It costs $10k to ‘own’ a Chick-fil-A franchise
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Some of the comments I’ve seen are a bit off. 2 of the 3 owner-operators I know have multiple locations, although this is rare. Income estimates are a bit low for typical stores I’d be surprised if any owner operator of a freestanding unit is below $250k. Also, the estimates of worked hours are a bit high. All the owner operators I know have great work-life balance, this is a function of how well they hire and train their general managers.
There are also some significant advantages to non-ownership that are win-win for both the company and operators. CFA provides significant support beyond what other franchisers do: IT, capex for renovation, and training. CFA is incredibly focused on efficiency in their stores. If you’ve seen a freestanding store recently, you’ve probably seen it be renovated to allow for double drive through lanes and a walkthrough parlor for pickup. That’s not the type of thing many franchisees at other companies have the cash (or willingness) to do.
The best part of Chic-Fil-A (in my opinion) is not the food but their total devotion to the customer. The level of service you receive at a Chic-Fil-A freestanding store is unparalleled at virtually all other fast food joints (with the occasional exception of In-N-Out ((maybe the hyphens add to greater service?)) and most restaurants in general.
I recently used a self-serve machine at Taco Bell (love the dreadful beef chalupa) and had a poor experience. The machine was too low for my height and unadjustable. Poor design really brings out the worst in the fast food experience.
https://medium.com/@cfatechblog/bare-metal-k8s-clustering-at...
https://medium.com/@cfatechblog/edge-ai-in-a-smarter-chick-f...
On this point. They shouldn’t be allowed in certain locations in my opinion because of this policy. Certain airports are already limited on options for eating and then they close on Sunday. It turns the airport dining experience upside down and its incredibly frustrating.
I also think every Sunday off helps them find and retain better workers.
that's interesting - and you also see this FOMO in all aspects of life, and some clever/insidious marketing can create this artificial scarcity to drive up demand.
My typical shift was 4-close, and right around 4:15 demand would be a constant car after car until close, every single day. Demand was so high we had a term called 'wrap around' where the line of cars in the drive thru would wrap entirely around the store. This would be the case from 4:30-6 every single day I worked there, and this was only a mid sized suburb in the midwest in a strip mall with every other chain restaurant you can imagine, so they were dominating competition.
I'd point out McDonald's as a major exception to this. In the past decade, MCD has completely razed and rebuilt from dirt a huge number of its freestanding stores. Yes the franchisees have complained and not all are down with the program but the new stores are generally far more comfortable and pleasant than the old-style, (yet iconic) red-roofs. I imagine far more profitable as well.
They're clearly not just wanting to sell their brand - they're wanting to own their brand.
The 10k is just a token - It's maybe more than you have in your clearing account, but a figure that most people could likely produce and is just an indicator that "you're serious"
Important part is that they put you through the grinder to make sure you're the person they want to run their store. To be honest just looks like a regular job interview - with the exception that they charge you to join the company, but you get a cut of the profits.
Not even sure if they're in the UK yet, but you can see the converse with Subway that keeps appearing all over the place, despite not having any customers.
https://www.nbcnews.com/feature/nbc-out/u-k-s-first-chick-fi...
(article dated October)
That's certainly not immediately. Also not by decision of CFA. The local landlord folded and decided not to renew the lease, so after the initial 6 months, that CFA location would have to close.
“As a fast-food franchise owner, you’re often fighting a war for pennies,” says Rose. “Food is the most competitive industry known to man: It has the highest investment level of any industry, the highest failure rate, and the lowest margins.”
https://www.businessinsider.com/in-n-out-employee-pay-2018-1
* Store managers earn an average yearly salary of more than $160,000, more than what the typical tech worker in Silicon Valley makes for the year.
* High wages for fast-food workers can lead to increased productivity, less employee turnover, and bigger profits in the long run.
[1]https://www.thebalancesmb.com/most-popular-food-franchises-a...
[2]https://www.thebalancesmb.com/wendy-s-franchise-review-13503...
Wow, I did not know this. Why is that?
Most organizations lose 30% - 50% of their "mojo" with each layer of separation from an "engaged stakeholder". Generally meaning someone with equity or substantial profit sharing.
I'd also bet that the majority of their owners only own one business, which means they are even more engaged.
Compare that with the typical master franchise operator, who may be running multiple locations and multiple brands. Unless they have an awesome process and technology team, their operational efficiency is probably a full order of magnitude below the typical highly engaged Chick-fil-A...
And generally better for you than the major chains...
I'm not really sure what MacDonald's actually serves anymore... much less any of the others...
Is it though? I really don't get it. Chick-fil-A's entire menu consists of unremarkable chicken sandwich variations, and unremarkable... everything else. It's just not very good - at least compared to other fast food options. It doesn't stand out to me. I can't figure out why it stands out to so many other people.
I think the push-back against them from LGBTQ activists is really pretty silly. Even still, I know many bleeding hearts who are perfectly aligned with such activists and who regularly patronize Chick-fil-A (but jokingly call it "hate-chicken" or something similar) - but they keep going, and keep spending their money there. Why?!?
The food just isn't special or particularly good.
There is also something powerful about the spicy chicken sandwich in particular. Every brewpub offers some nashville styled whatever cut of chicken these days. Popeyes is still selling out their sandwiches a half year after release. Howling rays is still getting people to wait for over an hour for a chicken sandwich, and crashed the postmates website when trialed delivery for one day a few months ago.
shrug... every other chain that offers one? I guess this is all subjective, but I don't taste any quality difference between Chick-fil-A and other fast food chain chicken sandwiches. It seems like hype to me.
You go to a wendys or a mcdonalds and order a dozen nuggets, you will see they come in exactly 4 shapes—ground whatever parts of chicken pressed into a mold of one of 4 randomly chosen shapes, breaded and flash frozen at a factory, and flash fried in store. Taste is subjective of course, but the quality of meat difference here is actually pretty objective.
If I go to a CFA, I can count on the food being a certain, consistent quality. I have eaten a lot of CFA over the years, and I've had a low-quality piece of chicken (e.g. tough, full of gristle, etc.) maybe once. Compare this with "chicken" served at milkshake and burger fast food joints, which is mostly made from parts and not whole meat. I've gotten violently ill from KFC before and have since desisted from buying their food, and my local Popeyes has such bad service that no one goes - I think DoorDash is singlehandedly keeping them in business. Even Bojangles in the South or Hardee's/Carl's Jr. have given me real clunkers of sandwiches and chicken before. Chick-fil-A is consistently good quality in comparison. When I'm done with a meal at CFA, I never feel like I'm going to spend the next few hours wondering I need to begin praying to the porcelain gods.
The other killer feature is the service and efficiency. I don't hesitate to get in a long CFA line, because I know it will clear soon. This is another aspect of consistency that is just underrated. If I get in a long line at, say, McDonald's, it may clear one 5 mins or 30. With CFA, I know it'll very likely be done in 10 mins.
The third really big differentiating factor for me is that when you get something you expect to be fresh from CFA, it is consistently fresh. I have not experienced wilting lettuce, "gelling" tomatoes or carrots that have been left too long at CFA. At any other fast food joint, that is a regular experience, even the ones that are too posh to have a drive-thru. Their fresh fruit is the same thing - consistently high quality and tasty. Same goes for lemonade and iced tea (theirs really is the best in the business; and for those not from the South, you can always ask for diet or unsweetened versions of fresh drinks). My son actually gets upset at me when I accidentally get him a side of waffle fries from CFA rather than the fruit cup, since the quality is so good.
The last part is that they seem to really treat their employees well. CFA tends to start their employees at higher wages than almost any other fast food chain, and they give them extensive training in how to operate the store and treat customers. I've heard employees - both Christian and not - say that having a guaranteed day off once a week is wonderful. The restaurants are clean and the workers seem to take pride in doing good work. It's just a good atmosphere. It seems like the kind of job that gives low-skill people the actual skills they need to be productive citizens and employees when they're looking for something beyond food service.
If I were to put it all in statistical terms, along almost any measure dimension, CFA has an above-average mean and extremely low variance. Other fast food places have optimized certain dimensions like this as well: McDonald's for example has extremely consistent - and mediocre - quality and a very consistent low price point. None of them match the breadth of consistency as well as CFA does.
The spices on the chicken taste weird to me...
Fewer stores targeting higher revenue areas, often where they are exclusive local operator. It's like Mac vs PC. You can get higher revenue per store if you limit your market size.
Have you seen the video of the McDonalds worker assaulting a customer because they complained about cold food. They are the worst.
I also think the size of their chicken sandwich is the key. Not press-meat but a true 6 ounce breast filet. The other fast food stores use junky meats.
During the busy periods they put order takers outside in line to take orders.
They have so serious efficiencies. I like that.
During the busy periods they put order takers outside in line to take orders."
In-N-Out was doing those a decade ago, easily. It was my first memory of eating at one, the line spilled out to the highway exit ramp, and they had people there outside running down the lanes and the street to take orders.
Maybe not even junk "meats" at all.
"Those results were averaged: the oven roasted chicken scored 53.6 per cent chicken DNA, and the chicken strips were found to have just 42.8 per cent chicken DNA. The majority of the remaining DNA? Soy."
https://www.cbc.ca/news/business/marketplace-chicken-fast-fo...
https://www.charlotteagenda.com/152719/chick-fil-a-woodlawn-...
Honestly though, my guess is probably consistent customer service- everyone seems to be happy- and consistently high quality food.
Also, where else would I get waffle fries?
The wendy's spicy sandwich costs more while being cafeteria food tier and is barely seasoned. BK and mcdonald's offerings aren't much better. Not sure who else is even in this spicy chicken game, but it is a massive game to get into. There is a reason why popeyes still can't keep their sandwiches from selling out instantly, and howling ray's has an hour wait on a good day. Good spicy chicken sells itself.
It is literally the default choice for soccer moms ferrying kids among afternoon activities.
It’s sort of like how folks won’t eat pork.
Dietary science really was awful, and probably still is comparatively weak. I think it's getting better though; I'm pretty convinced that sugars are bad.
My intuition is their revenue is so much higher because of a mix of higher service people are willing to pay for (almost casual versus definitively fast food), higher average cost per person, and cheaper inputs (chicken versus beef price per pound).
# Speed of Service
I've ordered Chick-fil-a and literally been handed my food before the credit was done processing. That's not the norm, but was surprising. They get fast casual pricing while still being able to complete orders in a fast food
#Cost per Person
Chick-fil-a doesn't have a value menu. As a quick reference, look at the menu prices for Chick-fil-a [1] and McDonald's [2]. It's not a perfect datasource, but it roughly aligns with what I've seen.
At McDonald's you can get 2 cheeseburgers for $2. The cheapest sandwich at Chick-fil-a is listed at $3. Chick-fil-a doesn't have a "value menu" or "dollar menu" like other fast food chains do.
# Menu Simplicity
Chick-fil-a does a better job of keeping their menu simple. While it's not a direct effect on revenue, it would help training and there would probably be bigger containers of ingredients and fewer to reach over (reducing completion time).
Compare the unique ingredients between McDonald's [3] and Chick-fil-a [4]. There are way more combinations with McDonald's than Chick-fil-a. Additional complexity to be dealt with behind the scenes (though I've heard they make it dead simple to learn how to make the food). Taco Bell can (or used to be) be noted for only having about 8-10 ingredients which were mixed and matched into their entire menu!
[1] https://www.fastfoodmenuprices.com/chick-fil-a-prices/
[2] https://www.fastfoodmenuprices.com/mcdonalds-prices/
I don't think I've ever seen a bad Chick-fil-A...
In other words, the "per store" metric isn't as impressive when you look at the number of stores.
Longer answer: McDonald's has chosen to optimize for total revenue, while Chick-fil-A has chosen to optimize for something more like ROI on each store. This is a direct consequence of the different franchise models, where McDonald's takes a cut of sales and doesn't have an ownership stake in each location, while Chick-fil-A take a cut of both sales and profits, and has ownership of the physical location.
As dave5104 mentioned, there are over 14,000 McDonald's locations in the US vs around 2,000 Chick-fil-As. McDonald's has saturated the market to the point that individual McDonald's locations cannibalize the sales of other nearby locations.
For example, there are 14 McDonald's locations within a 5-mile radius of where I live. If you closed down half of them, total revenue would probably drop some, but not anywhere near half. Many people who wanted McDonald's would just travel a little bit further to get to one. As a result, per-store revenue would go up. Per-store profit would go up by an even greater percentage since there are fixed costs per location. And if you closed the right number (which might be more or less than half), total profit would go up as well.
This would be great for franchisees, but from McDonalds' perspective it's worse since total sales would decrease, and that's what they're getting a cut of. Chick-fil-A's model, where they take a cut of both sales and profits aligns their interests more with their franchisees.
One in the vons, directly across the street from one in the ralphs, and if you head north on vermont in this street view you will hit a burger king. Today that is a freestanding starbucks. Three starbucks locations in less than a square mile.
They're so close that I've switched locations depending on the length of the line. Sometimes both are packed though.
https://www.chron.com/business/article/One-on-corner-there-a...
Grown up me still doesn't understand why the equipment costs that much, except that it's small production runs and captive audience.
Anyway, I don't find this a compelling argument against allowing mechanical failures. Manufacturers these days understand the trade-offs between cost to manufacture, part reliability, and tolerance of failure.
(That said, mechanical failure might not even be a problem with the machines. It could just be the need to claim their offline so that staff can service other customers better.)
I fully agree - my point was not to anthropomorphize machines. However, as you said, manufacturers understand the trade-offs, and for "industrial-grade" products, they prioritize having longer Mean time to failure compared to consumer goods. MTTF is sometimes baked into the contract/warrantees since any downtime is money lost - McDonald's can't take the fry machine offline and continue serving 95% of their meals
Or more likely, the two high schoolers working that night shift did not want to get swamped and behind having to add 2 minutes to every single order in their queue when they have to step away from what they are doing for the rest of the orders and make a shake. Rather than do that and have to be working from behind all night, the shake machine becomes 'broken' for that shift, and there aren't going to be any brown nosing managers working night shift anyway to put their foot down.
Unbelievable, owning a franchise seems pretty stressful just to be taking in 50k/year. I guess once you get it off the ground with good managers you don't have to baby it as much, but still.
This allows CFA to find people who are ambitious irrespective of current wealth.
Americans say fil-eh British say fill-it.
International agreement?
The franchise brand owner had no incentive, so while it's possible to abolish them through government. It's not clear why we'd go that direction. Given the franchise brand owner takes on additional risk it's not clear why they'd move to take on risk without gain
Regardless, corporate is always incentivized to help their franchisees succeed; they wouldn't really have a business without them, and of course they want their cut of sales/profits to be a higher absolute value.
Also a common area of abuse. There was a sandwich shop chain in the US where this got very ugly a few years ago...
https://www.restaurantbusinessonline.com/financing/brief-his...
Also Quiznos collapsed and was blamed for one franchisees eventual suicide due to their predatory tactics that locked franchise owners into paying high ingredient costs that they could not make a profit on.
Even for a more "traditional" franchise, where the franchisee is responsible for all the start-up costs, even $50k is small peanuts compared to the full cost to bring the restaurant up from scratch. Calling that "predatory" feels like a gross exaggeration.
What incentivizes the new location to do due-diligence in picking a good location? If this is placed into the chain owner: What's the difference between a franchise vs single owner?
Even for a Subway. Earning back $350,000 takes a lot of sandwiches.
Apparently too many subways has caused bully by Subway the corporation of franchisees over good locations.
This naturally means it's very hard to qualify for one.
As such, it is necessary to vet the potential franchisee to ensure they're going to support and improve your brand image rather than damage it. Requiring a "deposit" as such is part of this, as the franchisee will need to at least recover the amount invested by providing good service.
Also, bear in mind that the franchise's corporate brand reputationsuffers when a franchise fails, so there's inherently some risk sharing.
[Agreeing] There are massive costs (relatively speaking) for an independent involved in just learning/optimising the supply chain. With a franchise you, presumably, can skip this which gives a huge head start.
Also if it's a brand chain then you have the benefit of brand level advertising (which works at a different psychological level to shop/activity/product advertising) which should be more efficient per "lead".
They tend to target unemployed middle-aged managers, since that audience is often driven by ego to "be the boss" and has the disposable funds to pony up a large setup fee. I was aggressively targeted when I was laid off last year.
What they didn't know - until we got on the phone - is I'm the target prospect from hell. I certainly have the funds; however, I got them via two decades of finance and strategy work. Old habits die hard. Due Diligence? Don't mind if I do...
I was polite but I laid out my expectations in financial terms based on investments in businesses of similar size. Actual deals which I had managed. Made it clear I had the funds to deliver if they could meet my goals in writing.
They ran like hell.
However, in the meantime, I wound up speaking with a diverse assortment of scum, villainy, and ineptitude.
The parent company has no interest in that location ever closing. They're not house flippers or day traders. They rely on stable long-term income, not random tiny spikes a few times a year. Franchise fees are barely even a blip on the radar of a company like McDonald's.
Independent restaurants, if they hit their market, run into the same problem with landlords, who want to take the profit from exorbitant rents after the the lease expires.
It is fried chicken after all - hardly a challenging item to cook, but to perfect it as a recipe, scale and process for "Nextgrid's artisan non franchised fried chicken" will take probably more than $10k and worse of all will take a lot of time in which you will be paying rent and salaries.
He had managers on every shift running day to day so he never really needed to visit the store, but he did a couple times a week anyway to show face with the staff and even step onto the line and bag orders if it got swamped while he was there, simply to lighten the load on the staff.
If this had been an independent restaurant, he might have been doing things like cooking in the back 12 hours a day to lower his payroll. Predatory is not the word I would use for most franchises these days; passive income is the word I would use.
But as far as I know it doesn’t seem to happen? Can you really predict what will be profitable that accurately?
With years of work you might get close. Finding good people and aligning incentives so you retain them is not easy.
Most franchisees that try and be hands-off from the start crash and burn. Which makes sense, really. If it were a lucrative passive investment, the franchisor would just throw some money at it and keep all the profits.
(vs $1.2 million for KFC and $2.8 million for McDonald's)
I think I'd rather just get a job at Google.
Maybe from the perspective of a tech person in silicon valley that's not great. But in comparison with pretty much any other job out there this is stellar.
$150k-$250k/year is a fairly nice ROI for even $2M (though taking on loans or investment changes the math), but the calculation gets a little murkier when you factor in additionally needing to work 60 hours/week, six days/week to keep it coming in.
Put another way, if you already have access to $2M, $150k-$250k/year might not seem all that attractive when compared to what you've done prior to that.
Most people work far more for less and would love to have their own business with this much potential earnings and low startup cost.
In most cases, they aren’t permitted to “own” multiple locations. They aren’t permitted to run any other business.
Quote the opposite. In a Forbes (or similar business publication) last month it stated that Chick-Fil-A is very selective about who it allows to have a franchise. It gets something like 20,000 applications each year but only awards a few franchises.
Apparently the biggest factor in getting a franchise is whether the owner has a demonstrated history of investment and involvement in the community.
Salvation Army. The Fellowship of Christian Athletes.
Calling those groups "anti-gay" and protesting a fast food restaurant for donating to them is absurd.
To illustrate, I might refer to an organization under religion X as an "anti-women religious group" because perhaps religion X had some policy on women's activites that I believed were sexist; then for me "anti-women religious group" would be a technically correct phrase in that X is "anti-women" and "a religious group", but the phrasing would probably be objectionable to practitioners of the religion who don't see those particular policies as fundamental to their religion, and perhaps didn't even consider the policies sexist in the first place.
In general, I don't think I often see this loose use of terminology applied to other cases; like I don't think people call Nike a pro-child-labor company, although if that were the topic of discussion I might say Nike uses child labor. To me it's about avoiding ambiguity.