With 1,976 franchise stores in the United States and Canada but one of the most onerous application processes, you still wonder if starting a Chick-Fil-A franchise is a wise investment.
In this post, we’ll examine the financials of Chick-Fil-A franchises using the most recent FDD data. We’ll look at things like how much sales you may expect and, more significantly, how profitable this business is.
Chick-fil-A Franchise: An Ultimate Guide
About Chick Fil A
Chick-fil-A is a fast-food restaurant franchise in the United States. It is the world’s largest fast-food restaurant brand, specializing in chicken sandwiches. The brand operates 2,873 locations, most of which are in the United States.
Chick-fil-A operates in 47 US states and Washington, D.C., with the exception of Alaska, Vermont, and Hawaii. Outside of the United States, the firm has multiple locations in Canada.
Chick-fil-A is a privately held firm that will never go public due to the founder’s final request. Cathy signed a deal with his children that stated that the chain would stay a private corporation, but his children could sell it.
Understanding The Chick-fil-A Franchise Model
Before we get into the mechanics of the franchise concept, it’s necessary to understand the franchisee selection process. Chick-fil-A is well-known for being quite picky about who may launch a franchise and for good reason. The firm aims to guarantee that each site maintains Chick-fil-A’s excellent quality and customer service.
To become a Chick-fil-A franchise owner, you must fill out an application. The application process is lengthy, with many rounds of interviews with Chick-fil-A representatives. Individuals with a demonstrated track record of commercial success and a strong dedication to their community and customer service are sought after by the corporation.
If you are chosen to open a franchise, Chick-fil-A will offer you extensive training on operating your operation. In addition, the organization provides continuing assistance and tools to help you succeed.
The Franchise Agreement
Ownership Structure
The ownership structure of the Chick-fil-A franchise concept is one of its distinguishing features. Chick-fil-A franchisees are more like operators than owners, unlike other franchise models in which the franchisee owns the firm. The corporation owns the physical restaurant, but the franchisee runs it.
This implies that the franchisee oversees the restaurant’s day-to-day operations, such as employing personnel, maintaining inventory, and guaranteeing quality control.
On the other hand, Chick-fil-A owns the real estate and equipment, and the franchisee pays rent to the corporation.
Revenue Sharing
Chick-fil-A charges a fixed fee for the privilege to operate the business rather than a portion of the franchisee’s revenue.
The first franchise agreement costs $10,000, followed by a 15% royalty charge on gross sales yearly. This cost covers Chick-fil-A’s franchisee assistance and resources, such as marketing, training, and continuing support.
Chick-fil-A uses this revenue-sharing approach to maintain a consistent brand image and level of quality across all of its locations while also giving franchisees the tools they need to flourish.
Site Selection And Development
Chick-fil-A is heavily involved in each new location’s site selection and development. A team of real estate consultants works with franchisees to discover prospective locations for additional restaurants.
Chick-fil-A collaborates closely with the franchisee to design and build the restaurant when a site is chosen. The corporation maintains stringent design and layout criteria for its restaurants, which are meant to produce a similar customer experience across all locations.
Training And Support
The intensive training and assistance that the firm gives to its franchisees is one of the secrets to the success of the Chick-fil-A franchise model. Each franchisee must undergo a rigorous training program that includes every facet of running a Chick-fil-A restaurant, from food production to customer service.
The firm also offers continuous support to franchisees, including marketing and promotional materials, operational assistance, and access to the chicken franchise’s customized restaurant operating systems, technology, and support teams.
The Initial Investment
The majority of the expense, however, is in the store’s development: real estate, building fees, equipment, inventory, and everything else required to get a new restaurant off the ground.
If you are accepted, you will first pay a franchise fee – an upfront, one-time payment for the opportunity to conduct business with the company. The franchise’s initial investment ranges from $342,990 to $1,982,225 for Chick-fil-A.
In the United States, the total investment required to open a Chick-fil-A restaurant is between $342,990 and $1,982,225.
- The investment ranges from Can$ 434,200 to Can$ 2,509,300 in Canadian dollars.
- The investment is around £247,100 to £1,428,100 in UK currency.
The Royalty And Advertising Fees
Unlike other franchise arrangements, Chick-fil-A pays almost the full cost of opening each new location (which, according to financial reports, ranges from $343k to $2m). The franchisee merely has to pay the $10,000 franchise fee.
Chick-fil-A pays for (and owns) everything — real estate, equipment, and inventory — in exchange for a far larger slice of the pie. While KFC gets 5% of sales, Chick-fil-A takes 15% plus 50% of any profit.
Chick-fil-A’s average sales per location is $4.2 million, the most of any fast-food chain in America, dwarfing both direct competitors (KFC; $1.2 million) and larger brands (McDonald’s; $2.8 million).
This is especially amazing, given that all Chick-fil-A locations are closed on Sunday. Based on these calculations, Chick-fil-A’s 15% royalty (not counting its 50% profit split) might amount to about $600,000 per location each year. (Remember, it still owns the land and equipment.) This arrangement might also be a good deal for Chick-fil-A franchisees. That is, assuming you get the job.
Also read: Dollar General Franchise: 2023 Cost, Fees & Profit
How Much Does A Chick-fil-A Owner Make?
Chick-fil-A earns an amazing $5.3 million yearly income per location, which amounts to $14,520 in daily revenue. The daily profit is $726 if the profit margin is 5%.
These data demonstrate Chick-fil-A’s constant success and profitability. The monthly sales are $441,667, with a profit of $22,083.
In terms of earnings, most owners make a proportion of their total sales – generally between 5% and 7%.
This implies that, after expenditures, Chick-fil-A franchise owners may expect to earn between $200,000 and $240,000 each year.
Factors That Affect Income
- Narrow Product Focus: Chick-fil-A’s emphasis on chicken items distinguishes them from competitors, but it limits menu variety. Competitors with a larger product offering may appeal to a broader client base, especially when consumer preferences develop.
- Closed On Sundays: While some view Sunday closure as a strength, it certainly has negatives. Customers who like to dine out on Sundays may be inconvenienced by the ban, which results in missed income potential.
- Dependence On The US Market: Because most of its stores are in the US, Chick-fil-A is significantly reliant on the success of the US economy. Any downturn in the economy or changes in customer tastes might greatly influence the company’s revenue and growth prospects.
- Supply Chain Interruptions Are Possible: Chick-fil-A’s reliance on chicken products exposes it to disruptions in the poultry supply chain, such as disease outbreaks or price variations.
Support And Benefits Provided To Chick-fil-A Franchise Owners
- Drive-Thru Optimization: As drive-thru service becomes more significant in the fast-food sector, Chick-fil-A attract more customers and increases revenues by optimizing drive-thru efficiency and layout. Using cutting-edge technology, like AI-powered ordering systems and digital menu displays, can improve the drive-thru experience.
- Strategic Alliances: Chick-fil-A improves its awareness and attracts new consumers by collaborating with well-known businesses or celebrities. Co-branding possibilities or limited-time menu options can build interest and generate buzz.
- Sustainability Initiatives: Showing a commitment to sustainability and corporate social responsibility may boost Chick-fil-A’s brand image and appeal to environmentally sensitive customers. This might involve sourcing environmentally friendly foods, decreasing packaging waste, and implementing energy-efficient practices in restaurants.
Conclusion
With its strong beliefs and ideals, Chick-Fil-A provides a lucrative franchise opportunity. It does, however, have a tough application and interview procedure.
To open a franchise, you must go through at least 12 interviews. If you do not match their requirements, you will be fired. And if you are chosen as a franchisee, Chick-Fil-A will have a firm grasp on your life.
Regardless, the Chick-Fil-A franchise can generate substantial profits at the lowest possible cost. Many corporations demand greater franchise fees, with the franchise fee accounting for half of the franchise earnings.
