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The Chick-Fil-A Franchise Story

Chick-Fil-A Franchise

 

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.

Chick-Fil-A franchise

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.

truett-cathy-chick-fil-a

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.

Chick-fil-A Franchise

 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.

Dunkin’ Donuts Franchise

Dunkin’ runs on owners CEO wants co. to be closer to franchisees

By Donna Goodison

Friday, October 1, 2010

Dunkin’ Brands Inc., which has had a contentious past with franchise owners, says it’s now focused on strengthening those relationships. If a company with 1,000 corporate-owned stores wants to cut the price of its $2 bottled water, it simply goes ahead and makes the change, according to CEO Nigel Travis. But for a coffee-and-doughnut chain with 9,000-plus franchised restaurants in 31 countries, getting franchisees to buy into company decisions such as installing a uniform point-of-sale system is critical to success, Travis said. When company profitability is sometimes at odds with franchisee profitability, collaboration backed up with strong communication skills is required, Travis told executives at a Greater Boston Chamber of Commerce forum yesterday in Boston.

Dunkin’ must ensure it fosters an environment in which franchisees have opportunities to share their thoughts and believe they are being taken seriously, he said. “My favorite expression is that franchisors get the franchisees they deserve,” Travis said. Travis has put the emphasis on developing stronger ties with Dunkin’ franchisees since joining the Canton company in December 2008. “We needed to shift the culture from ‘growth, growth’ to operational excellence,” he said. “(Franchisees) are on the front line every day, and they understand what our guests want.” That required Dunkin’ to “beef up” its communication channels with franchisees, according to Travis, who noted that the company’s brand advisory council of elected franchisees accomplishes the goal of “two-way communication from the brand down.” “We don’t have to have exactly the same assumptions and objectives, as long as we can bridge the gap,” he said. Though the Dunkin’ Donuts Independent Franchise Owners group has criticized the company as recently as last year for being excessively litigious with franchisees, Travis said that’s changed. “I believe in positive, constructive franchisee relationships,” he told the Herald following his speech. “I think we’ve achieved that. We’re getting more and more on the same page