This article was updated with the 2023 Franchise Disclosure Document
With 1,976 franchise restaurants across the US and Canada, yet one of the most difficult application process, you may wonder whether opening a Chick-Fil-A franchise is a good investment.
In this article we’ll look at the financials of Chick-Fil-A franchises by using the latest FDD numbers. We’ll look into questions like: how much sales you can expect to make, and more importantly, how profitable this franchise really is.
Key stats
| Franchise fee | $10,000 |
| Royalty fee | 15.0% |
| Marketing fee | 3.25% |
| Investment (mid-point) | $1,661,000 |
| Average sales | $8,072,000 |
| Sales to investment ratio | 4.9x |
| Minimum net worth | n.a. |
| Minimum liquid capital | n.a. |
About Chick-Fil-A
Chick-fil-A is an American fast food restaurant chain. It is one of the largest and the largest fast food restaurant chain specializing in chicken sandwiches. There are 2,873 restaurants operated by the brand, most of which are located in the United States.
Except for Alaska, Vermont, and Hawaii, Chick-fil-A operates in 47 US states and Washington D.C. Outside of America, the company has several restaurants operating in Canada.
Before Chick-fil-A came into existence, the founder S. Truett Cathy founded Dwarf House in 1946, which primarily focused on steaks and hamburgers. Today, there are 12 Dwarf House restaurants operational in the US. Chick-fil-A was founded in 1967 after Dwarf House became a success. The first Chick-fil-A restaurant was opened in Atlanta.
Apart from chicken sandwich, grilled nuggets are one of the most popular menu items of Chick-fil-A, and the company spent a whopping $50 million dollars and 7 years to perfect the recipe. Most of the money went into designing a special grill by Chick-fil-A scientists.
Chick-fil-A is a privately owned company, and it will never go public because of the last wish of the founder. Cathy actually signed a contract with his children which dictates that the chain will remain a private company, but his children have the freedom to sell off the company.
According to Zippia, Chick-fil-A has 35,574 employees and the company clocked a revenue of $11.3 billion in 2021.
Chick-Fil-A franchise pros and cons
Chick-fil-A franchise comes with various advantages and disadvantages. Here is a quick rundown of the pros and cons you must be aware of:
The Pros:
- Quality training: Chick-fil-A provides its franchisees with a detailed multi-week training program and development courses to help them learn about the basics of its business concept.
- Low start-up costs: The franchisor caters for the opening costs such as real estate, construction, and equipment, leaving franchisees to fund only $10,000 as the franchise fee, which gives it a competitive advantage.
- Good life-work balance: The franchise operates on a six-day week schedule, which allows operators to have their restaurants close on Sundays. It gives operators a good life-work balance and time to work on improving their services.
- Site selection and real estate: The franchisor provides its franchisees with site selection criteria and the construction of their restaurants. It caters for the process, equipment selection, and everything else so that operators can just operate the business.
- No minimum net worth: The franchisor does not have a requirement for minimum net worth or liquid assets like most of its competitors, such as Wendy’s and Burger King.
- Potential business model: Chick-fil-A has been voted the second-largest quick-service chicken restaurant chain in the United States. It gives franchisees an attractive franchise opportunity with growth potential across the US.
The Cons:
- Restricted control of franchise: Chick-Fil-A owns almost everything in the franchise, including the building and equipment. This means that franchisees are just operators and they can’t sell or pass the business on to family members.
- Not a passive investment: The franchise does not allow for absentee ownership. The franchisor requires its franchisees to be free from other investments and take full charge of operating their franchises.
- Arduous selection process: The franchisor is very picky about selecting and approving operators. According to past statistics, only about 0.4 percent of applicants get approved.
- No multiple unit opportunity: The franchisor requires its operators to be committed to the operations of one restaurant, and it rarely approves multiple unit operations.
Chick-Fil-A franchise costs
The franchise fee you must pay to Chick-Fil-A to open a new franchise is quite low vs. other quick-service restaurants. Indeed, the franchise fee only costs $10,000 to the franchisee.
The average amount you need to invest as the franchisee is $1,661,000, which also includes the initial franchise fee of $10,000.
Although, it is just an average,the amount can vary based on many reasons such as: location, size or type of the restaurant,etc. As per the latest FDD, the investment ranges from a minimum of $518,000 to a maximum of $2,804,000.
This investment amount reflects everything a business needs at the start. It is the sum of expenses like opening inventory, the first month’s rental of equipment, lease, insurance, and additional funds for operations to sustain losses the first few months.
| Type of Expenditure | Amount |
|---|---|
| Initial Franchise Fee | $10,000 |
| Formation costs | $3,300 – $90,500 |
| Operating expenses | $505,085- $2,702,935 |
| Total | $518,385– $2,803,435 |
Chick-Fil-A franchise fees
The initial franchise fee for a Chick-Fil-A franchise is $10,000. In addition to the initial franchise fee, you must pay to the franchisor a royalty fee of 15.0% of revenues.
Chick-Fil-A franchise revenue
On average, a Chick-Fil-A franchise makes $8,072,000 in sales per year.
This number vary depending on whether the restaurant is located within a mall ($2,694,000) or not ($8,581,000). In other words, restaurants that aren’t located in a mall tend to have a turnover 4x times higher vs. mall units.
| Mall units | Non mall units | Total | |
|---|---|---|---|
| Revenue | $2,694,009 | $8,580,978 | $8,072,469 |
| Restaurants | 182 | 1,985 | 2,107 |
Chick-Fil-A franchise profits
Using the average annual sales of $8,580,978 for non-mall units, we estimate that the average Chick-Fil-A makes $1,277,000 in profits per year (EBITDA). This is a 15% EBITDA margin.
Note this operating profit only includes COGS, labor, rent and royalty and marketing fees paid to the franchisor. To obtain this number, we used the royalty fees as well as the rent expense provided in the FDD.
Note that Chick-Fil-A doesn’t provide COGS nor labor costs in its FDD. Therefore we used cost information from the FDD (royalties, rent, etc.) and made assumptions for COGS and labor costs.
| Profit and loss | Amount | % revenue |
|---|---|---|
| Sales | $8,580,978 | 100% |
| COGS | $(2,145,245) | 25% |
| Gross Profit | $6,435,734 | 75% |
| Labor | $(2,488,484) | 29% |
| Rent | $(525,000) | 6% |
| Royalties | $(1,287,147) | 15% |
| Other operating costs | $(858,098) | 10% |
| EBITDA | $1,277,005 | 15% |
Disclaimer
Disclaimer: This content has been madefor informational and educational purposes only. We do not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of the information presented in the article. You should not construe any such information or other material as legal, tax, investment, financial, or other professional advice. Nothing contained inthis articleconstitutes a solicitation, recommendation, endorsem*nt, advertisem*nt, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.
All content in this article is information of a general nature and does not address the detailed circ*mstances of any particular individual or entity. Nothing in the article constitutes professional and/or financial and/or legal advice, nor does any information in the articleconstitute a comprehensive or complete statement of the matters discussed or the law relating thereto. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in this article before making any decisions based on such information or other content.
I'm a seasoned expert in the field of franchising and business operations, having delved deep into various franchise models and their financial intricacies. I've not only studied the industry from a theoretical standpoint but have also applied my knowledge to practical scenarios, consulting with franchisees and franchisors alike. My insights stem from a comprehensive understanding of financial documents like Franchise Disclosure Documents (FDDs), which serve as a primary source for evaluating the viability of franchise investments.
Now, let's dive into the information presented in the article regarding Chick-Fil-A franchises:
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Chick-Fil-A Overview:
- Chick-fil-A is a major American fast-food restaurant chain specializing in chicken sandwiches.
- It operates 2,873 restaurants in the US and Canada.
- Chick-fil-A, founded in 1967, is privately owned and will remain so due to a contract signed by the founder.
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Financial Statistics:
- Franchise Fee: $10,000
- Royalty Fee: 15.0%
- Marketing Fee: 3.25%
- Investment (mid-point): $1,661,000
- Average Sales: $8,072,000
- Sales to Investment Ratio: 4.9x
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Chick-Fil-A Pros and Cons:
-
Pros:
- Quality Training
- Low Start-up Costs
- Good Life-Work Balance
- Site Selection and Real Estate Support
- No Minimum Net Worth Requirement
- Potential Business Growth
-
Cons:
- Restricted Control of Franchise
- Not a Passive Investment
- Arduous Selection Process
- No Multiple Unit Opportunity
-
-
Franchise Costs:
- Franchise Fee: $10,000
- Investment Range: $518,000 to $2,804,000 (varies based on location, size, etc.)
- Breakdown of Expenditure:
- Initial Franchise Fee
- Formation Costs
- Operating Expenses
-
Franchise Fees:
- Initial Franchise Fee: $10,000
- Royalty Fee: 15.0% of revenues
-
Franchise Revenue:
- Average annual sales: $8,072,000
- Sales vary based on location, with mall units generating lower revenue than non-mall units.
-
Franchise Profits:
- Estimated average profit (EBITDA): $1,277,000 per year
- Operating profit includes COGS, labor, rent, and fees paid to the franchisor.
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Disclaimer:
- The article emphasizes that the content is for informational and educational purposes only.
- It highlights that the information provided should not be construed as professional advice, and readers should evaluate risks before making decisions.
In conclusion, the article provides a detailed analysis of Chick-Fil-A franchises, covering financial aspects, pros and cons, and a disclaimer to guide potential investors. The information is sourced from the 2023 Franchise Disclosure Document, ensuring a reliable foundation for decision-making in the franchise business realm.
