Since its founding in 1946, Chick-Fil-A (or “the Company”) has been serving up America’s favorite fried chicken sandwich for nearly seventy years. With over 1,900 locations and $6 billion in annual sales, the Company has grown to become the largest quick-service chicken restaurant while generating more revenue per restaurant than any other fast-food chain in the United States. Given Chick-Fil-A’s success to date, I chose to further investigate the business in order to identify core drivers of its success.
Much of Chick-Fil-A’s success can be attributed to its powerful, yet simple business model: focus on serving great tasting food in a clean, wholesome environment with great customer service. The Company is able to execute this model successfully by aligning its people and operations to deliver value to its customers. This alignment is best demonstrated through its customer service, restaurant operations, employee recruitment and franchise agreements.
A critical component of Chick-Fil-A’s success is its uncanny focus on customer service. The Company prides itself on going the extra mile by providing amenities to customers that are not common in a quick-service restaurant. Amenities such as offering fresh ground pepper, refilling drinks, or carrying heavy trays for customers, are all common practices.
In addition, Chick-Fil-A employees frequently say “My pleasure”, a phrase commonly said by Ritz Carlton employees. Such attention to customer satisfaction has not only spawned an enthusiastic subculture but also has increased customer loyal and allowed the company to charge a premium price.
Chick-Fil-A focuses exclusively on chicken offerings which results in a simple menu and a standardized operating process. The process for cooking the chicken sandwich has not changed in over fifty years, making it easy for any 16 year-old employee to learn. In addition, the Company uses boneless chicken pieces that cook more quickly (< 4 minutes) and more evenly than bone-in chicken. This gives employees additional time to focus on quality and service as well as eliminates the need to cook ahead of time or hold food in warming cabinets.
Quality and freshness are further emphasized since none of the chicken comes pre-breaded or partially cooked. Instead, employees open each chicken breast by hand to ensure it is completely unfolded and then hand-bread each piece prior to cooking. This attention to quality and freshness is made possible through Chick-Fil-A’s efficient operating model.
At the core of Chick-Fil-A’s differentiated dining experience are its employees. The Company is highly focused on recruiting people that share its passion for service. For operators, the screening process is rigorous with many candidates enduring a year-long vetting process that may include more than twenty interviews. In the end, only 75 out of every 10,000 applicants are selected, making Chick-fil-A much more selective than HBS.
As a result, the Company gets people who are unusually dedicated in an industry known for high turnover. Chick-fil-A’s average turnover for operators and hourly workers is extremely low at 5% and 60%, respectively (versus 30% and 107% for the industry). Furthermore, operators are discouraged from running more than one restaurant, meaning they are in store virtually every day helping to drive quality and customer service – leading to higher sales and profits for both Chick-fil-A and the operator.
Unlike other fast-food chains whose franchisees typically spend approximately $1.9 million in start-up costs, Chick-fil-A franchisees need only a $5,000 initial investment to become an operator. The Company funds the entire cost of its new restaurants (~$3 million) and selects all store locations. As a result, Chick-fil-A retains ownership of the restaurant, gets 15% of sales (versus 8-10% at most franchises), collects rent on the property, and splits the remaining pretax profits 50/50 with the store operator. A typical operator earns >$100k a year.
By providing a lucrative profit-sharing arrangement for operators, Chick-Fil-A is able to attract highly motivated individuals who will drive sales and remain loyal to the Company. By maintaining ownership of its units, Chick-Fil-A retains the power and flexibility to upgrade restaurants, launch new products and/or change operators when deemed necessary – a luxury not typically realized by other fast-food franchises.
In summary, Chick-fil-A has mastered the QSR space by creating great alignment in both its business and operating models. The company’s strategy, people, and operations are highly synchronized, resulting in great tasting fried chicken sandwiches (and waffle fries) for all to enjoy!