- Chick-fil-A franchisees pay just $US10,000 to open a new restaurant.
- Chick-fil-A pays for all startup costs – including real estate, restaurant construction, and equipment – and leases everything to its franchisees for an ongoing fee equal to 15% of sales plus 50% of pretax profit remaining.
- The company prohibits most of its franchisees from opening multiple restaurants, which can limit franchisees’ potential profits.
- Chick-fil-A gets more than 20,000 inquiries from franchisee candidates every year. From those candidates, Chick-fil-A selects between 75 and 80 new franchisees annually.
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Chick-fil-A is among the most successful fast-food chains in the US, and it’s also one of the cheapest to open.
The company’s sales grew by $US1 billion to more than $US10 billion in 2018, making it larger than Chipotle and KFC combined.
Chick-fil-A is now the fifth-largest fast-food chain in the US by sales, and it generates more revenue per restaurant than any other chain nationally, according to Technomic.
Despite its success, Chick-fil-A charges franchisees only $US10,000 to open a new restaurant, and it doesn’t require candidates to meet a threshold for net worth or liquid assets, the company told Business Insider.
That’s cheaper than every major fast-food chain in the US.
McDonald’s, for example, requires potential franchisees to pay between $US1 million and $US2.2 million in startup costs – including a $US45,000 franchise fee – as well as have liquid assets of at least $US500,000. Taco Bell’s startup costs average between $US1.2 million to $US2.6 million.
Chick-fil-A, on the other hand, pays for all startup costs – including real estate, restaurant construction, and equipment.
In turn, the company leases everything to its franchisees for an ongoing fee equal to 15% of sales plus 50% of pretax profit remaining, the Chick-fil-A spokeswoman Amanda Hannah told Business Insider.
“The barrier to entry for being a franchisee is never going to be money,” Hannah said. “We seek to find the very best business partners who find great joy in making other people’s days. They do so with a combination of great business acumen, an entrepreneurial spirit, and a passion for serving others.”
So what’s the catch?
While Chick-fil-A’s startup costs are low, the ongoing fees are higher than those charged by many of its rivals.
McDonald’s, for example, charges an ongoing monthly service fee equal to 4% of gross sales and an additional fee for rent, which is also a percentage of sales. Franchisees pay an average of 10.7% of sales in rent costs, according to theService Employees International Union.
Chick-fil-A also prohibits most of its franchisees from opening multiple units, which can limit franchisees’ potential profits.
This limitation is meant to enable Chick-fil-A’s franchisees to be intimately involved in the day-to-day operations of their restaurants.
“Chick-fil-A operators must be as comfortable rolling up their sleeves in the kitchen as they are shaking hands in the dining room,” Hannah said.
The company also puts a big emphasis on community service and encourages franchisees to be actively involved in the communities where they live and work.
“Oftentimes, several operators in a market will combine resources to market events through advertising and promotion,” Hannah said. “Our daddy-daughter date nights are an example of this.”
The application process
Chick-fil-A gets more than 20,000 inquiries from franchisee candidates every year. From those candidates, Chick-fil-A selects between 75 to 80 new franchisees annually, Hannah said.
To apply, candidates have to submit a form through the company’s website expressing their interest.
Chick-fil-A will then contact the candidates for interviews. The company may also interview candidates’ friends, family members, and business partners.
Once they are selected and hired, franchisees have to undergo a multi-week training program before they can open and operate their own restaurant.