This article is based on a video originally recorded on Vetted Biz Youtube Channel
The Chick-fil-A Franchise develops quick-service restaurants throughout the United States.
Their menu specializes in the boneless breast of chicken sandwiches. Chick-Fil-A is also famous for its waffle fries and a wide variety of sauces. Most of these restaurants are run by franchised operators who are independent contractors.
Its restaurants are largely operated by franchisees or licensees. Generally, licensees operate in airports and non-traditional locations.
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Want to Buy Chick Fil A Stock?
Chick-Fil-A is a Georgia corporation formed on March 23, 1964, and uses the trade name Chick fil A. S. Truett Cathy, the Founder, opened his first restaurant, the Dwarf Grill, in Hapeville, Georgia, in April 1946. Now, Dan Cathy has been the Chief Executive Officer since November 2013 and was the Assistant Secretary since June 2001.
At this time Chick-Fil-A stock is privately owned and they have no plans to offer shares to the public. Many restaurant brands like Mcdonald’s, Chipotle, and Starbucks allow their consumers to own stock in their company.
Keep reading to review other franchising options.
Chick-Fil-A Franchise Fee Is Only $10,000
Chick-fil-A charges $10,000 for the initial fee and $5,000 for any additional franchise unit. Of the initial fee of $10,000, $5,000 is considered working capital and can be received back at the end of the term under the franchisor’s discretion. It is rare for a Chick-Fil-A franchise owner to operate more than two locations.
Chick Fil A Franchise Cost (For 2022)
The total investment necessary to begin the operation of a franchised Chick-fil-A restaurant business is from $219,055 to $2,912,697. However, the Chick Fil A franchise is only responsible for $10,000. Chick Fil A corporation will invest up to $2 million or more to build the restaurant! This helps overcome traditional financial barriers of entry for potential franchisees, but opening a Chick-Fil-A is very competitive.
Chick Fil A Franchise Cost Breakdown
| Initial Franchise Fee | $10,000 |
| Opening Inventory | $19,000 – $93,050 |
| First Month’s Rent of Equipment | $750 – $5,000 |
| First Month’s Lease / Sublease of Premises | $2,500 – $85,800 |
| First Month’s Insurance Expense | $310 – $11,510 |
| Additional Funds | $186,495 – $2,707,337 |
Disclaimer: These costs, besides the initial franchise fee, are paid by being deducted from Gross receipts after the restaurant opens. Chick-Fil-A once the loan is paid off will allow you to become a full owner and reduce its stake to its royalty and marketing fees. They will also allow you to then open additional franchises. The costs have variability depending on the location and existing status of retail space. Chick-fil-A’s estimate is based on its own experience in establishing similar operations.
Chick-Fil-A Franchise Opening and Operating Requirements
It is important to remember how competitive it is to open a franchise. In fact, it is easier to be accepted to Harvard than it is to open a Chick-Fil-A! Only about 0.4% of applicants are actually approved to open a Chick-Fil-A. Meanwhile, 5% of applicants to Harvard are accepted.
Additionally, if you are considering opening a location, you are required to work 60-70 hours per week operating your restaurant. While Chick-Fil-A helps provide financial resources when first getting started it is important to remember the time commitment expected by owners once their location opens.
When applying you should expect a serious vetting process like any other franchise. You should expect interviews, credit checks, and speaking with other operators. If you become an owner you will be constantly evaluated. The company will award you the right to open more locations if you are performing well. It takes between 18-24 months to open a standard Chick-Fil-A franchise. During this time many new owners shadow veteran stores to be able to hit the ground running once their Chick-Fil-A opens.
Requirement: Close on Sundays
Additionally, it is important to know that all Chick-Fil-A locations are required to be closed on Sundays. The Cathy family is christian and believes that all employees in addition to executives should have the right to rest and worship on Sunday if they so choose.
Chick-Fil-A is also famous for providing among the highest wages for its employees. Chick-Fil-A typically pays about 11% above the national average for fast-casual restaurants. This on top of being closed on one weekend day allows the brand to be able to attract a large number of applicants to work at its restaurants. This is a major benefit to franchisees as many other chains since the start of the Covid-19 pandemic have struggled to have a large enough team.
Chick-Fil-A Menu and Facts
Many people do not know that Chick-fil-A has a breakfast menu. The breakfast menu offers a variety of chicken and egg-themed sandwiches. However, the most famous part of the business are the chick fil sauces. These sauces can now even be purchased in grocery stores across the country. The customer service at Chick-fil-A is also a staple to the brand with employees famously saying “my pleasure.”
Chick Fil A nutrition information is listed on the menu with Chick Fil A calories. Additionally, there are healthy alternatives to fried chicken sandwiches including chick-fil-a salads! You can expect to pay anywhere from $4.99 for a sandwich to $12.00 for a meal.
For those with a sweet tooth, there are a wide variety of milkshakes and cookies for dessert. Chick Fil A catering is also super popular! People love the nugget trays for holidays and events. There is also Chick-Fil-A delivery, which is outsourced through doordash. Be sure to download the Chick-Fil-A app to earn rewards points. People often ask when Chick-Fil-A is open, remember the company is closed every Sunday for religious reasons.
Chick-Fil-A Franchise Costs and Fees (Ongoing):
The corporation pays for the land, construction, and equipment of the restaurant. Therefore, it rents or subleases the property to the franchisee for 15% of sales plus 50% of pretax profit remaining (Paid Monthly).
Also, it leases all software which is $9,500 – $20,000 per year for high-speed internet access. If a franchisee is late on making their loan payment they will incur a 1.25% interest fee. Franchisees should also expect to pay a small commission anytime a customer uses the Chick-Fil-A rewards app.
Chick Fil A Licensed Restaurant Sales Figures:
AS OF DECEMBER 31, 2021, THERE WERE APPROXIMATELY 2,704 DOMESTIC CHICK FIL A RESTAURANTS, 393 LICENSE UNITS, 2,311 FRANCHISED UNITS, and 76 were being operated by Chick-Fil-A or its affiliates.
2,038 of the 2,311 domestic Chick-fil-A franchises were open at least one calendar year, while 15 of these were satellite units.
The remaining non-satellite units are used for financial performance for the 2021 year.
There are 187 mall units, and their sales figures are indicated below:
Median Annual sales volume: $2,541,021
Average Annual sales volume: $3,224,721
Highest Annual Sales Volume: $14,665,022
Lowest Annual Sales Volume: $949,465
*34% of mall units had an annual sales volume of at least $3,200,000
While the mall locations have performed very well over the last couple of years it is important to note that Chick-Fil-A has closed approximately 50 mall locations since 2018. This means that not all malls perform well. In an economy focused on staying at home e-commerce has caused many malls to close and lose many tenants. Chick-Fil-A as a result is strategic about which malls they grant franchises to open in. If you are to open a franchise in a mall Chick-Fil-A will help find the best strategic storefront in the mall. Chick-Fil-A prides itself on assisting franchisees to get off the ground on all fronts from financing, to having the proper mentors in place across all the different types of locations.
Chick Fil A Franchisor Income Statement
Consolidated Statements of Comprehensive Earnings – Years Ended December 31, 2019, 2018 and 2017
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| Revenue and income | 3,790,311,709 | 4,321,122,548 | 5,764,153,899 |
| Income from restaurants | |||
| Base operating and business service fess | $1,687,768,627 | $1,916,655,067 | $2,342,515,371 |
| Additional operating service fess | 754,102,047 | 867,326,016 | 1,193,220,121 |
| Rental income | 897,441,035 | 1,005,801,406 | 1,173,440,640 |
| Other sales, including sales from company-operated restaurants | 294,905,377 | 397,365,698 | 874,091,667 |
| Other income | 156,669,706 | 133,973,821 | 180,886,100 |
| Total revenue and income | 3,790,886,792 | 4,321,122,548 | 5,764,153,899 |
| Costs and expenses | |||
| Cost of sales, including cost of sales from company-operated restaurants | 201,865,424 | 285,129,981 | 657,296,489 |
| Selling, general, and administrative expenses | 2,251,276,652 | 2,312,826,054 | 2,736,729,381 |
| Depreciation and amortization | 395,047,922 | 517,009,027 | 585,642,930 |
| Interest | 48,152,030 | 56,830,836 | 87,961,707 |
| Total costs and expenses | 2,896,341,938 | 3,171,795,898 | 4,067,630,507 |
| Earnings before contributions, scholarships, and income taxes | 894,544,854 | 1,149,326,650 | 1,696,523,392 |
| Contributions and scholarships | 38,509,243 | 39,361,003 | 64,393,513 |
| Earnings before income taxes | 856,035,611 | 1,109,965,647 | 1,632,129,879 |
| Income taxes | 185,915,210 | 267,209,889 | 393,225,108 |
| Net earnings | 670,120,401 | 842,755,758 | 1,238,904,771 |
| Other comprehensive (loss) earnings, before tax | |||
| Pension plans | (2,920,346) | (133,340,764) | (40,125,157) |
| Postretirement medical plan | (20,956,170) | (29,791,901) | (19,632,610) |
| Foreign currency translation | (234,204) | 556,701 | (12,534) |
| Derivate financial instruments | (5,780,760) | (6,314,104) | 6,322,420 |
| Other comprehensive (loss) earnings, before income taxes | (29,891,480) | (168,890,068) | (53,447,881) |
| Income taxes | 6,963,000 | 42,024,000 | 12,561,000 |
| Other comprehensive (loss) earning, before income taxes | (22,928,480) | 16,367,470 | (17,274,308) |
| Comprehensive earnings | $647,191,921 | $715,889,690 | $1,198,017,890 |
Chick-Fil-A Income Statement Key Insights:
Chick fil A is a very profitable business for the franchisor with retained earnings of $1.25 Billion in 2021. Compared to $670 million in 2019, Chick Fil A saw an increase of 47% from 2020 to 2021. This highlights that Chick-Fil-A is rapidly growing and that the Chicken themed fast-casual restaurant is being widely accepted by the public. Revenue over the past five years has increased 56% at non mall locations meaning popularity continues to increase.
Competition
Chick-Fil-A competes in the fast-food market against big brand companies such as McDonald‘s, Burger King, Wendy’s, and KFC. Chick Fil A franchisees (“Operators”) also compete against other nearby Chick-fil-A locations. However, only 9 chain restaurants reported higher unit sales than Chic-Fil-A in 2021. The Unit Volume has grown by nearly 33% over the past five years despite the number of units dropping by 5%.
Kentucky Fried Chicken
KFC has been around since 1952 and is one of the largest global brands. In fact, KFC is one of the top 20 most popular franchises! You can expect to pay anywhere from $1,442,550 – $2,771,550 to open a KFC. KFC also charges a much higher initial franchise fee of $45,000.
Since KFC has been in business for so long it has been able to expand to over 20,000 locations across 145 countries. Colonel Sanders may just be the most recognizable face in the world creating a high demand for franchisees to open locations.
Although you must have a high net worth of 1,500,000 with liquid assets of at least $750,000. KFC charges between 4-5% royalty fee, and 5% for marketing. KFC is one of the most expensive franchises to open within the food and beverage industry, but has the potential to be highly profitable, just like Chick-Fil-A. The average franchised-owned franchise earns at least $1,159,852 in revenue annually. Would you believe that over 43% of KFC locations perform better than this? Chicken seems to truly be beloved on an international level.
KFC is famous for its traditional fried chicken menu. It offers a variety of different chicken bucket sizes for family dinners. Although the brand has adapted to compete with Chick-Fil-A and has begun to sell chicken sandwiches. The brand even offers 7 different sauces and cleverly started marketing its most famous sauce as KFC sauce.
Popeyes
Popeyes has recently made a big push in the Chicken Sandwich market to directly compete against Chick-Fil-A. Popeyes has a long history of providing similar meals to KFC as it opened its first location in 1972. The cost to open a Popeyes ranges between $423,800 and $3,545,800. Popeyes, charges a standard royalty fee of 5% of gross sales, and an above-average marketing fee of 4% of gross sales.
Popeyes, has a strict vetting process that an individual must have a net worth of at least $1 million, and liquid capital of $500,000. While Popeyes is expensive, Chick-Fil-A’s ongoing fees and costs are much higher.
Back in 2018, Popeyes led a marketing campaign that hyped up its soon-to-be-released chicken sandwich. The company was blown away as it could not provide them at a fast enough rate to franchisees. On its launch day people were waiting for hours hoping to get their hands on one. This success continued as in the first 7 months of 2019 after it launched the company had sold over 2.3 billion chicken sandwiches bringing in over $10 billion in sales. Popeyes has been growing rapidly and has more than doubled in size over the past 15 years.
Popeyes, KFC, and other famous competitors have been around for some time. It is also important to recognize new threats within the industry. Chicken-themed restaurants are opening across the country to try and gain market share against Chick-Fil-A.
Chicken Guy (the Guy Fieri Chicken Restaurant)
Given Chick-Fil-A’s success, there are many chicken-themed restaurants opening to directly compete. This includes Chicken Guy, which is named after and promoted by food network star Guy Fieri. Guy Fieri even hosted a reality TV show where Chef Steek won a Chicken Guy franchise. This means he will be able to open a location for free after gaining a wide following from the TV competition. While Chicken Guy currently only has 7 locations and it is positioned to become one of the largest players in the industry. On top of the celebrity marketing power, Guy Fieri brings, Robert Earl serves as the company’s chairman.
Robert Earl is the Chief Executive of Earl Enterprises which has a number of major subsidiary companies. These include Planet Hollywood, Buca di Beppo, Bertucci’s, EOS, Brio Italian Grille, Bravo Italian Kitchen, TooJay’s, Seaside on the Pier, Café Hollywood, and Tequila Taqueria. A major executive committing to be the Chairman of Chicken Guy demonstrates that the company is set to expand rapidly. Additionally, Earl Enterprises offers an experienced team to help grow Chicken Guy at an accelerated rate.
Chicken Guy Menu:
The Chicken Guy Menu offers all-natural ingredients at an affordable price. Customers love that Chick-Fil-A offers a variety of sauces. Well, Chicken Guy has 22 different sauces! This includes a similar spicy mayo that competes against the world-famous Chick-Fil-A sauce. Chicken Guy has even opened a location in Disney Springs, which will grant it brand exposure. A typical sandwich ranges anywhere from $6.99 to $7.pp. Meanwhile, for a combo meal you can expect to pay between $11.49 to $12.49 making it on par with competitors’ prices.
While Chic-Fil-A provides financing to help franchisees open their location, the ongoing fees can be extremely expensive. 15% of sales plus 50% of pretax profit remaining (Paid Monthly), can truly be overwhelming for many potential franchisees. Chicken Guy simply charges a 6% royalty fee, 4% Marketing fee, and a brand fund of 2% (capped at $30,000 annually). Additionally, since Chicken Guy is a young company it is not nearly as competitive to open a location. The expected cost of a Chicken Guy franchise is between $767,5000 and $1,482,500 while Chick-Fil-A can range anywhere from $219,055 to $2,912,697 (paid over time).
Dave’s Hot Chicken
On the other hand, is Dave’s Hot Chicken! This up-and-coming franchise brings a Nashville twist to the Chicken-Themed fast-casual sector! Dave’s Hot Chicken started as a parking lot stand in West Hollywood and has grown to over 60 locations. The company has even sold over 500 franchise agreements and is expecting to open 75 new locations within the next year alone. That’s a lot of Nashville-themed chicken!
NBA star Kris Humphries has even committed to open 10 locations himself giving the brand celebrity influence. This gives the brand major marketing privileges to be able to compete against Chic-Fil-A and rival chicken start up Chicken Guy. Dave’s Hot Chicken comes in at the lower side of start-up costs ranging between $585,800 – $996,500. Dave’s Hot Chicken charges industry-standard fees of 5% Royalty and 2-3% marketing. When thinking about opening a Chic-Fil-A franchise it is important to evaluate the alternatives on the market, especially a younger franchise such as Dave’s Hot Chicken or Chicken Guy.
Dave’s Hot Chicken is famous for its simple combo meals. Customers are able to choose from multiple sliders, and tenders. They even allow you to customize your spice level from No Spice to the reaper, which has a disclaimer label.
Conclusion
Chick-Fil-A offers the opportunity to be a part of a highly desired franchise business. The company helps remove financial barriers to entry by providing up to $2 million in a loan. This is reduced to the standard royalty and marketing fees once the loan is repaid. Additionally, once becoming an operator Chick-Fil-A rewards owners who master both the Chick-Fil-A sandwich as well as operating their location. It is important to have realistic expectations when applying for and operating a Chick-Fil-A franchise. Opening a Chick-Fil-A is one of the most desired types of restaurant franchise given the history of success and limited immediate start-up costs. While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in the Food and Beverage Industry.
Did this make you hungry? You are probably asking yourself where is the closest Chick Fil A?
