In this FDD Talk post, you’ll learn the following:
- Section I – Estimated initial investment (franchise costs) for a Chick-fil-A franchise, based on Item 7 of the company’s 2022 FDD
- Section II – Initial franchise fee, royalty fee, and marketing fee for a Chick-fil-A franchise, based on Items 5 and 6 of the company’s 2022 FDD
- Section III – Number of franchised and company-owned Chick-fil-A outlets at the start of the year and the end of the year for 2019, 2020, and 2021, based on Item 20 of the company’s 2022 FDD
- Section IV – Background information on the Chick-fil-A franchise opportunity, including relevant news updates
- Section V – Presentation and analysis of Chick-fil-A’s financial performance representations (average revenues and/or profits), based on Item 19 of the company’s 2022 FDD, including information on the:
- 2021 average, median, high, and low sales for the 187 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, 2021
- 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, 2021 and generated annual sales of less than $2,000,000; between $2,000,000 and $3,200,000; and over $3,200,000, respectively
- 2021 average, median, high, and low sales for the 1,836 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, 2021
- 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, 2021 and generated annual sales of less than $7,200,000; between $7,200,000 and $9,000,000; and over $9,000,000, respectively
- Section VI – Key ratios, comparables, computations, and analyses for the Chick-fil-A franchise opportunity (exclusive content for Platinum subscribers)
Section I – Chick-fil-A Franchise Costs
- Chick-fil-A franchise costs, based on Item 7 of the company’s 2022 FDD:
- Initial Franchise Fee: $10,000
- Opening Inventory: $19,000 to $93,050
- First Month’s Rental of Equipment: $750 to $5,000
- First Month’s Lease/Sublease of Premises: $2,500 to $85,800
- First Month’s Insurance Expense: $310 to $11,510
- Additional Funds: $186,495 to $2,707,337
- Total Estimated Chick-fil-A Franchise Costs: $219,055 to $2,912,697
Section II – Chick-fil-A’s Initial Franchise Fee, Royalty Fee, and Marketing Fee
- Chick-fil-A’s initial franchise fee, royalty fee, and marketing fee, based on Items 5 and 6 of the company’s 2022 FDD:
- Initial Franchise Fee: $10,000
- Additional Franchise Fee: $5,000 for each additional Chick-fil-A Restaurant business, whether for a traditional location or a satellite unit
- Advertising: advertising fund contribution may vary (a) between 0% and 3.25%, to be determined by Chick-fil-A, as a percentage of Gross Receipts or (b) by vote of Operators in local or regional areas
- “Base Operating Service Fee” for a particular restaurant for each calendar month is the amount by which 15% of the Gross Receipts for the month exceeds the monthly equipment rental payable and business services fee for the calendar month.
- “Additional Operating Service Fee” as to a particular restaurant for each calendar month is, in the case of the Initial Business (i.e., your first restaurant), 50% of the Net Profit for Initial Business for the month.
Section III – Number of Franchised and Company-Owned Chick-fil-A Outlets
- 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: 2,149
- Outlets at the End of the Year: 2,235
- Net Change: +86
- 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
- Outlets at the Start of the Year: 60
- Outlets at the End of the Year: 76
- Net Change: +16
Section IV – Background Information on the Chick-fil-A Franchise
19 Things You Need to Know About the Chick-fil-A Franchise
Andrew Cathy Appointed as New CEO
1. In mid-September 2021, Chick-fil-A announced that then-CEO Dan T. Cathy would step down on November 1, ending an eight-year run that saw the chicken chain grow into a more than 2,600-unit empire. Andrew T. Cathy, Dan Cathy’s son, would take over. Dan Cathy will remain chairman of Chick-fil-A. Tim Tassopoulos, current president and chief operating officer, will continue in his role as well.
2. Andrew Cathy, only the chain’s third CEO, began his Chick-fil-A career in 2005, working two years as operator of a store in St. Petersburg, Florida. In 2007, he became part of the support center staff as a franchisee selection consultant. After becoming the leader of franchisee selection, Andrew Cathy joined Chick-fil-A’s executive committee in 2015 as chief people officer before becoming head of operations. He then helmed international strategy in 2016 and was named VP of operations in 2019.
3. Andrew Cathy said, “Over the years, I’ve been fortunate to work with and learn from so many Chick-fil-A Operators and executive leaders, including my dad and grandfather. I look forward to continuing to work closely with our great Operators and Staff as we continue to have a positive influence across the communities we serve as a purpose-driven company and one of America’s most trusted brands.”
4. Dan Cathy became Chick-fil-A’s president and COO in 2001 and CEO in 2013. He added chairman to his title following Truett Cathy’s death at the age of 93 in September 2014. When he was first appointed president and COO, the chain earned $1.24 billion in sales and had just over 1,000 restaurants. By the time he became CEO, the company collected sales of $5.78 billion across 1,881 restaurants. It’s now the highest-earning chicken chain in the country by some distance.
5. Dan Cathy said, “The most successful CEO transitions are made when the next leader is ready to lead. I have every confidence Andrew is ready. As a privately held, family-owned business, Chick-fil-A is able to look at succession through a longer lens and approach a transition like this in a thoughtful and coordinated way. While rare in business today, deliberate, long-term succession planning provides us with stability and continuity at a time of tremendous opportunity. I’m in excellent health, I continue to love this business and all of you with all my heart, and I’m as energized as I’ve ever been about Chick-fil-A and our shared future. Instead, this CEO transition is about Andrew and his readiness to lead us forward.”
6. Under Dan Cathy’s tenure, Chick-fil-A expanded to 48 states, including breaking into the New York City market in the fall of 2015. It also entered Toronto, Canada, in 2019, and plans to expand to Puerto Rico, as well as Hawaii within the next year or so. Chick-fil-A expanded by a net 107 stores from 2019 to 2020 after adding 130 venues the previous year.
7. Dan Cathy, 68, told the Atlanta Business Chronicle, “One of the things we learned is that you don’t want to make transitions under crisis. You don’t want to do it when the wheels are falling apart. You don’t want to do it when the leader has long since worn out their welcome and everybody’s kind of waiting on them to retire or to leave. You want to hand that baton off when things are in their best shape ever.”
Tests Express Drive-Thru Lanes
8. In late June 2022, Chick-fil-A unveiled its latest drive-thru technology that could address some of the brand’s issues with drive-thru crowds. Chick-fil-A is piloting an express drive-thru lane solely dedicated to customers who ordered ahead using the brand’s app. It’s currently live at about 60 stores, with the potential to roll out to more in 2023, pending further testing, the company said.
9. There have been stories lately regarding Chick-fil-A’s traffic prompting zoning violation notices and other jams. In Pennsylvania’s Newtown Township, the board of supervisors approved a settlement that granted the construction of a 400-square-foot addition to a Chick-fil-A kitchen and a right turn lane along the main road to address “significant stacking issues.” It also green-lighted a bypass lane to allow customers who received their orders to drive past the pickup window and exit the lot.
10. Chick-fil-A believes the option will cut down on-site wait times (since guests who use it are just there to collect); give users a new quick and convenient option if they don’t want to wait, yet with the same drive-thru experience where they don’t have to get out of their cars; and also enable employees to serve customers more efficiently, “but still with great care.” Jonathan Lassiter, a senior integration leader on Chick-fil-A’s service and hospitality team, called the express drive-thru lane “a game-changer for our busy customers and our team members.”
11. Logistically, the express lane is a partially or fully dedicated lane in the drive-thru. Customers who order ahead will be able to bypass the other line and go right to pickup. Customers choose a location on the app and, if available, select “Drive-Thru Express” as the destination and then place an order. When they arrive, signage will point them to the express lane, where they use the app to scan a QR code in the dedicated lane before pulling around to receive their order from a Chick-fil-A employee.
12. Lassiter said, “We see this as a way to serve customers more effectively and give them more control over their experience. The lengthiest part of our drive-thru ordering process is the brief wait to get your order taken. The express lane cuts down ordering and payment time significantly, granting customers access to greater speed, ease and convenience when they want it most.”
13. Chick-fil-A said the option is “part of a more personalized experience where guests choose their own adventure.” In other words, it’s not replacing the ability to order at the drive-thru line or inside the restaurant. Or to pickup in-store.
14. Lassiter added, “We recognize that Chick-fil-A restaurants are busy because customers value the experience and hospitable service we offer. Speed, quality, accuracy and friendly service are a focus for us. By giving guests the opportunity to order and pay ahead through the Chick-fil-A App, checking in at the dedicated lane becomes a seamless experience, making the express drive-thru lane a convenient new option.”
15. In tests, the company said the express lane decreased wait times “significantly” since consumers have already ordered and paid. And “most guests” are choosing to use the express drive-thru again on their visit.
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. For several years, Cathy served traditional diner food. Then, in 1961, Cathy found a pressure-fryer that could cook fried chicken as quickly as a fast food hamburger. Cathy began experimenting with fried chicken sandwich recipes and settled on what would become Chick-fil-A’s signature chicken sandwich.
17. Cathy felt that he had a hit item on his hands and shifted his restaurant business to focus on the chicken sandwich. Between 1964 and 1967, the sandwich was licensed to over fifty eateries, including Waffle House and the concession stands of the new Houston Astrodome. In 1967, Cathy opened the first Chick-fil-A restaurant in the Greenbrier Mall in an Atlanta suburb. Cathy’s gamble paid off and the chicken sandwich was a hit with customers. Over the next few decades, Chick-fil-A continued to grow by opening locations in suburban mall food courts.
18. In 1986, the first standalone Chick-fil-A opened and this has become the chain’s preferred business model, although the chain remains a mall food court staple. In the 1990s, Chick-fil-A began expanding beyond the Southern United States. Today, Chick-fil-A has locations across 48 states and Washington, D.C. The Cathy family still owns and operates Chick-fil-A.
Entrepreneur’s Franchise 500
19. Chick-fil-A did not rank on Entrepreneur’s 2022 Franchise 500 list.
Section V – Financial Performance Representations (Average Revenues and/or Profits) for the Chick-fil-A Franchise (Item 19, 2022 FDD)
Domestic Chick-fil-A Restaurants Included in Sample
- As of December 31, 2021, there were approximately 2,704 domestic Chick-fil-A Restaurants open and operating, including approximately 2,311 domestic company-operated and franchised Operator Chick-fil-A Restaurants and 393 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, 2021, approximately 2,235 of the 2,311 domestic Chick-fil-A Restaurants were being operated by Operators and 76 of the 2,311 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 2021 by Chick-fil-A or its affiliates, and their annual sales volumes, are not the subject of these financial performance representations.
- Approximately 2,038 of those 2,311 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, 2021 and had been operated by Operators during the entire year.
- Of these 2,038 domestic Chick-fil-A Restaurants operated by Operators, 15 were “satellite” units. Those 15 satellite units and their annual sales volumes are not the subject of these financial performance representations. The remaining 2,023 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, 2021, and their annual sales volumes, are the subject of these financial performance representations and discussed below.
- Approximately 187 of the 2,023 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, 2021 were located in malls, and approximately 1,836 of the 2,023 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, 2021 were located in non-mall environments (e.g., freestanding or drive-thru only units).
- During the calendar year ending December 31, 2021, 16 domestic non-satellite franchised Operator Chick-fil-A Restaurants located in mall units permanently closed, of which 0 had been open for less than 12 months, and 11 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.
Annual Sales Volume 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, 2021 (187 Units)
- Less than $2,000,000: approximately 32%
- Between $2,000,000 and $3,200,000: approximately 34%
- Over $3,200,000: approximately 34%
- Average: $3,224,721 (63 of the 187 (or 34%) did as well or better than the average)
- Median: $2,541,021
- Highest: $14,665,022
- Lowest: $949,465
Annual Sales Volume 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, 2021 (1,836 Units)
- Less than $7,200,000: approximately 35%
- Between $7,200,000 and $9,000,000: approximately 34%
- Over $9,000,000: approximately 31%
- Average: $8,142,257 (849 of the 1,836 (or 46%) did as well or better than the average)
- Median: $7,969,510
- Highest: $17,153,144
- Lowest: $1,842,932