Chick-fil-A is one of the biggest American fast-food restaurants specializing in fried chicken sandwiches. The franchise is primarily located in the United States with over 2,600 locations in over 47 states. Chick-fil-A also operates in Puerto Rico and Canada. The popular fast-food chain was founded in 1946 as the Dwarf Grill and then renamed as Dwarf House until their rebranding into Chick-fil-A in 1967.
How much does it cost to open a Chick-fil-A? Chick-fil-A franchisees can expect to invest $518,385 – $2,803,435 depending on location. Chick-fil-A also charges a franchise fee of $10,000, which is cheap compared to comparable franchise opportunities.
Chick-fil-A does not require any starting liquid capital or net worth which is something most franchises require. Liquid capital is the amount you need on hand to be eligible for the agreement. Net worth is the amount of your assets combined, which include the amount you have in investments, savings, retirement accounts, property or other assets. Take our franchise quiz to determine if Chick-fil-A is the right choice for you.
Now that we have looked at some initial numbers, let’s take a closer look into all the details to help you understand what’s required to operate this franchise successfully. As we’ll explain further, you’re more likely to get into Harvard than to be accepted into the Chic-fil-A family even if you meet all the financial requirements.
Base Finance Requirements and Fees
||$518,385 – $2,803,435
Here is more of a rough breakdown of the initial investment costs. These are are relative and shown in the charts below. There could be additional costs to consider.
|Initial Franchise Fee
|First Month’s Rental of Equipment
|First Month’s Lease
|First Month’s Insurance
Here are few more fees that may occur as you open your Chick-fil-A franchise.
|Type of Fee
||May vary (a) between 0% to 3.25%, to be determined by Chick-fil-A, as a percentage of Gross Receipts or (b) by vote of Operators in local or regional areas.
|Additional Franchise Fee
||$5,000 for each additional Chick-fil-A restaurant business.
|Business Services Fee
|Rent (for a typical restaurant)
||$2,550 to $85,500 (including where applicable, percentage rent).
|Occupancy charge (Satellite unit)
||Determined under the Concession Agreement attached as an exhibit to the Concession Sublicense Agreement; currently estimated to range between 4% to 30% of Gross Receipts.
|Food truck usage Fee
||Currently $2,100 to $3,100, plus additional fees, costs and expenses.
|Food truck insurance Fee
||Currently $250 to $450
||$240 to $12,000
||Currently $750 to $5,000 monthly
|Hardware and Software Support; High-speed internet access
||$9,500 to $20,000 (annually).
|Fines (minimum standards and procedures)
||Will vary depending on the circumstances.
||Will vary depending on the circumstances.
|Operating Service Charges
||Depends on the formula
|Credit Cards Fees and related Processing Fees
||Will vary depending on the circumstances.
|Interest on Late Payments
||The maximum rate permitted by law, or it will be approximately 1.25% per month
|Cash Handling System services
||$85 to $450 monthly
|Reimbursement of Cost of Performance
||Depends on the cost and expenses of performance
|Holdover on Liquidated Damages
||Double the base rent and percentage rent
All the leasing, rental, equipment, and other costs can total up to around 15% of the sales from the franchise, plus an additional 50% of the pretax profit. There is also a royalty fee of 15% back to the Chick-fil-A corporation, which is one of the highest royalty fees amongst most franchises!
However, you are able to get some financial assistance from the Chick-fil-A corporation. They do leases and subleases for the restaurants, which can be helpful for new franchisees. They also allow extended payment terms for certain re-opening circumstances that are under their Franchise Agreement. Not only that, but the company also provides rental for equipment that is based on a monthly fee on the fair market value rental price that’s determined by Chick-fil-A themselves.
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Average Store Sales and Revenue per Year
The average standalone Chick-fil-A restaurant outside of malls generates around $8.6 million in gross annual sales which is way more than other lead quick-service restaurants like Popeyes, Subway, and almost double the leading fast-food restaurant McDonald’s.
Chick-fil-A has over $18.8 billion in annual system-wide sales, which is impressive for the number of stores they have functioning. The company still has the opportunity to expand into more areas internationally since they only operate in North America, Canada, and Puerto Rico at the time of writing.
||Quick Food Services
How Much Profit Does the Chick-fil-A Franchise Make Per Year?
If you base the average sales from non-mall locations which is $8,580,978, a Chick-Fil-A franchise makes $1,277,000 in profits annually.
There are a couple of reasons why they’re one of the top-selling quick service restaurants per unit. Even though there is a high initial cost, the sales help you earn back the initial investment quickly.
According to the Franchise Disclosure Document (FDD) of Chick-fil-A, the company’s cash assets as of December 31, 2022 were $1.9 billion. This figure includes cash and cash equivalents.
Here are some additional insights from the income statement according to the FDD of Chick-Fil-A:
- Chick-fil-A has a very high gross profit margin. In 2021, the company’s gross profit margin was 66.3%. This means that for every $100 in sales, Chick-fil-A generated $66.30 in gross profit. This is a very high gross profit margin for a restaurant business.
- Chick-fil-A has a very low operating profit margin. In 2021, the company’s operating profit margin was 12.3%. This means that for every $100 in sales, Chick-fil-A generated $12.30 in operating profit. This is a low operating profit margin for a restaurant business.
- Chick-fil-A’s low operating profit margin is due to its high cost of labor. In 2021, the company’s labor costs were 33.4% of sales. This is a very high cost of labor for a restaurant business.
- Chick-fil-A is able to maintain its high gross profit margin by selling high-margin items. The company’s most popular items are chicken sandwiches, which have a very high-profit margin.
- Chick-fil-A is able to maintain its low operating profit margin by keeping its overhead costs low. The company has a very efficient operating model, which helps it to keep its overhead costs low.
Overall, Chick-fil-A is a very profitable company. The company has a high gross profit margin, which is due to its high-margin items. However, the company’s low operating profit margin is due to its high cost of labor. Chick-fil-A is able to maintain its high gross profit margin and low operating profit margin by keeping its overhead costs low.
With their immense amount of profits, there are clear advantages to how Chick-fil-A operates and many reasons why they’re on top of the market.
As a franchise owner, you won’t have to worry too much about the beginning and opening of your restaurant. Once you get accepted as a franchisee, Chick-fil-A will decide where your store will be located and pay for all the expenses to build it and the equipment too. They take great care in making sure that their franchises are successful. The main investment you’ll put in is the $10,000 franchise fee. For first-time franchise owners who are unsure of how to get started, Chick-fil-A does a lot of the work for you. This is often the most foolproof way to get a successful business up and running.
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Their total gross sales may not look as much compared to other fast-food chains, but that is largely due to their low number of stores that are in existence. Though they are slowly expanding, and the number of total gross sales is steadily increasing. Having a fewer number of stores also creates a craving for Chick-fil-A, since they’re not everywhere like many other fast food restaurants. There will be high demand when there is a low supply.
Chick-fil-A also has a great emphasis on its Christian beliefs and family-oriented values. This has them closing all their franchises on Sundays. While many can see this as a loss of revenue, this piggybacks to the earlier conversation about supply and demand, so consumers will want to satisfy their craving. Revenue will be met with higher demand on other days, so there is no need to worry. Sunday will also give time for store owners to get much-needed relaxation, spend time with their family, watch Sunday night NFL, etc. This represents Chick-fil-A giving time and consideration to their employees.
In addition, this creates a healthy relationship between corporate headquarters and the franchise owners. It relieves some of the pressure and creates a sense of community, which will persuade store owners to stay longer and invested in Chick-fil-A. Instead of a company and franchisee owner, it feels more like a supported partnership between the two.
Popular Menu Items
Chick-Fil-A is known for their chicken sandwiches (which also comes in a spicy flavor) and is the most ordered entrée on their menu. Other popular items include their Chick-fil-A Nuggets and their biscuits. Why are Chick-Fil-A’s sandwiches very popular? We credit founder Truett Cathy for coming up with the perfect seasoning blend for their breading. Chick-Fil-A’s sandwiches are simple without all the crazy condiments but they made the simplicity work quite well to everyone’s tastebuds.
Opening More Locations
There are over 2,600 Chick-fil-A locations at the time of this writing and it looks like there are more stores opening. There’s one opening in Old Fourth Ward neighborhood in Atlanta, another one in Waikiki, and more in Clifton Park and North Greenbush, New York. More stores opening up can only mean that Chick-Fil-A is doing well.
- Popular menu items
- Much of the logistics are taken care of when opening
- Strong foundation in beliefs
- Low initial amount of money needed to start franchise
- Supportive company
Every business will encounter challenges in the beginning and down the road. Here are a couple of challenges that Chick-fil-A franchisees may have.
Franchise owners of Chick-fil-A are actually labeled as operators, which signifies that the control is with Chick-fil-A corporation, not the store owners. This results in the franchise owners to not receive or own any equity in their business. If you are looking to own your own business and have control of it, this is not for you.
This also means you’re not able to choose where your location will be, which can be a downside for many. You also cannot sell your location or pass them onto the next generation in your family, and you cannot own multiple franchises without the approval from Chick-fil-A (which will be rare). With such a hands-on company, you will have much less control over how you want to run your business. Although this may be great when you are first starting out, some can find it limiting and controlling later on. There may be decisions and changes you want to make, but everything needs to go through the corporation for approval first.
If you’re looking for a franchise to make passive income or add to an investment portfolio, Chick-fil-A is not your solution. The company clearly states on their website that they require you to a full-time commitment to manage this hands-on operation. In other words, you need to be prepared to be active in the day-to-day operations of the business.
While some may want to delegate tasks to management and other leaders, Chick-fil-A values a proactive franchise owner and will not accept those that are not ready or committed to this role.
Another obstacle that you may face is that there were also some controversies that have damaged Chick-fil-A’s publicity. The owners exposed their opinions about gay marriage and their donations to anti-LGBTQ organizations. This created a lot of backlash, protests, and boycotts to the chain. Opening a Chick-fil-A may risk you excluding a portion of the customer base due to these concerns and negative publicity. When making a franchise decision it’s important to keep this in mind. Although the chain is still largely popular, some people are still hesitant about dining at the restaurant.
With their intense beliefs and values, Chick-fil-A does have a rigorous application and interview process. You’ll go through approximately 12 interviews or more and at any time, and will be dropped if you don’t meet their criteria. Even if you have the base financial requirements, Chick-fil-A looks for much more than that. Every year they will only take in 75-80 franchises, from a pool of more than 20,000 applications. From an odds standpoint, Chick-fil-A is tougher to get into than Harvard.
- Recent bad publicity
- No passive income; no potential for creating big inflow of revenue
- No control over your franchise
- Competitive application process
Is the Chick-fil-A Franchise Right for You?
Based on the estimated annual profit of $1,277,000 for a Chick-fil-A franchisee, you can be confident you’ll live comfortably if you join the company and stick to the operations plan. However, the company is going to have a tight grip on your lifestyle if you decide to join them. There’s no guarantee you’ll make it through the company’s franchisee vetting process either.
Chick-fil-A requires you to be hands-on and work in the store as a franchise owner. They are not going to allow you to have this restaurant as a side gig or passive investment. The restaurant must be your main focus. This requirement helps maintain the high customer service reputation by choosing owners that are truly invested in running the business. The company works hard to weed out people who are not in the same mindset as them or share the same core values as them during the interview process.
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They also have training programs that will teach you how to run a fast food restaurant in every aspect. You don’t need to have had any prior experience because you can be trained as long as you’re willing to learn. While with other franchises you may have to worry about finding the right location and type of store you want to open, Chick-fil-A takes all the guesswork out of this process.
You’re considered lucky if you’re able to open a Chick-fil-A restaurant and be accepted into the company. However, be ready to dive in full throttle because they are not going to let in people who only want this business as a part of a broader investment portfolio.
This brand has a core emphasis on Christian values and beliefs, so make sure your belief system aligns with the corporate culture. For instance, Chick-fil-A is closed every Sunday and major holidays like Thanksgiving and Christmas. You can learn more about this opportunity and view emerging markets for the company at the companies official franchise website.