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The Rise Of Chick-fil-A

Chick-fil-A. It’s a fast-food chain
with chicken sandwiches said to be so good, even McDonald’s
wants to steal them. And it has a reputation so
controversial, entire cities have banned the restaurant from
their airports. Critics say Chick-fil-A has a
history of supporting and donating millions of dollars to
anti LGBTQ organizations, which has drawn the ire
of lawmakers and civilians alike. Chick-fil-A’s values are
not Chicago values. But it also has its
share of ardent supporters. Whatever you think of the
company’s politics, Chick-fil-A’s sales are on a tear. As of June 2019, it is the
third biggest restaurant chain in the U.S. by system-wide sales. And it generates the most sales
per store of any other fast-food restaurant in the country. The ascent is so rapid, that
even McDonald’s and Popeye’s are taking note. In July 2019, McDonald’s franchise
owners demanded the company add a Southern style chicken sandwich to
its menu in order to keep pace with Chick-fil-A. A month later, Popeye’s debuted its
own chicken sandwich on a buttered roll with pickles, the first
to be sold by the chain nationwide. Chick-fil-A is also eating market share from giants
in the chicken category like KFC and Wingstop. So how is it that a
restaurant that’s ensnared in controversy, and closed on Sundays, is next in
line to overtake Starbucks and McDonald’s? It all started in Atlanta,
Georgia, where Chick-fil-A’s founder, Truett Cathy was raised and where
the company is now headquartered. Cathy grew up watching his
mother prepare chicken in traditional southern fashion. In 1926, the 25-year-old and
his younger brother cobbled together about $10,000 to open
a diner called Dwarf Grill. Legend has it, that’s where
Cathy invented Chick-fil-A’s original chicken sandwich, fried in peanut oil
and served on a bun with pickles. The menu item regularly sold out. So in 1967, he opened
the very first Chick-fil-A in the Greenbriar Mall in Atlanta. From the outset, Cathy implemented a
policy still in place to this day. All stores would be
closed on Sundays. A devout Christian, he reasoned
that Sundays were for spiritual worship. Cathy carried those Christian values
with him to Chick-fil-A’s flagship store, which featured an upbeat
logo of a bright red chicken. Cathy said the A of the
company’s name represented grade A chicken. He was one of the first to
envision putting fast food in malls, and as malls began to grow
in popularity, Chick-fil-A was taken along for the ride. Between 1971 and 1974, Chick-fil-A tripled in size, expanding into the
rest of Georgia and the Carolinas and continuing through
the south and southwest. In 1986, Chick-fil-A decided to
grow beyond malls by opening its first freestanding restaurant. By 1993, its 500th
restaurant had opened. But this pushed it into
competition with established chicken focused fast-food chains like KFC,
which also opened in the south fifteen years
before Chick-fil-A. Chick-fil-A didn’t have as much money as those
companies to spend on advertising, so it decided to make
a splash another way. In 1995, it put up huge
billboards on the side of highways in the south east. The first billboard featured a pair
of cows scrawling “eat more chicken” to try to get
people to stop eating beef. The campaign went viral
and it worked. In 2000, the privately held
company hit one billion dollars in sales, doubling its performance
from when the billboards first debuted. It also rose to the third largest
fast food chain in the chicken category behind KFC and Popeye’s. That was also the year Kathy
and his three children signed a covenant promising to
uphold Chick-fil-A’s principles. The agreement included staying closed
on Sundays and never taking the company public. The company culture is very unique
and has clearly led to a lot of
success and culture…it’s all interlocked. Like you pull one strand of
it and the whole blanket can unravel. And sometimes if
a company is public, someone might want to pull out
a strand and might not realize that’s the strand that could
unravel the whole blanket here. Chick-fil-A’s fast paced growth was also
fueled by a few key innovations in its
operating structure. Each franchise is owned by an
independent operator who usually has just one unit and no other
business ventures, a model that’s still relatively unique in
the fast-food business. This allowed franchise owners to be
focused on the restaurant and truly connected to the community. Employee makeup is another
differentiator for the brand. Chick-fil-A has said that two thirds of Chick-fil-A
employees have grown up working for the company, doing shifts in
high school and college, and ultimately returning for a
career with Chick-fil-A after graduating. Chick-fil-A is extremely selective of who is
even allowed to become an operator. That structure has created
a network of experienced franchise owners who are
loyal to the brand. It’s the main reason why they’re
successful because they have these people that are in the
stores every single day. They’ve gone through a
heavy training process. They believe very strongly in
the brand and they’re interacting with customers. So they are interacting
with the employees. They are interacting with everybody,
and it really works. The franchise agreement also allows
operators to start restaurants for an extremely low cost. The initial fee is just $10,000 . In comparison, the fee at
McDonald’s is $45,000 and Wendy’s is $40,000. Unburdened by the debt of
a large initial fee, Chick-fil-A franchisee operators are able to put
more of their funds into growing and improving their store. The closed on Sunday policy
also applies to the Chick-fil-A’s operating in stadiums. It’s Mercedes Benz location even
remained closed when the Super Bowl was held there in 2019. Analysts say the policy comes
with a hefty price tag. If you do the math, I think
it works out to roughly $1.7 billion dollars in system-wide
sales that are lost by being closed on Sunday. Now, again, that’s assuming you just
opened up on some days and everything else works normally. But they also say being closed
might actually help the chain provide better service. Every employee can look forward to
time off no matter how hard they’re working Monday
through Saturday. And sometimes the rest and
relaxation can do a person real good. On top of that, you know, the
guests like the better get to the Chick-fil-A restaurant before Sunday comes
because if they find the time on Sunday and they have that
craving that Sunday and they show up on Sunday, not get any
food from that Chick-fil-A restaurant. In 2018, there
were 2,352 Chick-fil-A’s in business with 234 in malls, 264 on college campuses and 73 at hospitals, businesses or airports. The culture of Chick-fil-A today
still focuses on the Christian values that Cathy founded
the chain on. Outside its Atlanta headquarters,
a plaque with Chick-fil-A’s mission statement still hangs. Analysts point to the chain’s religious
backbone as a driving force behind the company’s number one rank
in customer service for four years from 2015 to 2019. In a 2013 survey of drive
through s, Chick-fil-A employees were reported to have smiled 91.4% of the time, while
employees of the next highest chain, KFC, smiled 78.5% of the time. Basically, you’re starting to see that
they’re almost a little bit of a lifestyle brand , you
come in and its an experience. From the minute you walk in
you’ve got that fresh-face kid who’s, you know, greets you, “thank
you,” you know, they’re polite. They’re walking around helping you
etc, its beyond just a transaction, ita an
entire experience. And I think you’re starting to
see some of the bigger brands, really trying, trying, you know, as much
as they can to mimic that and trying to give
you an experience. Chick-fil-A’s christian values have also
been a source of major controversy in recent years. In July 2012, Chick-fil-A came
under fire after Truett Cathy’s son and the company’s current
president, Dan Cathy, publicly expressed his views
on gay marriage. He told the Baptist Press that
he was guilty of supporting the biblical definition of
a family unit. The comments incited backlash in
the form of boycotts, an LGBT kiss-ins at Chick-fil-A
restaurants around the country. According to a brand’s satisfaction
measurement from YouGov, the company’s rating dropped to its lowest
level in two years following the comments the day of
Dan Cathy’s first comments. Chick-fil-A’s rating was 65,
19 points above average. But four days later, the
chain had fallen to 47. Even though the comments hurt
the brand’s reputation, the company’s annual sales improved. In 2012, the company saw $4
billion dollars in system-wide sales, a 13 percent increase
from the $3.6 billion dollars a year earlier. It also grew 7.4 percent in average sales per unit. Dan Cathy said in 2014 that
he regretted publicly commenting on gay marriage and that he would
stay out of political debates. But in 2017, reports revealed
that Chick-fil-A foundation had donated millions to what critics
say are anti LGBT groups. Such as donations to the Fellowship
of Christian Athletes, a sports ministry that believes homosexual misconduct
is unnatural in the eyes of God. Again, sales remained unharmed. Chick-fil-A pulled in $8 billion dollars in
system-wide sales in 2017, up 15 percent from the previous year. And the company has still
not redeemed itself among LGBT supporters. During the 2019 Pride Parade in
New York City, attendees taped a large X over one
of Chick-fil-A’s storefronts. Between 2017 and 2018,
system-wide sales improved 12.8 percent from $8 billion
dollars to $9 billion dollars. Its sales per store is higher than
any other fast-food chain at $4 million dollars. McDonald’s generates $2.7 million dollars a unit. And in 2019, it became the
third largest restaurant chain in America by system-wide sales. It surged past Wendy’s, Burger King,
Taco Bell and Subway in just one year. Since 2007, Chick-fil-A has doubled
its number of stores to 2,400 restaurants. The majority of its restaurants are
still in the south and southwest. Texas, for example,
tops the chart with 391 restaurants, while
Georgia has 218. From its history of store openings,
however, it seems the company is slowly working to expand
its foothold in other regions. Between 2011 and 2018, for example,
the company grew from having one location in New
York to having 17. 25 years ago, this was a
regional concept that was much smaller. And today, know depending on
what source you use, it very much is the third biggest
restaurant concept in the whole country. And they’re still under-penetrated some
of those heavily populated parts of country. They aren’t all open
on Sundays at all. So they’re a big player. The chain is also a growing
threat to other fast food chains. Technology estimates that Chick-fil-A
tallied over $10 billion dollars in revenue in
2018 and grew 13.5 percent, while McDonald’s
grew just 2.5 percent. In July of 2019, a group
of McDonald’s franchise owners signed a joint letter asking the company to
add a southern style chicken sandwich to its menu The company is an especially big
threat to other chicken focused restaurants. Between 2009
and 2018, Chick-fil-A grew from owning 19.3 percent of the chicken
fast-food market to 38.5 percent. Their chicken venue
doesn’t change. We are experts in chicken and
we will occasionally give you something additional spicy chicken, or
like I said, finish or whatever it is. But by being maniacally focused
on what they do, it allows them to then be
focused on all those extras …the service, the atmosphere. You know, they’re not always searching
for: What’s that next big LTO. The energy of their brand and
what they do day to day is just, once again, growing their
brand from the perspective of excellence. So is there a
ceiling for Chick-fil-A? Truett Cathy passed away in 2014,
leaving his three children to inherit the company and the
$11 billion family fortune. Dan Cathy is now the company’s
chairman and CEO, while his brother Bubba, is an
executive vice president. The private company declined to comment
for this piece, and is secretive about its financial
information and goals. But analysts say that if
Chick-fil-A manages to maintain its growth, there are major regions that
the chain has yet to take over. Chick-fil-A plans to open its
first international location in 2019 in Toronto, and plans to open
at least 15 more locations in Canada. Looking ahead, they just need to
make sure that, you know, they have the the
management infrastructure because, you know, as any company
gets bigger and bigger, it just becomes that much more challenging to
make sure the quality of work remains high. So, you know, if I had
to guess, will they achieve that? Yes. But there’s no 100
percent certainty in the future, and I’m sure they’re aware of
that and trying to work as hard as they can to make sure the
odds of success for them are as high as they can be.


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