Chick-Fil-A is an extremely successful and consistent franchise system. The privately held chain did over $2.5 billion in systemwide sales in 2009 from over 1,300 franchised stores in the U.S.
The founder of Chick-Fil-A, Truett Cathy, 88, credits the company’s success to over 1000 franchisees and over 600 employees who are unusually dedicated in an industry known for grumpy operators and high turnover among hourly workers. The turnover among Chick-fil-A franchise operators is an extremely low 5% a year. Among Chick-fil-A hourly workers turnover is 60%, compared with 107% for the industry. Chick-fil-A focuses on hiring and bringing in franchisees who are looking for lifetime commitments to the company.
That’s not the only company mandate. Chick-fil-A’s corporate mission is to “glorify God.” It is the only national fast-food chain that closes on Sundays which allows franchise operators to go to church and spend time with their families; franchisees who don’t go along with the rule risk having their contracts terminated which is unusual in today’s “bottom line” approach. Chick-fil-A’s approach is to balance life with work which seems to be working.
Many of the Chick-fil-A franchisees have come from the foster homes run by a nonprofit organization Chick-fil-A funds, the WinShape Foundation. The upfront franchise fee for a Chick-fil-A is only $5,000. Most franchise systems require net worths in excess of $500k and upfront franchise fees of $35k or more.
The structure of the Chick-fil-A franchise from a business model is unique also. Chick-fil-A pays for the land, the construction and the equipment, they then rent everything to the franchisee for 15% of the restaurant’s sales plus 50% of the pretax profit remaining. Operators are discouraged from running more than a few restaurants will typically take home about $100,000 a year on average from a single outlet.
Truett Cathy is extremely particular in who he selects as franchise operators. He wants married workers, he would like them to have attended Christian-based relationship-building retreats and Chick-fil-A will even interview family members of prospective operators. They would like to learn more about candidates and their relationships at home. “If a man can’t manage his own life, he can’t manage a business,” says Cathy.
How is this legal and why does it work so well for Chick-fil-A? The structure is based on core beliefs and principles which are consistent throughout the franchise system. Whether it is legal is open for debate, but the bottom line is that in franchising, the rules are different than in employment law. There is much more freedom in who is selected and why as opposed to hiring an employee where religion and marital status are to be left off the table.