The Good and Bad of Owning a Chick-Fil-A Franchise – Not A Traditional Opportunity
by Seth Lederman
Technically and legally, Chick-fil-A is a franchise. BUT Chick-Fil-A demands much more control than other franchisors. They don’t even use the word franchisees. They describe that relationship as operators, and their franchise program is referred to as an operating partner program.
It’s easy to understand why initially someone would find the idea of owning a Chick-fil-A franchise appealing. When it comes to most business metrics for fast food chains, it dominates. QSR magazine found that in 2016, the chain averaged $4.4 million in sales per restaurant, with their locations only being open six days a week. But before you decide to invest, there are crucial facts you need to understand about a Chick-fil-A franchise that may have you rethinking whether it is for you.
Is Chick-Fil-A a Traditional Franchise?
Technically and legally, Chick-fil-A is a franchise. BUT Chick-Fil-A demands much more control than other franchisors. They don’t even use the word franchisees. Owners are operators, and their restaurant franchise program is an operating partner program.
The operators must bring $10,000 to the table to start, and then the chain pays for everything else upfront. The low start-up cost is part of Chick-fil-A’s appeal. They also require extensive training to start, and then the operator pays Chick-fil-A 15% of the sales and splits the remaining profits. Plus, they expect operators to run the restaurant in a very hands-on manner. So any plans to eventually hand over day-to-day operations aren’t going to happen.
Chick-fil-A also picks the restaurant’s location and rarely allows an operator to run more than one location. That means you may even have to consider moving if you want a franchise.
Is Owning a Chick-Fil-A Considered an Asset?
So why does it matter that Chick-fil-A calls its franchisees “operators?” That language sleight-of-hand is rather revealing because their operators don’t actually own the business or have any equity in it. Since the operators don’t own the restaurant, they can’t sell the location or pass it on to another family member. When you decide you want to retire or simply move on, you will get nothing. For many interested in investing in a franchise, the money earned from selling the franchise down the road is a big part of the investment’s appeal.
And as mentioned above, the chain wants to be your sole focus. So no holding down another job or passing on the operations to a manager. They expect you to be at the restaurant running things.
Why Is Buying a Chick-Fil-A More Like Purchasing a Job?
Someone investing in a Chick-fil-A franchise is purchasing a job, not a business. The chain expects operators to work in the store. The reality is, you are working “in” the business and not “on” the business. So no running another business, continuing an existing career, or even kicking back and traveling. Your Chick-fil-A location is expected to be your sole focus.
And obtaining this privilege isn’t even easy. The chain receives about 20,000 applications a year but only accepts about 75 new franchises during the same time frame. That breaks down to 0.4% of those that apply for a Chick-fil-A end up approved. The applicants they do accept must have restaurant management experience, as well.
Additionally, the openly Christian chain seems to prefer married operators, asking applicants to share their marital status, how many children they have, and what community, civic, social, church, or professional organizations they are involved in. The late founder and chairman of Chick-fil-A, S. Truett Cathy, once said, “You don’t have to be a Christian to work at Chick-fil-A, but we ask you to base your business on biblical principles because they work.”
The franchisee makes a minimal investment to manage the location on a revenue-sharing basis with corporate. It’s a management position, pure and simple.
What Does “Owning” a Chick-Fil-A franchise Really Mean?
Yes, Chick-fil-A makes a lot of money, and their operators stand to gain as a result. It may sound like a good deal because the chain covers the real estate, construction, and equipment costs, but the reality is much less rosy. It is a case of you get what you pay for. The low cost of entry can be enticing, but that is because you don’t own anything, and when you are ready to move on or retire, you and your family will reap no financial gain.
What is the Expected Chick Fil-A Salary for an Owner?
Because Chick-Fil-A ownership differs from traditional franchise ownership in many ways, unlike others, your salary is going to be the key to accumulating wealth. Since you will be devoting all of your time to managing and having all hands on deck, your salary is going to be the most important thing. Since you don’t actually “own” your franchise, making a great salary to put money away is going to be critical to be able to retire comfortably. The average salary of a Chick-Fil-A owner is $353,111 annually, which is nothing to scoff at – but again, you won’t have a business to sell when you want to retire, so putting money away while you are working, and making enough to do so, will be your major focus.
What are the Costs for a Chick-Fil-A- Franchise? Can You Really Own a Chick-Fil-A for $10,000?
As mentioned before, to be an “operator,” which is for all intents and purposes what Chick-Fil-A owners are, you only need to contribute $10,000 upfront and then the chain will step in and pay the additional costs. So technically, you don’t have much skin in the game. It also means that the opportunity is available to many people of average means. The real costs come in the blood, sweat, and tears of your labor. As an operator, you are going to have to give up the salary you are currently making, which may or may not be a huge cash loss.
What are Chick-Fil-A’s Franchise Requirements and What is the Chick-Fil-A Acceptance Rate?
When it comes to being selective, the requirements for Chick-Fil-A operator positions are strenuous. It is a highly competitive position where they consider many factors related to your financial standing, your business record, and you as an individual and what you believe in. Unlike most franchise ownership requirements, you are judged by your background and “character” as well as your belief system. Since only about 0.4% of those who apply for a Chick-Fil-A operator are accepted, that can narrow your chances.
What Does the Franchise Application Process Entail?
When compared to other franchise ownership positions, the application for Chick-Fil-A is quite extensive. You begin with the initial online application, and if you make it past the first cut, there are additional layers that you have to slog through, including virtual and in-personal interviews to make it to the final selection phase. Things that you will have to submit are your previous work experience, your financial outlook, what geographical constraints or preferences you have, and other personal information such as marital status, whether you have children, and what types of leadership roles you have demonstrated in the past. Chick-Fil-A has one of the hardest selection processes in the franchise industry.
What are the Pros of Owning a Chick-Fil-A?
There are going to be both pros and cons to owning any business, and being a Chick-Fil-A operator is no different. One of the major advantages that Chick-Fil-A offers is that you only need to invest $10,000 to get started. That makes the opportunity to be an owner within the reach of many if they can make it through the stringent application process. Another advantage, depending on where you currently are, is that you can expect to earn about $353,000 annually, which is a great living. If you are going to become an operator, however, you need to realize that there are no guarantees for success. But the good news is that for $10,000 you don’t have that much to lose, either.
Another pro of being a Chick-Fil-A operator is that Chick-Fil-A touts a very low dropout rate for operators; as few as 5% call it quits, and many operate their business for more than 20 years. Also, the employee turnover rate is extremely low at 60%, especially when you consider that the average food industry chain shows attrition rates that are well over 100%. Chick-Fil-A is a corporation that is said to take great care of its employees, with incentives for those who work hard at whatever role they play.
What are the Cons of Owning a Chick-Fil-A?
There are two major cons to owning a Chick-Fil-A: namely, technically you don’t own anything but a full-time job, and second, that full-time job is not easy. Many who are operators will tell you that you don’t make much money at the outset; in some instances, it might be several years before you start earning a good salary.
The other major con of being a Chick-Fil-A operator is that you will be working day and night to manage and get the business off the ground. If you take a look at the testimonials of those who have grown successful Chick-Fil-A operations, they all say the same thing: you have to be hands-on and put in the work. It is not an absentee or even semi-absentee situation. Another con to owning a Chick-Fil-A is that you have very little decision control. The franchise has strict control over deciding all future locations
Why is Owning a Chick-Fil-A So Cheap?
The main reason owning a Chick-Fil-A is so cheap is that you don’t technically “own” anything. When you want to retire or move on to other ventures, you walk away with nothing but the money that you earned while you were an operator. Traditionally, franchise ownerships allow you to build a business, get it going, and then when you want to retire or you no longer want to be the owner, you sell your hard work or you can hand it down to future generations. When you are done with Chick-Fil-A, it is pretty much done with you.
Can You Operate Multi-Units or Other Business When You Own a Chick-Fil-A?
One of the stipulations of being a Chick-Fil-A owner is that you can’t own another business or have multi-units, which is where most franchise owners start to build an empire. You have to be an owner for ten years or more, while also operating in the top one-third of Chick-Fil-A franchises for it to even be an option, and ten years is a very long time.
Is Chick-Fil-A a Good Franchise for Young People?
If you compare Chick-Fil-A franchise ownership to others, being young is a huge advantage. Since you don’t technically own anything or have the ability to build equity, your equity is going to come in the form of a salary. The reason that being a young owner works in your favor is that you have the energy, usually the time, and the benefit of decades to earn a great salary to invest and sock away. If you are middle-aged, you won’t have that much time to accumulate money to put away, and being closer to retirement means that you will have to work harder when you should be looking to scale back.
Is a Chick-Fil-A Ownership Really For You?
As with any franchise opportunity, your success is going to be determined by whether you choose the right one for you personally. Chick-Fil-A offers opportunities for those who are a good fit, but the process is stringent and the odds aren’t in your favor. The good news is that it is possible for anyone at any financial level to own a Chick-Fil-A if that is what you want to do; just enter into it with eyes wide open and know what you can and can’t expect. At Frannexus, our mission is to find the right franchise opportunity for you to have the most success, whether that means Chick-Fil-A or not. Contact us to get started on finding what suits you best!
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