Chick-fil-A: Recipe for Success

Chick-fil-A traces its roots back to 1946 when founder Truett Cathy opened his first restaurant in Hapeville, GA. Since then, the company has grown to become the nation’s largest quick-service chicken restaurant chain with over 1,900 locations, generating sales of nearly $6 billion in 2014. A devout Southern Baptist, Cathy built the brand with the mission “To glorify God by being a faithful steward of all that is entrusted to us… [and] To have a positive influence on all who come in contact with Chick-fil-A.”[1]

To achieve these lofty aims, Chick-fil-A pursues a business model of selling Cathy’s original chicken sandwiches (and other chicken dishes) in a clean, comfortable environment with superior customer service and community-oriented values. While the business model of providing quick-service chicken certainly is not unique, Chick-fil-A is able to pair it effectively with its corporate operating model and its distinctive franchise model in particular. It is the close alignment of these two factors that has led to the company’s wild success, helping its restaurants and franchisees to achieve the highest average sales in the industry of $3.2 million per restaurant for 2012, far outpacing second-place McDonald’s $2.6 million.[2]

Chick-fil-A likes to tout its slogan, “We Didn’t Invent the Chicken, Just the Chicken Sandwich,” but chicken sandwiches today are not unique and can be purchased at any number of Chick-fil-A’s fast food competitors with comparable quality and little-to-no difference in price. In this fragmented market environment, Chick-fil-A seeks to differentiate on customer service. Employees greet customers with a warm welcome, offer fresh ground pepper to patrons dining in and carry heavy trays for moms looking after small children.[3] Rather than “you’re welcome” or “glad to help,” employees are trained to end all transactions with “my pleasure,” something Cathy borrowed from the Ritz Carlton’s upscale client interaction practices.[4] It is Chick-fil-A’s warm, friendly, comfortable service environment that has built brand loyalty among customers and turned the company into the most successful fast food restaurant in America.

What is perhaps most remarkable about the company is the highly effective way in which the business model described above aligns with its operating model and its unique franchise model, specifically. Unlike other fast food franchises, Chick-fil-A corporate selects the locations of each restaurant, bankrolls the entire cost of construction and retains ownership of the property and equipment. Selected franchisees, which Chick-fil-A calls “operators,” pay an upfront fee of $5,000 (as compared to the $1.9 million required to open a KFC), rent the property and equipment from corporate at a rate of 15% of sales, operate the franchise, and split the profits evenly with the parent company. The low upfront franchisee investment enables the company to attract like-minded people who are committed to executing on Cathy’s mission but might otherwise not be able to participate.[2][5]

Most importantly, this model allows the company to maintain tight control over the quality of the product and customer service offering. Additionally, the franchise agreement requires that operators “be free of any other active business ventures and operate the Restaurant on a full-time, hands-on basis,” ensuring that each is solely dedicated to the performance of his/her location.[1] This model is unique, unlike that of any other fast food chain, and is mutually beneficial for both parties—operators earn $190,000 a year on average, and while franchise turnover in the industry can run as high as 50-60%, turnover at Chick-fil-A has yet to surpass 3%, further bolstering the quality of the product and service offering over time.[2][5]

Chick-fil-A is in the business of selling chicken, which in and of itself is unremarkable. However, by effectively aligning its franchise operating model with its corporate business model, Chick-fil-A has been able to incentivize franchise operators effectively, ensuring commitment and consistency of service, and driving value creation and long term success for all stakeholders.

 

[1] Chick-fil-A Corporate Website. www.chick-fil-a.com.

[2] “What Investors Need to Know About the Chick-fil-A Franchise Opportunity.” www.franchisechatter.com.

[3] “A Lesson in Customer Service from Chick-fil-A President Dan Cathy.” www.sas.com.

[4] “Chick-fil-A’s Recipe for Customer Service.” www.fastcompany.com.

[5] “How Chick-fil-A Hires: The Christian Way.” www.linkedin.com.

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8 thoughts on “Chick-fil-A: Recipe for Success

  1. I believe the spicy chicken breakfast sandwich is the best sandwich ever created. This helps to explain why my taste buds have not been entertained in the nearly 3 years since I’ve had it.

    Thanks for your write up! I did not know the tight controls that Chick-Fil-A exerts in its franchise model. I have always noticed the difference in their customer service relative to other fast-food restaurants. Do you believe the heavy focus on consistent experience and branding across the franchise stores helps or hinders Chick-Fil-A’s ability to scale? Do you believe it helps to explain their limited presence in the Northeast?

  2. This is a great post! I didn’t know about the way they franchised, especially compared to KFC. I totally agree with you– I think it’s the company’s franchising model that has made them so successful. They are very generous in their franchising terms with their partners, so they were able to attract and pick operators that were committed.

  3. Having grown up in LA, I’d never heard of or tried Chick-fil-A until I visited my sister at Emory in Atlanta, Georgia. Your description of how the company differentiates itself on service completely makes sense to me since the chicken sandwich I had on my first visit was wholly unremarkable.

    Unfortunately, my view of the company is colored by the incident in 2012 in which the current CEO made some very public comments opposing same-sex marriage. The fact that sales soared after the controversy is not surprising to me but is still frightening nonetheless!

  4. Very cool post. Heard many good things about this operation… Steven Sinofsky… a good friend from Andressen Horowitz is a HUGE fan… Interesting account of the franchising model – I didn’t know and it makes a ton of sense…

  5. Doug – what a great company to highlight! When I think of Chick-fil-a, I think of 1) Quality, Quality, Quality! (it’s just so darn tasty!) and 2) my dad’s southern roots… we always go to CFA in North Carolina and it’s always been a staple for him, his brothers, and my cousins who live in the south, yet growing up in the Northeast, I just didn’t really get it… and having only been a handful of times, I’m still learning! For starters, I’ve always gotten it on the go (drive through, my sisters ran in while I waited in the car), so I had no idea that the customer service element was such a strategic focus for them…. but makes total sense in light of your fact about them far out pacing McDonald’s in sales per store… they’ve clearly been able to develop a hugely loyal customer base. I had no idea they they relied on a unique and innovative franchising model to be so successful! Seems like they really make it win-win for the company and the operator… that <3% franchise turnover rate is so impressive!

    I'm curious if you have any thoughts on their strategy in terms of locations & expansion as it relates to approving franchises? I think of Chick-fil-A as a very southern thing that people in the northeast & pacific northwest are still discovering (my dad emailed us all last year about NYC's first location opening)… out of curiosity I looked at their location map and saw that they are in fact very national, but still stores are more densely located in the midwest, south, etc. and they are slowly creeping their way through PA, NYC, etc… would love to hear your thoughts on or offline 🙂

    Thanks for writing such an interesting & informative post!

  6. Awesome post! I grew up in GA and probably ate Chicfila 3-5 times per week growing up. I was even (embarrassingly) asked to prom in a Chicfila one year haha. I did not know that the franchising model worked this way, and I wonder if any competitors or new entrants to the market have taken notice and modeled their operations in a similar way. Also didn’t know that the “my pleasure” came from the Ritz Carlton – a great trivia fact for future use. Thank you for the post!

  7. Interesting post! Growing up in the South I ate Chick-fil-a regularly and can attest to their incredible customer service and strong brand loyalty. The franchise model makes a lot of sense given their desire to expand – but how do you truly ensure consistency across franchises? Also, how do you think Chick-fil-a will compete as the market moves away from fast food, and particularly fried food, and more towards healthier options? Finally, curious how you think Chick-fil-a compares to newer fast food chains like Chipotle or Shake Shack.

  8. Doug – great post!
    Having grown up in GA, Chikfila definitely brings back memories!
    Questions / comments:
    What other controls does Chikfila corporate have to ensure quality and service at franchise locations? Are there required training programs for servers?
    How competitive is it for franchisees? How many locations does a typical franchisee own?

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