huge factor for our team,” added Chad Baker, principal reinvestment lead at Chick-fil-A. “The modular option gives us an advantage of starting these projects ahead of schedule, before the existing restaurant even has to close its doors.”
8. Chick-fil-A noted its development staff will be able to better control costs and build time by minimizing uncertainties related to schedule and labor. “By incorporating modularized construction into our restaurant development programs, we will be able to reduce the construction time needed to rebuild existing restaurants by 6-10 weeks,” Lollis said. “That allows our operators to minimize lost sales and increase team member retention.”
9. “A shortened construction time allows us to keep employees engaged and excited about what’s coming in the future,” added Jim Waddle, the operator of the Roswell location. There are other benefits, too. Since portions of multiple restaurants are built at the same time during modular construction, Chick-fil-A can work to ensure consistent quality through testing and inspections. In other words, flaws are called out before modules show up on-site.
10. According to Trent Gilley, lead designer of the modular building program at Chick-fil-A, “We knew that taking a modular approach would shorten the construction timeline, but we weren’t willing to sacrifice quality in the process. By building the restaurant offsite, we maintain control over the build process without the interference of outside factors, which helps ensure a consistent quality of construction.”
11. By reducing construction waste, Chick-fil-A units will be built in a more sustainable and efficient way, the company said. Modular construction reduces site disruptions and impact to adjoining property owners due to shorter duration and less traffic generated on-site.
12. Chick-fil-A generally keeps expansion goals tight to the vest. But, if the brand wants to, there’s plenty of whitespace to grab. In 2019, Chick-fil-A was only one of six restaurant brands to eclipse $10 billion in domestic sales. But it had far and away the fewest locations at 2,500. In fact, in all of quick service, Chick-fil-A is just the 19th largest brand on the map.
Testing Robotic Delivery
13. In mid-April 2021, Chick-Fil-A announced that it was partnering with Kiwibot to test robotic deliveries in the Santa Monica area. The news was revealed in conjunction with the launch of Kiwibot 4.0, which uses a new set of cameras, lights, speakers, and modular features (the robot is able to wink). According to Kiwibot, the latest version includes sensors to detect people, traffic lights, vehicles, and to make decisions on path planning and obstacle avoidance. The robots are remotely controlled by human supervisors to ensure safety.
14. The average delivery takes roughly 30 minutes and costs $1.99, a stark contrast to the high fees from third-party delivery companies. The pilots with Chick-fil-A in the past year have been used to evaluate the impact robots have on customer experience, Kiwibot said. Going forward, the company will leverage a manufacturing partnership with Segway to improve robot capabilities. Additionally, by the beginning of May, Shopify customers in Los Angeles, San Jose, Miami, Pittsburgh, and Detroit had access to the robots.
15. Since 2017, Kiwibot has completed more than 150,000 food deliveries and built 400 robots. The company’s goal is to become the largest robotic fleet in the world and “build an ecosystem to serve college campuses.”
16. Chick-fil-A traces its history back to 1946 when S. Truett Cathy opened the Dwarf Grill (later renamed the Dwarf House) in Hapeville, Georgia, a suburb of Atlanta. Cathy served traditional diner food at the Dwarf Grill and he eventually developed what would become Chick-fil-A’s signature chicken sandwich.
17. Initially, Cathy cooked the chicken sandwich using traditional methods, but in 1961, Cathy bought a pressure fryer that could cook his chicken sandwich in the same amount of time it took to cook a fast-food hamburger. After this, Cathy decided to focus on the chicken sandwich and registered the name Chick-fil-A.
18. Following the development of a fast food restaurant concept based on Cathy’s chicken sandwich, he opened the first Chick-fil-A in 1967 in the Greenbrier Mall in an Atlanta suburb. The chicken sandwich was a hit and Cathy continued to open restaurants in mall food courts around the Southern United States. The first standalone Chick-fil-A opened in 1986 and this became the preferred business model.
19. Over the next few decades, Chick-fil-A continued to expand around the United States, beyond the Southern region. In the early 1990s, Chick-fil-A made its first attempts to open international restaurants in Canada and the United Kingdom, but these locations failed. Chick-fil-A entered Canada again in the early 2010s. Today, Chick-fil-A, which is still owned and operated by the Cathy family, has locations across 47 states and the District of Columbia.
Entrepreneur’s Franchise 500
20. Chick-fil-A did not rank on Entrepreneur’s 2021 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 2021 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 2021 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 1,845
- Outlets at the End of the Year: 1,947
- Net Change: +102
- Outlets at the Start of the Year: 1,936
- Outlets at the End of the Year: 2,085
- Net Change: +149
- Outlets at the Start of the Year: 2,085
- Outlets at the End of the Year: 2,160
- Net Change: +74
- Outlets at the Start of the Year: 37
- Outlets at the End of the Year: 42
- Net Change: +5
- Outlets at the Start of the Year: 53
- Outlets at the End of the Year: 26
- Net Change: -27
- Outlets at the Start of the Year: 26
- Outlets at the End of the Year: 49
- Net Change: +23
Section V – Financial Performance Representations (Item 19, 2021 FDD) and Analysis
Domestic Chick-fil-A Restaurants Included in Sample
- As of December 31, 2020, there were approximately 2,598 domestic Chick-fil-A Restaurants open and operating, including approximately 2,209 domestic company-operated and franchised Operator Chick-fil-A Restaurants and 389 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, 2020, approximately 2,160 of the 2,209 domestic Chick-fil-A Restaurants were being operated by Operators and 49 of the 2,209 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 2020 by Chick-fil-A or its affiliates, and their annual sales volumes, are not the subject of these financial performance representations.
- Approximately 1,993 of those 2,160 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, 2020 and had been operated by Operators during the entire year.
- Of these 1,993 domestic Chick-fil-A Restaurants operated by Operators, 17 were “satellite” units. Those 17 satellite units and their annual sales volumes are not the subject of these financial performance representations. The remaining 1,976 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, 2020, and their annual sales volumes, are the subject of these financial performance representations and discussed below.
- Approximately 241 of the 1,976 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, 2020 were located in malls, and approximately 1,735 of the 1,976 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, 2020 were located in non-mall environments (e.g. free-standing or drive-thru only units).
- During the calendar year ending December 31, 2020, 1 domestic non-satellite franchised Operator Chick-fil-A Restaurant located in a mall unit permanently closed, of which 0 had been open for less than 12 months, and 39 domestic non-satellite franchised Operator Chick-fil-A Restaurants located in non-mall environments permanently closed, of which 0 had been open less than 12 months.
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.
- Because franchised non-satellite Operator Chick-fil-A Restaurants located in malls and franchised non-satellite Operator Chick-fil-A Restaurants located in non-mall environments achieve generally different levels of financial performance, financial performance representations have been included for each type of Restaurant in order to provide information relevant to prospective Operators.
- 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.