If you’ve ever considered opening a Chick-fil-A franchise, you may be wondering if it’s a good investment. With nearly 2,000 locations across the US and Canada, Chick-fil-A has a reputation for having one of the most rigorous application processes in the industry. In this article, we’ll delve into the financials of Chick-fil-A franchises using the latest FDD numbers. We’ll explore how much sales you can expect to make and, more importantly, how profitable this franchise really is.
The Basics of Chick-fil-A
Chick-fil-A is a major American fast food restaurant chain specializing in chicken sandwiches. With over 2,800 locations in the United States and several restaurants in Canada, Chick-fil-A is one of the largest fast food chains in the world. The company’s roots trace back to 1946 when founder S. Truett Cathy opened the Dwarf House, which initially focused on steaks and hamburgers. After the success of the Dwarf House, Chick-fil-A was established in 1967, with the first restaurant opening in Atlanta.
Chick-fil-A is well-known for its chicken sandwiches, but its grilled nuggets are also a fan favorite. The company invested a staggering $50 million and seven years to perfect the recipe, including the development of a special grill by Chick-fil-A scientists.
As a privately-owned company, Chick-fil-A will never go public due to the late founder’s final wish. While the chain remains private, the founder’s children have the freedom to sell the company if they choose to do so. According to Zippia, Chick-fil-A employs over 35,000 people and generated a revenue of $11.3 billion in 2021.
Pros and Cons of Chick-fil-A Franchising
Before diving into the financial details, it’s essential to consider the advantages and disadvantages of owning a Chick-fil-A franchise.
The Pros:
- Quality Training: Chick-fil-A provides detailed multi-week training programs and development courses to ensure franchisees understand the business concept thoroughly.
- Low Start-Up Costs: Unlike many competitors, Chick-fil-A covers the opening costs, such as real estate, construction, and equipment. As a franchisee, you need only $10,000 for the franchise fee, giving you a competitive advantage.
- Good Work-Life Balance: Chick-fil-A operates on a six-day week schedule, allowing operators to close their restaurants on Sundays. This arrangement provides a better work-life balance and time to focus on improving service.
- Site Selection and Real Estate Support: The franchisor assists franchisees with site selection criteria and restaurant construction. Chick-fil-A handles the entire process, including equipment selection, so operators can concentrate on running the business effectively.
- No Minimum Net Worth Requirement: Unlike many competitors such as Wendy’s and Burger King, Chick-fil-A does not impose a minimum net worth or liquid assets requirement.
- Business Potential: As the second-largest quick-service chicken restaurant chain in the United States, Chick-fil-A offers an attractive franchise opportunity with growth potential nationwide.
The Cons:
- Restricted Control: Chick-fil-A retains ownership of nearly everything in the franchise, including the building and equipment. This means franchisees are merely operators and cannot pass the business on to family members or sell it.
- Not a Passive Investment: Chick-fil-A does not allow absentee ownership. Franchisees are required to focus solely on operating their franchises and cannot have other investments.
- Selective Application Process: The franchisor is highly picky when it comes to selecting and approving operators. Historical data suggests that only about 0.4 percent of applicants are successful.
- Limited Multi-Unit Opportunities: Chick-fil-A typically approves operators committed to running a single restaurant and rarely allows multiple unit operations.
Franchise Costs
When it comes to Chick-fil-A franchise costs, the franchise fee is relatively low compared to other quick-service restaurants. The franchise fee for opening a new franchise is a mere $10,000.
As for the total investment amount, it averages around $1,661,000, including the initial franchise fee. However, this figure can vary depending on factors such as location, restaurant size/type, and other variables. According to the latest FDD, the investment ranges from a minimum of $518,000 to a maximum of $2,804,000.
The investment amount covers all the initial costs involved in starting a business, including opening inventory, equipment rental, lease, insurance, and additional funds for operations to sustain any initial losses.
Franchise Fees
Chick-fil-A Revenue
On average, a Chick-fil-A franchise generates $8,072,000 in annual sales. However, it’s important to note that this figure can vary depending on whether the restaurant is located within a mall or not. Non-mall units tend to have a turnover four times higher than mall units, with sales totaling $8,581,000.
Franchise Profits
Based on the average annual sales of $8,580,978 for non-mall units, we estimate that the average Chick-fil-A franchise makes $1,277,000 in profits (EBITDA) per year. This represents a 15% EBITDA margin.
It’s important to note that this operating profit only includes expenses like cost of goods sold (COGS), labor, rent, and royalty and marketing fees paid to the franchisor. COGS and labor costs are not provided in Chick-fil-A’s FDD, so we made assumptions based on the information available.
Conclusion
Opening a Chick-fil-A franchise can be a lucrative investment with its strong revenue and profit potential. However, it’s crucial to consider the pros and cons, as well as the specific costs involved. With its comprehensive training programs, low start-up costs, and potential for growth, Chick-fil-A offers an attractive franchise opportunity.
Remember that the information presented here is for informational and educational purposes only. It’s important to conduct thorough research and seek professional advice before making any financial decisions. Visit Garrity Traina for more information on franchise opportunities.
