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 three crucial things you need to understand about a Chick-fil-A franchise that may have you rethinking how great they are.
Chick-fil-A is not 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. They describe that relationship as operators, and their franchise program is referred to as 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.
Chick-Fil-A is not your 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.
When you buy a Chick-Fil-A franchise, you’re essentially buying yourself 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.
"Owning" a Chick-Fil-A franchise is not what you think.
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.
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