Over the weekend, my eldest son sent me a text at midnight, suggesting we buy a Chick-fil-A, because apparently 15-year-olds these days think selling chicken sandwiches is a good, long-term strategy.
He’s not wrong. Chick-fil-A is one of the hottest restaurant brands of any size in the U.S. It has led a revolution that has made the chicken sandwich a must-have item in the fast-food space. It does remarkably strong unit volumes and its Sundays-off strategy helps retain workers and managers.
Yet my tweet about my son’s midnight epiphany generated some discussion about this. That’s because the Chick-fil-A operator is basically just a company employee and doesn’t get equity in their store. When they retire, that equity remains with the brand. My 15-year-old, so the thinking goes, would be better off investing in a different franchise to build long-term wealth.
Neither answer is actually wrong. But let’s tackle the question.
First, we should get this out of the way: Chick-fil-A is a franchise only in the most technical and legal sense of the term. In reality, it’s an operating partner program that controls just about everything. It relies on carefully chosen operators to run its restaurants, believing that their ability to share in profits will result in long-term success. Most operator have just one or two restaurants, so they have a huge financial incentive to remain involved in day-to-day operations.
It’s hard to argue with the strategy. Chick-fil-A has grown immensely in recent years and is now firmly established as the third-largest restaurant chain in the U.S., behind only McDonald’s and Starbucks.
The most remarkable number is the unit sales volume. In 2019 its average annual unit volume was $4.7 million, according to Restaurant Business sister company Technomic. That’s all units.
According to Chick-fil-A's franchise disclosure document, however, its standalone, non-mall locations make a lot more than that, about $6.5 million on average. That is, uh, insane, and a number largely unmatched among fast-food chains not named Portillo’s, which is much smaller. Chick-fil-A has 1,600 of these locations.
For the right to operate these restaurants, a prospective operator pays $10,000 but submits to extensive training.
Not surprisingly, it’s really hard to get a Chick-fil-A. Its franchisee selectivity rivals that of Google or Harvard. In short, if you want to get into Chick-fil-A, you’d better have a Plan B.
But do not underestimate that selectivity as a strong point for the franchise. If you can pick and choose your operators from a huge pool, you can carefully select the best operators. By contrast, companies such as Quiznos or Burgerim were, uh, not selective, and the results at both chains were vastly different even with quality menu items.
Chick-fil-A’s selectivity opens it up to a huge pool of potential franchisees, rather than simply people who have of money. That might be the biggest reason to go for a Chick-fil-A: To get into such a quality franchise systems you have to have a strong net worth from the get-go.
Chick-fil-A pays for everything up front and leases everything back to the operator, who pays 15% of sales and then splits the profits with the franchisor. That profit split likely means the operator of a stand-alone unit makes an awful lot of money.
If the post-royalty profitability of that restaurant is 10%—which I argue is conservative—then the typical operator ends up with $320,000 a year. For someone running just a single restaurant that is a lot of money. Cut that profit to 5% and that’s still $160,000.
Not bad for six days a week and a $10,000 upfront fee.
That said, the operator is bound to Chick-fil-A’s standards and rules, far more than the typical franchisee. And that franchise is likely left with just that single store, though the company has more recently started offering satellite stores and food trucks to existing franchisees.
Still, that salary is the operator’s return on investment. Once they leave Chick-fil-A, that’s it.
It’s a strong return for that $10,000. And Chick-fil-A is a safe investment. Though its sales growth is going to stop eventually—it always does—the brand itself is not going away.
That said, a prospective franchisee can get that same safety by investing in, say, a group of Burger King or Wendy’s restaurants, even if they need three or four of them to equal a single Chick-fil-A’s volume.
Still, those concepts aren’t going away, either, making them relatively safe investments for anyone that has the upfront costs. The operator keeps more of the profits, too.
They also get the equity when they are done, enabling that operator to pass off the stores to the next generation or sell them and retire somewhere warm. Because the operator has equity in the business, they have more control over the state of the operation. And if they are successful they can get opportunities to invest in other concepts, enabling them to diversify their portfolio.
But it takes money to get into those brands, most of which prefer larger, multi-unit operators, anyway. The combination of upfront costs and operator net worth requirements makes those brands out of reach for the vast majority of people.
And though such brands can be relatively safe investments, they are not risk-free. Franchisors can sue franchisees and terminate their agreements over ticky-tack complaints, devastating if not completely wiping out their equity.
They’ve been known to push franchisees into bankruptcy. They can terminate operators who speak out. Some even sell their right-of-first refusal to other franchisees that intend to use them aggressively, hammering the value of existing locations.
Smaller, lesser-known or newer franchises, meanwhile, aren’t safe investments at all—weak ones can drain investors of life savings, as Quiznos did a decade ago. And as we saw with Burgerim there is no recourse for investors when the franchise is blatantly fraudulent.
What’s the best option for my teenager? Well, that depends on how much money he has, which at the moment is not much, and whether his goal is to build long-term, potentially generational wealth or to simply have a high-paying job that provides time off and a comfortable lifestyle.
None of that is guaranteed, however, and in the end, it's important to remember that any franchise is an investment that requires a lot of careful examination. Also, it helps to finish high school first.
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FAQs
We know that the average investment to open a Chick-Fil-A franchise is $1,363,510. Yet in comparison you earn around 15% net profit per year (industry average) ie. $634,000 per year.
How much do Chick Fil franchise owners make? ›
We know that the average investment to open a Chick-Fil-A franchise is $1,363,510. Yet in comparison you earn around 15% net profit per year (industry average) ie. $634,000 per year.
What is the number 1 most profitable franchise? ›
Most Profitable Franchises
- Anytime Fitness. Anytime Fitness is a popular gym brand with a low-cost investment and high revenue potential. ...
- McDonald's. McDonald's franchise program is one of the most established in the fast food industry. ...
- UPS Store. ...
- Jersey Mike's Subs. ...
- Dunkin' ...
- Sport Clips. ...
- 7-Eleven. ...
- Papa John's.
Startup costs for Chick-fil-A franchises are relatively low. That's because, unlike other franchises, Chick-fil-A actually purchases the real estate and all of the equipment required to open the business, and then leases them to you via monthly rent payments.
Is Chick-fil-A the top franchise? ›
The Chick-fil-A franchise is the third largest fast-food franchise, and the largest franchise offering chicken in America.
How wealthy is Chick-fil-A owner? ›
Daniel Truett Cathy (born March 1, 1953) is an American businessman. He is the chairman of fast-food chain Chick-fil-A, which was founded and expanded by his father, S. Truett Cathy. He has a net worth of $7.1 billion as of November 2020.
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| Dan Cathy |
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| Children | 2 |
| Relatives | S. Truett Cathy (father) Bubba Cathy (brother) |
3 more rowsChick-fil-A receives over 40,000 applicants each year. With a Chick-fil-A franchise fee of only $10,000; it initially seems like a great investment. But there are strict Chick-fil-A franchise requirements and a lengthy approval process which results in a less than one percent acceptance rate.
Can you become a millionaire from franchise? ›
The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.
Can you be rich owning a franchise? ›
Wealthy franchisees get to do what they want, as much or as little as they want. And they make plenty of money. That doesn't mean trillions of dollars, but relative to what they've invested, they're getting a great return. Wealthy franchisees live well.
What food franchise makes the most money? ›
McDonald's: $37 billion in system-wide U.S. sales. Starbucks: $13 billion in system-wide U.S. sales. Subway: $10.8 billion in system-wide U.S. sales. Burger King: $10 billion in system-wide U.S. sales.
Chick-fil-A cons
No multi-unit opportunities available. Chick-fil-A owns all property and real estate (you cannot sell your restaurant or pass down to the next generation) History of negative press related to their charitable giving. Your role can feel more comparable to an employee/manager than a business owner.
Why are the royalties so high at Chick-fil-A? ›
Chick-fil-A pays all costs associated with opening a new division ($ 343,000 to $ 2 million), and the franchisee only covers the commission. Hence the high royalty rate. For example, if KFC receives only 5% of its income, then Chick-fil-A receives 15% of its income and 50% of its net profit.
Is it profitable to open a Chick-fil-A? ›
Chick fil A is a very profitable business for the franchisor with retained earnings of $1.25 Billion in 2021.
Who's richer McDonald's or Chick-fil-A? ›
The report estimates Chick-fil-A brought in $11.3 billion in sales in 2019. Starbucks was ranked second, with $21.4 billion in US sales and McDonald's was in the top spot, with a whopping $40.4 billion.
Is Chick-fil-A franchise harder than Harvard? ›
CHARLOTTE, N.C. — Getting into Harvard is difficult but it's nothing compared to opening a Chick-fil-A restaurant. In fact, it's about 30 times more likely that you'll get into Harvard than to be approved for your own Chick-fil-A franchise.
Who are Chick-fil-A Top 3 competitors? ›
Chick-fil-A main competitors are Zax LLC, Chipotle Mexican Grill, and Jack in the Box. Competitor Summary. See how Chick-fil-A compares to its main competitors: KFC has the most employees (820,000).
How much does the owner of Chick-fil-A make a day? ›
A single Chik-fil-A location earns approximately $19,442 per day, meaning an average Chik-fil-A location's annual profits are slightly over $7 million. The franchise has thousands of locations across the country, meaning that it is pulling in millions of dollars daily.
Who owns the majority of Chick-fil-A? ›
Andrew Cathy, Truett's grandson, serves as CEO. Just as Truett built Chick-fil-A alongside his wife and children, several more second and third generation Cathy family members are carrying on that tradition, while others pursue talents in other fields.
Does Chick-fil-A have any debt? ›
Chick-fil-A has accomplished all of this since it was founded in 1946. The gross revenue for their first day of operations was under $50.00. They now make over $5 billion and are debt free.
How many Chick-fil-A franchises can one person own? ›
Chick-fil-A, Inc. offers qualified individuals the opportunity to operate a single Chick-fil-A® franchised restaurant. The restaurant can be located in a mall, or it could be a free-standing, Drive-thru only, or an in-line location. We do not offer multi-unit franchise opportunities to initial applicants.
Chick-fil-A competes with the biggest chains in sales, despite having thousands of fewer locations. The average customer eats fast food every other day, but only visits Chick-fil-A 11 times per year.
How involved are Chick-fil-A owners? ›
Chick-Fil-A owns it and you're considered an “Operator.” This means you can't sell your Chick-Fil-A location or pass it on to anyone. Chick-Fil-A insists that the Franchise owners of their fast food restaurants work at their location full-time running the day-to-day operations.
Do franchise owners keep profits? ›
As a franchisee, you earn money from the franchise's profits. This means that after your overhead costs are covered, you can draw a salary from the remaining profits. Most franchises have a series of expenses to consider.
Do franchise owners take a salary? ›
Most franchise owners don't receive a salary. Instead, your earnings as an owner come from the excess revenue after overhead costs to support the operation of the business are paid.
Is owning a franchise a good side hustle? ›
Depending on the franchise opportunity, and the circ*mstances of your situation, it's quite possible to keep your full-time “Day Job” while earning a passive income. This extra discretionary income may come in handy for numerous projects and pursuits you might otherwise have to forego.
What is a negative of owning a franchise? ›
Less flexibility than running a business on your own.
Some franchisors exert a level of control that you may find too restricting. Franchisees often have restrictions on where they can sell their products or services, as well as requirements on the suppliers to be used or operating hours.
What is the success rate of owning a franchise? ›
Franchise Success Is Nuanced
Bates looked at more than 20,500 small businesses and found that 65.3% of franchises survived after four years compared to 72% of independent businesses. Retail franchises had a lower survival rate of 61.3% compared to 73.1% of independent retail locations.
How much does the average franchise owner make a year? ›
On average, typical franchisees make about 80,000 dollars a year, not considering tax and expenses. Only a small part of franchise owners make over $200,000 annually, more than fifty percent of franchisees make about $50,000. The industry you're operating in impacts the amount of profit as well.
What fast-food pays the most? ›
Highest paid fast-food jobs
- Burger King. If you want to work at Burger King, you can expect to perform a variety of duties. ...
- In-N-Out Burger. At In-N-Out Burger, you can expect a team-friendly environment and a variety of flexible shifts. ...
- Wendy's. ...
- Chick-fil-A. ...
- Arby's. ...
- Domino's. ...
- McDonald's. ...
- Taco Bell.
The leading quick service restaurant chain in terms of sales per unit was Chick-fil-A, with 5.01 million U.S. dollars worth of sales per unit in 2020. Chick-fil-A is a southern American fast food chain specializing in chicken sandwiches.
8 jobs in the food industry with above-average pay
- Sous chef. National average salary: $50,239 per year. ...
- Dietitian. National average salary: $50,363 per year. ...
- Sommelier. National average salary: $51,137 per year. ...
- Restaurant manager. ...
- Director of dining services. ...
- Head chef. ...
- Restaurant owner. ...
- Food service manager.
Specializing in chicken sandwiches, Chick-fil-A was by far the leading quick-service chicken restaurant chain in the United States - the company's systemwide sales in the U.S. came to more than double its globally famous competitor Kentucky Fried Chicken (KFC).
How reliable is Chick-fil-A? ›
According to its press release, Chick-fil-A secured the number one spot for the seventh consecutive year, even though their customer satisfaction score dropped by 1% from 2020 to 83. The industry standard customer satisfaction rating remained 78.
What is the #1 fast food chain in America? ›
McDonald's Corporation is the largest fast-food chain. As of 2022, Starbucks is the largest restaurant company by revenue, with 35,000 stores globally.
Who makes more money Starbucks or Chick-fil-A? ›
chick fil A makes more per restaurant than McDonald's, Starbucks, and Subway combined. they make $5.2000000 per. per restaurant, top line. and here's what's crazier.
How long is Chick-fil-A franchise agreement? ›
Term of Agreement and Renewal: The initial franchise term terminates on the earlier of December 31 of year the agreement is signed or when the lease expires, if earlier. The term is automatically extended for one-year periods unless written notice given at least 30 days prior to end of existing term by either party.
What percentage of franchise does Chick-fil-A take? ›
Chick-fil-A has a distinct franchise business model. The Chick-fil-A franchise fee is a very accessible at $10,000. Chick-fil-A corporation will pay for land, construction and equipment for a restaurant, then rent it to the franchisee for 15% of sales plus 50% of pretax profit remaining.
What is the payback period of a franchise? ›
Basically, calculate the payback period, which is the period of time it takes for your franchise to pay off or to fully return your total investment. In a simple example, if you invest $150,000 in a franchise, and it delivers a net income of $75,000 per year, then the payback period of this franchise is 2 years.
Can I buy an in n out franchise? ›
Among those is In-N-Out Burger, a regional chain of fast-food restaurants located in California and the Southwest. But if you were thinking of buying into In-N-Out franchise, you can scratch that name off your list, because In-N-Out does not franchise, and, its president has said, it never will.
What state has the most Chick-fil-A? ›
The state with the most number of Chick-Fil-A locations in the US is Texas, with 471 restaurants, which is about 16% of all Chick-Fil-A restaurants in the US.
According to trend experts and data scientists, nostalgic menu items will be huge in 2023. McDonald's is still the most profitable fast-food restaurant in the world, with nationwide sales of $46.0 billion.
What is the most profitable Chick-fil-A location? ›
Atlanta, Georgia is Chik fil e's highest grossing city. It sells the most chicken sandwiches.
What is the highest level Chick-fil-A? ›
Chick-fil-A One® has four membership tiers: Chick-fil-A One Member, Chick-fil-A One Silver Member, Chick-fil-A One Red Member, and Chick-fil-A One Signature Member.
Is Chick-fil-A the #1 in US? ›
The American Customer Satisfaction Index released its list of best fast-food restaurants, and Chick-fil-A took the top title for the seventh straight year. Of the fast-food places, also known as limited-service restaurants, Chick-fil-A came in first place with a score of 83 out of 100.
What is the number 1 meal from Chick-fil-A? ›
In 2021, the famous Chick-fil-A® Chicken Sandwich reclaimed the number one spot as the most popular entrée on the menu, surprisingly outranking Chick-fil-A® Nuggets after their years-long reign at the top of the list.
Why is Chick Fil so popular? ›
Chick-fil-A thrives because customers value the pleasant dining experience they have come to count on from the restaurant, an experience that likely results from the top-down corporate culture of the company. The fact that their food consistently receives high marks for taste doesn't hurt, though.
What is the average sales of a Chick-fil-A store? ›
On average, a Chick-Fil-A franchise makes $4,227,417 in sales per year.
Does it cost $10000 to own a Chick-fil-A franchise? ›
While operating a Chick-fil-A restaurant requires a relatively modest $10,000 initial financial commitment ($15,000 CAD in Canada), it requires a holistic commitment to own and operate the business in a hands-on manner. We are in the restaurant industry - the quick-service restaurant industry, at that.
How much do franchise owners make? ›
On average, typical franchisees make about 80,000 dollars a year, not considering tax and expenses. Only a small part of franchise owners make over $200,000 annually, more than fifty percent of franchisees make about $50,000. The industry you're operating in impacts the amount of profit as well.
What is the acceptance rate for Chick-fil-A franchise? ›
Chick-fil-A calls their franchisees “operators” and becoming one isn't easy. Chick-fil-A's acceptance rate rivals Harvard and Stanford—less than 1% of franchisee applicants are accepted. If you believe you can beat the odds, stick around. We're breaking down what you need to know about opening a Chick-fil-A franchise.
Most valuable QSR brands worldwide 2022
McDonald's was the most valuable fast food brand in the world with an estimated brand value of about 196.5 billion U.S. dollars in 2022. That same year, the brand value of Starbucks amounted to approximately 61.7 billion U.S. dollars.
What is the most profitable fast-food in the US? ›
These are the largest fast-food chains by revenue in the United States, including all system-wide sales (which includes franchise sales) as reported by QSR Magazine: McDonald's: $37 billion in system-wide U.S. sales. Starbucks: $13 billion in system-wide U.S. sales. Subway: $10.8 billion in system-wide U.S. sales.
Which restaurant makes the most money? ›
In fact the highest grossing restaurant in the U.S, Tao Las Vegas, racks in annual sales of around $42,000,000 from 226,146 meals served, bringing them a cheque average of $90.
Is owning a franchise a full time job? ›
Buying a franchise doesn't have to mean making a full-time commitment. Believe it or not, there are many franchises that can be run on a part-time basis, especially when you first start out.
What happens if you buy a franchise and it fails? ›
Often the best answer to a franchise that is not succeeding is for the franchisee to sell the business to a third party who becomes the new franchisee for that territory. This allows the failing franchisee to terminate its obligations under the franchise agreement and under any lease.
How many franchises fail in 10 years? ›
Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
Can you break away from a franchise? ›
There are at least a few options: (1) determine whether or not you have any leverage you can use against the franchisor so that it will allow you to exit the business; (2) sell the business to a third party or existing franchisee; (3) sell the business back to the franchisor; or (4) find out if the franchisor is ...
