People love chicken sandwiches. It seems like every franchising business has something to do with it, like Ike’s or Chick-Fil-A. Chick-Fil-A is the most popular franchise chain in North America, serving chicken sandwiches with the ultimate taste to relish. Taking the love for the chicken to every corner, Chick-fil-A is spread across 38 states in America with nearly 2,500 stores and a sales volume of $10 billion.
So what makes the Chick-fil-A franchise so popular for its cult following?
Chick-fil-A has a cult following because of its unique business model. Chick-fil-A constructs its restaurants, pays for all equipment and leases them to franchisees who in return, pay the company 50 per cent of their gross sales. The business model is hugely successful in generating turnovers for franchisees with low start-up costs.
“The company asks for as little as $10,000 for a franchise fee and pays for the land, construction, and equipment of the franchise outlet, which it then rents out to the franchise at 15% of its gross sales plus 50% of profit before tax.”
In contrast, McDonald’s would cost you $1 million to start a franchise. In addition, Culver’s costs roughly $4 million. The startup costs for Chick-fil-A are FAR lower, and the company offers support to those who wish to become a franchise partner. However, those figures shouldn’t be the only deciding factor. There are some well-proved reasons why you should not buy a Chick-Fil-A franchise.
Many other investment avenues have similar startup costs to Chick-fil-A.
Another reason why Chick-fil-A is such a huge hit among its customers is that it does not choose to grow into a big franchise by having hundreds of outlets all over the country. The company follows a strategy of keeping its footprint small and selecting only the best locations for new franchise stores. Also, Chick-fil-A attracts so many customers that it offers an intimacy and personal experience like no other fast food restaurant.
Do you want to buy a franchise in the QSR sector? If so, our team of innovative advisors can help you find the right product for your Return On Investment(ROI) requirements. Unlike other franchise brokers, we do not tout our clients to buyers. We are a franchise development company with a transparent set-up where all information regarding QSR franchise opportunities and franchising is shared with the client. We believe an investor should make an informed decision before deciding on their new business.
Hey, I’m Dan Rowe. As an expert at helping businesses find the right franchise, my company, Fransmart, is committed to providing you unbiased information and assistance for franchise investment. We first go through the investigation, evaluation, and purchasing process to help buy your franchise. Our comprehensive analysis of existing franchisee complaints, competitors’ proposals, and the company’s franchise agreement has seen that the Chick-fil-A business is nowhere near as lucrative as it looks.
Let us first understand the costs involved in starting a Chick-fil-A franchise.
Chick-fil-A Initial cost Breakdown:
Chick-fil-A pays almost all the start-up costs of its franchise, making you not the franchise owner but a manager for their outlets. The company calls its franchises its “operators,” which signifies their role.
The company has a complete say in deciding the location of the business outlet, and it is also the owner of its real estate. The franchises do not have any say in either selling the outlet or passing it onto their next generation. The franchises do not own or receive any equity in their outlet.
Chick-fil-A also does not encourage multiple locations under one entity, making your earrings from this business quite limited.
Initial financial requirements for a Chick-fil-A restaurant is only- Franchise Fee: $ 10,000
The major initial franchisee cost to buy a Chick-Fil-A food-chain franchisee is as follows:
- Initial franchise fee- $10,000
- Additional funds- $2,225,083
- Insurance expense for first month- $11,165
- Opening Inventory- $94,560
- Rental of equipment for the first month- $5,000
- Sublease or lease of premises for the first month- $85,800
Some of the other popular restaurants in the QSR industry has the following minimum net worth requirements as against their percentage royalty:
| Brand | Min. Net Worth Requirement | Percentage royalty |
| Wendy’s | $5 Million | 4% |
| Jack in the Box | $ 1.5 Million | 5% |
| Carl’s Jr. | $ 1 Million | 5% |
| McDonald’s | $ 500,000 | 4% |
| Dunkin’ Donuts | $ 250,000 | 5.9% |
| Subway | $ 80,000 | 8% |
| Chick-fil-A | $ 10,000 | 15% plus 50% |
Chick-fil-A charges a 15% plus 50% royalty of all profits from franchisees, which is by far the steepest of any QSR branOn, on the other end of the spectrum, Wendy’s requires from its franchisees a minimum net worth of $5 million but charges them just 4% royalty.
How Much Does A Chick-fil-A Franchise Owner Make:
How much money a franchise owner makes is commonly asked, which we have answered here.
A Chick-fil-A restaurant makes a whopping $ 4.2 million per store, more than any other fast-food chain in America. Compared to its direct competition- KFC $ 1.2 Million, or the biggest in the industry- McDonald’s $2.8 Million the numbers are awe-inspiring. But after you deduct the various royalty fees and other operating fees, the amount left will be much less.
A Chick-fil-A franchise fee costs almost $10,000, but at the same time, you pay all lease and labour costs out of pocket, along with 15% royalty fees and 50% profit. On top of that, you need to work 60 hours a week managing the store. If you can put together the money, time, and passion and pass the gruelling three-month interview process, you can own an 18% cut of a restaurant that’s projected to bring in over $53,285 average base pay.
For a more detailed analysis of how much Chick- Fill- Franchise owner earns, watch our youtube video:-https://www.youtube.com/watch?v=Cn8z-twy3wY
As you plan your franchise business, you will need to know the approximate investment, the projected revenue, and the expected ROI. With the popular formulas of the breakeven analysis and the internal rate of return, you can easily find your Return on Investment (ROI) for your franchise business.
You can also calculate the profit and cost by applying specific Excel or MS Office formulas. The video above discusses some basic economic concepts and procedures that will help you make an informed decision when choosing a franchise.
A single Chick-fil-A restaurant expects to make $ 200,000 a year. If you divide this figure by the franchise’s investment of $10,000, you’ll get an ROI percentage of 20%. Now, when you consider this number as a business investment, it’s nowhere near what is expected. This figure doesn’t include overhead costs such as employee wages and food purchases.
It is also as far as you can go with the Chick-fil-A franchise because there is no profit from owning a business with this brand. As with almost all other brands, you raise equity in running your business for many years that you can either sell or pass on to your next generation. But with Chick-fil-A, the company owns the franchise, which makes you a “ buyer of the job” at the Chick-fil-A restaurant.
Whatever you may feel for the business model of Chick-fil-A, it is working for the brand as it is now the second-largest fast-food restaurant in America after McDonald’s and the first in selling chicken sandwich category. But as far as the profits of the individual franchise owner are concerned in this business, it is not a lot.
Why is the Chick-fil-A franchise opportunity so affordable?
It’s because of the company’s unique business model. The company doesn’t have any franchises, just corporately owned restaurants. And instead of charging franchise fees, it covers startup costs for you. So, for example, instead of paying a $320k franchise fee to open up a new restaurant, you only pay $10k for the opportunity to own your restaurant.
Fransmart “Making Billions” OPPORTUNITIES
With the help of our experts, we have chalked out an excellent combination of financially rewarding and award-winning franchise opportunities that have low risks involved. They are
We’ve been in your shoes before — we’re experts on everything from finding a great franchise to financing to opening day. If you have any queries about buying a franchise, leave a message here, and we’ll get back to you as soon as possible!
Chick-fil-A Franchise Business -Our Say
Other than the numbers representing the company’s present costs and revenue, other aspects of a business need to be considered while choosing a brand that could affect your future profitability, such as the ease of working with it or the company’s future.
Chick-fil-A has some considerable disadvantages that should make an investor deliberate before going ahead with it. The company, for one, is extremely picky in awarding its franchise and approves only 80 out of 60,000 applicants.
If you are among the 0.13% of the chosen applicant by the company, still, the process of opening and finally running the business is quite tedious and can take almost a year before you can start the work.
The company, Chick-fil-A, also restricts any other additional work with this business, making your income sources relatively constrained when you work with this brand.
Sources:
https://1851franchise.com/how-much-does-a-chick-fil-a-franchise-cost-2715278#stories
https://thehustle.co/why-it-only-costs-10k-to-own-a-chick-fil-a-franchise/
https://www.entrepreneur.com/slideshow/307000
https://www.mashed.com/179233/how-much-chick-fil-a-franchise-owners-really-make-per-year/