Chick-fil-A is a typical example of a company that believes in “what is worth doing is worth doing well”. Chick-fil-A’s business model is centered on customer service and providing a small-size menu. Unlike most restaurants with a wide range of food menus used as a strategy to attract a larger customer base, the Chick-fil-A business model remains laser-focused on selling chicken sandwiches.
The capital A in the name is referred to as “A-top quality” and the emphasis on customer service has made the business one of the best fast food industries with commendable customer satisfaction. The business retains ownership of all its restaurants, while selected franchisees with an initial investment of $10,000 will also go through a series of meticulous training that qualifies them to operate the business.
The business racks up billions every year with an average of 8% increment yearly.
A brief history of Chick-fil-A:
A restaurant was opened in 1946 by the former CEO S.Truett Cathy. The restaurant is located in Hapeville Georgia, which shares a close distance from the former Ford Motor Company Atlanta Assembly plant. The employees of the motor company were major patrons of the business.
In 1961, Cathy stumbled upon a pressure fryer that could cook the chicken sandwich similarly to the time it took to cook a fast-food hamburger, thus he decided to venture primarily into the chicken sandwiches. He registered the brand and called it Chick-fil-A Inc. The company’s flagship menu item was the fried chicken sandwich as it also trademarked the slogan “We didn’t invent the chicken, just the chicken sandwich”. The company was the first national chain to flagship the fried chicken sandwich.
The sandwich became licensed in 1964 to over fifty eateries, unfortunately, in 1967, the right to sell the sandwich was withdrawn when the first stand-alone eatery was opened in Greenbriar Mall, Atlanta. From the ’70s and ’80s, the chain expanded by opening locations in malls’ food courts, to independently expand outward.
The company has been actively involved in major CSR (Corporate Social Responsibility) such as:
- Titled sponsors of the Peach Bowl and the College football bowl played on New Year’s Eve in Atlanta;
- A key sponsor of both the SEC and ACC college athletics events.
In the 21st century, Chick-fil-A has shown that the business is concerned about customer welfare and satisfaction.
- Chick-fil-A was the first fast-food restaurant to completely go trans-fat-free in 2008;
- The business opens 6 times a week, but broke the tradition by opening on a Sunday to prepare meals for passengers left stranded during a power outage at Atlanta Hartsfield-Jackson International Airport on December 17, 2017;
- Also, the business opened on a Sunday to honor the birthday wishes of a boy with cerebral palsy and autism on January 13, 2019.
Who Owns Chick-fil-A:
Chick-fil-A is the Cathy family business, passed on from the founder S.Truett Cathy to his two sons, Dan and Bubba Cathy. Currently, Dan is the chairman, Andrew Cathy (the son of Dan Cathy) is the CEO, and Bubba remains the executive vice president.
How Chick-fil-A makes money
Chick-fil-A makes money majorly from two sources: 15% of the total sales from the franchisees and also 50% from all their franchisees. The returns are one of the highest in the food chain industry, and there is a reason why it is so.
Chick-fil-A operates its franchise in an unusual way compared to other companies in the food national chain. Other food chain industries operate by ensuring that the franchisees are valued at a certain net worth before paying a huge amount of money to use their brand name in exchange for a percentage cut in sales.
The franchisee is responsible for acquiring and developing properties with their own money, in simple terms the brand contributes 20% to 30% of the business while the franchisee takes the entire 70% to 80% of the business expenses and costs which are often six digits above, resulting to why franchisee earns a majority of the profits and royalties paid to the fast-food franchises are within 4% to 8%, excluding the 2% to 6% of the advertising fee.
Chick-fil-A is quite the opposite as it has no minimum net worth requirements from the franchisee often referred to as operators, its franchise fee is as low as $10k, and Chick-fil-A is responsible for the acquiring and development of properties, often runs from $343k to $2m. In simple terms, the Franchisee contributes less than 10% while the business contributes above 90%. Chick-fil-A retains ownership of the business while the operators manage the affairs of the business, the business has the highest return of 15% of sales, plus 50% of any profit made.
Chick-fil-A’s Business Model Canvas
Chick-fil-A’s Customer Segments
Chick-fil-A’s customer segments consist of:
Buyers: These set of people are loyal customers to the traditional quality of the brand and are satisfied with the menu and customers care service;
- Operators: The operators are a set of selected people who have proven to be competent and capable of leading and managing an outlet, they serve as ideal candidates for the brand.
Chick-fil-A’s Value Propositions
Chick-fil-A’s value propositions consist of:
- Customer communication: The business prioritizes its communication channel with customers by developing innovative ways of tracking customers’ feedback to ensure transactions are executed seamlessly and customers are satisfied. Examples of tracking channels are the Chick-fil-A one app, receipt survey, and a very active social media presence;
- Operators’ service: operators are not confined to their office as they are actively involved in monitoring customers’ experience, their accessibility allows for on-spot decision-making from customers’ requests.
Chick-fil-A’s channels consist of:
- Social media
- Franchisees/ Restaurants
Chick-fil-A’s Customer Relationships
Chick-fil-A’s customer relationships consist of:
- Through social media
- Customer service
- Community service
Chick-fil-A’s Revenue Streams
Chick-fil-A’s revenue streams consist of:
- Profit from restaurant sales
- License fee
Chick-fil-A’s Key Resources
Chick-fil-A’s key resources consist of:
- Supplier network
- Real estate
- +2,000 locations (as of 2021)
Chick-fil-A’s Key Activities
Chick-fil-A’s key activities consist of:
- In-store product sales
- procedures for payment processing
- Research and development of new products and services
Chick-fil-A’s Key Partners
Chick-fil-A’s key partners consist of:
- SEC and ACC
- West Coast farms
- Barn Raised Chicken Farms
- The Children’s Cancer Center
Chick-fil-A’s Cost Structure
Chick-fil-A’s cost structure consists of:
- Franchise fee of $10,000
- Marketing fee
- Fixed and current assets cost
- Salary and inventory maintenance
- McDonald’s: The most famous and largest fast food restaurant in the world, located in over 100 countries, with over 38,000 locations and serving 70 million customers daily. The restaurant is mostly known for its hamburgers;
- KFC: This company is second only to McDonald’s in size, with over 22,621 locations in 150 countries, and has about 60% of its fast-food under franchise. The restaurant is majorly known for its fried chicken special, which is a unique species with its secret recipe;
- Wendy’s: The business has over 5,938 restaurants — it is the third-largest hamburger seller according to the ranking in the U.S. —, and it maintains a competitive advantage by focusing on price minimization and larger quantity size. Compared to Chick-fil-A, it has larger patties;
- Subway: The business is strictly franchised, as it was developed by a college professor and a student. The majority of the operators are all franchisees, with over 21,700 locations. The unique feature of Subway’s fast food is its variety of vegan food.
Chick-fil-A’s SWOT Analysis
Below, there is a detailed swot analysis of Chick-fil-A:
- Services: It is no secret that the biggest strength of Chick-fil-A is the time and energy invested in providing excellent customer service, this pattern is often unusual to other fast food restaurants, thus uniquely branding Chick-fil-A services;
- Menu: Chick-fil-A has perfected its chicken sandwiches, which kept its customers loyal to the brand over the years;
- Sponsorships and Donations: The Brand is known to be a key sponsor of some major events and also a major donor to a charitable non-profit organization
- Ownership: The unconventional franchise system, ensure the business still retains its major influence in the brand decision-making;
- Satisfied employees: The business pays attention to its employees as it provides opportunities for career advancement and reserves funds in case of any emergency.
- Menu options: The menu is limited, therefore reducing the potential of having more customers interested in other varieties of food;
- Low global presence: The business has not fully taken advantage of the global market, as it is majorly known only in the U.S.;
- Pricing: Compare to competitors, Chick-fil-A prices are on the high side and are not popular with the lower income group in the U.S.;
- Rigid structure: Chick-fil-A retained its traditional structure over the years, making it a bit difficult for innovation, the business is somewhat comfortable with its approach thus giving less opportunity for change.
- Expansion: The business has the potential to expand internationally so as to increase profit and global awareness;
- New menu: the introduction of a new menu would expand customers’ patronage;
- Healthier food: The public is aware of the importance of good and is willing to patronize any fast food restaurant that provides healthy, tasty meals.
- Economic and political changes can affect the stability of the business, either through rising in price or the implementation of policies against the business operation;
- Intense competition as there are various players in the fast food industry who are constantly innovating new ways to attract more customers to their brands.
Chick-fil-A has proven to be one of America’s favorite fast food restaurants because of its excellent customer service and its famous menu that has kept customers satisfied over the years. The business has an unusual mode of operation from other types of franchises, but that could be a contributing factor to its success. Apart from its food and customer service, the business is also known for its CSR in sponsoring major events and public donations to non-profit organizations for charity. The business pays attention to its employees and ensures a conducive work environment and space for career development.
Chick-fil-A has the potential to expand as such, it must be willing to go beyond its conventional operation and embrace a new menu, new geographic location, and business opportunities.