Opening a Chick-Fil-A Franchise
Info on the Costs and Requirements
If you have $10,000, you can apply to operate a Chick-Fil-A restaurant, one of the most profitable quick-service restaurants (QSR) in the industry. In 2018, the privately-owned Atlanta-based company, which was founded by S. Truett Cathy in 1946, generated more than 10 billion dollars.
Beyond its impressive revenue, the restaurant chain is wildly popular with consumers. In 2019, Chick-Fil-A was named America’s favorite fast-food restaurant in an annual poll conducted by Market Force, besting In-N-Out Burger, which previously claimed that distinction in 2017 and 2018, with a 79% loyalty rating, the highest overall.
With such profitability and favorability, the demand to become a franchise operator is understandably high. Each year the conservative conglomerate, which has more than 2,500 stores in 47 states and Washington D.C., receives between 50,000 to 70,000 new operator requests annually, of which less than one hundred spots are awarded.
When the chicken empire opened up its first international location in Toronto in late 2019 and announced plans to open 15 more locations, more than 3,000 people reportedly expressed interest in becoming operators.
According to the QSR Magazine, Chick-Fil-A has the eighth highest earnings per store, with 4 million dollars in profits per location, which is more than the revenue generated by high profile eateries like Pizza Hut, Chipotle, KFC, Sonic, Arbys, and Jack In the Box, according to the QSR 50 rankings for 2018.
All of those figures make the prospect of being an operator enticing, on top of the low franchise fee. The other attractive part of getting awarded a franchise is that there's no threshold for net worth or liquid assets, and the company covers all of the start-up costs, including the real estate purchase, the cost of construction, and the equipment, which it leases to operators for a set fee. If you’re interested, though, get in line, and be prepared to toe the line. The right to operate a franchise comes with some stringent stipulations.
Requirements for a Chick-Fil-A Franchise
- You cannot have any other active business ventures you’re involved in currently.
- You must be willing to be an on-site, hands-on operator. If you’re seeking a passive investment, this is not it.
- Your store will be closed on Sunday to give employees a day off to rest or worship, although you might have some discretion to allow work on Sundays when it comes to charitable activities.
- You will not be allowed to select your location or to open multiple locations.
- You will not own the property upon which the store is located, and you cannot sell it or pass it on to your heirs. If you want a business you can sell someday as part of an exit strategy, Chick-Fil-A is not for you.
- You will not own or receive any equity in your business.
- The franchisor will provide you with all your equipment, renting everything to you for 15 percent of your unit's sales, plus 50% of your monthly net profits (pre-tax). In comparison, other franchise brands charge from 5 to 10 percent of gross sales.
- It's not required that all operators be Christian, but in addition to closing the restaurant on Sundays, you must be willing to participate in group prayers during training and management meetings and publicly espouse Christian values.
Franchise Acceptance Process
In order to be considered, you don’t need to possess any previous restaurant experience, but you must have experience being a leader, managing people with at least five years of established work experience. You also need to have good credit—meaning you have never filed bankruptcy or received protection from your creditors.
Typical Chick-Fil-A operators are described as responsible "family men" with track records of solid decision-making, according to Mr. Truett, the company’s founder. "We're seeking people with character rather than experience."
Should your initial application pass muster, Chick-Fil-A will interview you and your business partners as well as your family members and friends. If you're looking for a low-cost franchise and are low on cash, maybe Chick-Fil-A is the way to go. Be aware, though; the $10,000 franchise fee must come from funds that are non-gifted, non-borrowed, and not from a retirement account.
Perhaps because franchisees who make it through the vetting process tend to be like-minded, the franchisee turnover rate initiated by franchisees is very low with a 5 percent turnover, and many remain franchisees for two decades or more.
Potential Risks for Franchisees
In today's climate of concern about joint-employer issues, some investors might be cautious about Chick-Fil-A, whose level of control over franchisees has been challenged by several states, alleging that Chick-Fil-A franchisees are actually employees.
Thus far, Chick-Fil-A has prevailed, though should this change in the future, the franchisor would become subject to occupational rules and federal employment discrimination laws that don't apply to independent contractors. Chick-Fil-A has repeatedly been sued for employment discrimination, sometimes on religious grounds and sometimes based on gender discrimination.
Chick-Fil-A has also been mired in controversy since 2012 when the company’s current CEO, Dan Cathy, son of founder Truett Cathy, shared his views on gay marriage with the Baptist Times, noting that he subscribes to the biblical definition of marriage. His comments sparked outrage in the gay community and inspired protests from the LGBTQ community.
Although the younger Cathy has done his best to tamp down his sentiments, the ire was further stoked in the spring of 2019 when reporting from outlets like the Huffington Post revealed that Chick-Fil-A made charitable donations to anti-LGBTQ organizations.
Although direct mentions of faith are not mentioned on the company’s website, a plaque that sits outside the company’s headquarters in Atlanta spells out Chick-Fil-A’s ideology and mission, as defined by its founder, pretty clearly and succinctly. “To glorify God by being a faithful steward of all that’s entrusted to us. To have a positive influence on all who come in contact with Chick-Fil-A.”
But while the faith-based company’s expansion efforts have not always worked out—backlash from the perceived anti-LGBTQ sentiments has resulted in two licensing opportunities at airports in Buffalo, New York, and San Antonio, Texas being rejected—Chick-Fil-A continues to enjoy strong growth across the country.