Top 6 reasons to NOT Buy a Chick-fil-A Franchise - By Robert Edwards
Let me begin by saying there is a lot that Chick-fil-A has done right. Their earnings per store or average unit volumes are at the top of the QSR50 at 4.4 million. To put that into perspective the average unit volume of a Subway store - lets go way down second from the bottom of the chart -uh-oh at a paltry $422,000. So Chick-fil-A locations earn 10 times what a Subway earns! Now for those of you who follow this channel know I am not a fan of Subway, but if I had to choose between the two I would invest in a Subway before Chick-fil-A even despite those earnings. I'll reveal why in a moment.
Chick-fil-A also has a very low franchisee dropout rate at less than 5% and many operators are with the company for 20 years or more. Employee turnover is also low at only 60% compared to typical food industry attrition rate of over 100%. Chick-fil-A really seems to take care of their employees and provides incentive programs for hard workers that show initiative to move up the ladder. Considering how effective this is it's surprising how few companies offer this.
Chick-fil-A has just over 2000 restaurants and every one of them closes on Sundays. Despite having one less day to sell, Chick-fil-A has higher total revenues than many franchises open Sundays and with double the locations. The corporate office doesn't hide the fact they are a Christian organization that believes in traditional marriage and family values and they got some heat recently for opposing same sex marriages and sending millions to organizations that lobby against it.
Chick-fil-A was actually started as the Dwarf Grill in 1946 and opened by S. Truett Cathy, The first Chick-fil-A opened in 1967 so they have a long history and experience in franchising.
So it looks like for some people we have the American Dream here - Christian values, closed on Sundays , 4 million dollars annual volumes per store, happy employees and low franchisee turnover AND did I mention a super low franchise fee of only $10,000! Sign me up!!
Interesting to note: Despite all these good things you will never see investor groups, single investors, brokers, sports celebrities or anyone looking to build a franchise empire buying a Chick-fil-A. Why is that? Lets look at those Top 6 reasons you may not want to buy a Chick-fil-A:
1. You absolutely need to be at the store and run the store. The store becomes your life. One of the benefits of franchising is the ability to eventually or even initially operate your store in a passive capacity, meaning it will still operate and generate revenue while you are doing other things. Some franchises are better at this than others but being able to have your business operate while you run other businesses, work a career, travel or whatever else, is a major benefit of franchising. In situations like this where franchisees are required to work in the store we call this "buying a job" and with Chick-fil-A you will be required to work in the store.
2. You are not allowed to operate multi units or any other businesses. Recently we uploaded a video on a young college student named Dylan Patel - now he is still in College and already owns and operates 3 franchises between classes and after school. We see many people building franchise empires this way either through multi-units or master franchising. With Chick-fil-A you can not own multi units. Now we have heard there are a few operators in the system that own a couple of stores but apparently you need to be an owner for over 10 years and your store in the top 1/3 to be considered. Thats a slow empire.
3. You own nothing and build no equity. This is huge. In a typical franchise arrangement after you have spent years working hard, building up a business when it's time to retire or move on you can sell that business or pass it on to your family. Franchises that are successful can be worth millions. In the case of Chick-fil-A however you own nothing and because you have no equity in the business you have nothing to sell. Ownership is always retained by corporate - not you. So are you really an owner? Its interesting that on Chick-fil-A's own website they they don't refer to franchisees as owners but"operators" and many states have opposed Chick-fil-A stating their franchisees are actually employees not franchise owners at all and therefore entitled to employee benefits.
4. Chick-fil-A tells you where you will open the store. If you are not prepared to move to where the next store is slated to open you will likely wait a long time.
5. Low earnings. Now Chick-fil-A is quite secretive regarding their facts and figures so information is difficult to come by, but it appears that the general consensus is that owners receive between 5%-7% of the gross. So lets put that in perspective at 5% if your store does 1 million you get $50,000, 2 million you get $100,000 3 million you get $150,000 and 4 million you get $200,000. So that would put the average store owner Chick-fil-A earnings at $200,000 per year at 5% and $240,000 per year at 6%. Now a quarter million a year is a pretty good salary, but from a franchise ownership perspective only receiving 6% of the gross is very low.
6. Your chances are virtually zero to ever get one. Now again numbers are hard to come by but from what we have heard Chick-fil-A receives about 20,000-50,000 applications per year, and awards only 60-100. So the chances of you ever actually getting one even if you are a christian family man who agrees to abide by their corporate prayer policy your chances are slim to none. If you don't have solid references, verifiable family history, roots in the community or are gay. Forget it.
In fairness to Chick-fil-A there are two ways to look at this and both are valid. One, that the company is giving hard working, strong valued people an opportunity to earn pretty good money and live a solid Christian valued lifestyle. And as we started the video they do have a lot of great things going for them. Another way to view it is that Chick-fil-A is using hard working folks, keeping most of the store earnings, disallowing expansion or growth by owning other businesses or more locations. But let's be honest - would each store be so successful if owners were focusing on other businesses? I highly doubt it. So we really have a catch-22 here. But based on their success it would appear Chick-fil-A has made all the right decisions.
Now hopefully after this article you are beginning to understand why when you call us and ask "What is the best franchise" we can't answer. Depending on your goals, dreams, budget, objectives and even religious views in this case Chick-fil-A could be the worst choice ever or the greatest franchise in the world. We don't make the decisions we just give you the facts and let you decide which is the best franchise.
Now for those of you who do think Chick-fil-A is a great opportunity next article and video we will show you how one man did achieve his dream of ownership and what he did to make that dream happen. Stay tuned!