The Rise of Chick-fil-A
Here is the video from this transcript: Chick-fil-A
Chick-fil-A grew to be one of the largest restaurant chains in America, operating over 2,300 restaurants and generating over 10 billion dollars in annual revenue. Let’s take a look at how they grew into such a big chain.
We can trace the firm’s beginnings back to 1946 when Truett Cathy opened a diner in Hapeville, Atlanta. The diner was so small that he called the restaurant Dwarf Grill, which was later named Dwarf House. It was not until 1961, when Cathy found a way to cook the chicken sandwich in the same amount of time it took to cook a hamburger that the business took off. Cathy basically invented the boneless chicken sandwich.
After perfecting the chicken recipe, Cathy rebranded to Chick-fil-A in 1967 when he opened the first Chick-fil-A restaurant in a food court in Atlanta. Their name was re-designed to be a play on chicken fillet. The capital A represents the top-quality chicken used in the sandwiches. The chain’s slogan reflects their origins: “We Didn’t Invent the Chicken, Just the Chicken Sandwich”.
During the 70s and 80s, the chain’s strategy was to expand in suburban mall’s food courts. Their food court concept allowed the restaurant to use space efficiently. Chick-fil-A moved outside of the mall food court in 1986, opening its first free standing restaurant on North Druid Hills Road in Atlanta. Since then, the company began to focus more on this stand-alone type unit in suburban areas.
The chain opened its first drive-thru only restaurant in 1993 in Greenville, South Carolina. They then ventured out of the U.S. in 1994 when they opened a restaurant in the University of Alberta, which was subsequently closed after three years. They later tried their luck at Calgary’s airport in 2014, which then closed in 2019. They also attempted to expand in South Africa in 1996 and 1997 but closed shop in 2001.
In 1995, the chain introduced a billboard ad that showed cows writing the message ‘Eat mor Chikin’. The message they were trying to get across was to eat more chicken instead of cows. The message somehow resonated with a lot people. The campaign was so successful that they stuck with it for many years. The cows’ message ended up being placed on TV, radio, buildings and even calendars. Actually, before the cows came in the picture, the chicken that is featured in their logo was the chain’s mascot, Doodles.
The chain has been the sponsor of the Peach Bowl, an annual college football bowl game, since 1997. They are also a key sponsor of the NCAA Atlantic Coast and Southeastern Conference Football. More recently, Chick-fil-A has signed a multiyear deal with Little League designating the chain as the official Quick Serve Restaurant of Little League Baseball and Softball.
In 2003, the chain gained tremendous traction when it announced the opening of a new store in Arizona. The ad stated that the first 100 to enter its doors would get a free combo meal every week for a year. They even threw an opening day carnival that featured karaoke, free ice cream and prize raffles. The first 100 ad was so successful that is now held at the opening of every new Chick-fil-A restaurant. But underneath of all that lied a simple business strategy. They had a simple menu that remained committed to chicken sandwiches and they strive to provide an irreproachable customer service.
It is also important to note that Cathy built the company around his religious beliefs. The corporate purpose states the business exists “To glorify God by being a faithful steward of all that is entrusted to us”. All Chick-fil-A restaurants are closed for business on Sundays, as well as on Thanksgiving and Christmas. The only times they broke their tradition to open on a Sunday were to prepare meals for stranded passengers at an airport in Atlanta and to honor a birthday wish for a boy with cerebral palsy. Cathy’s faith-based entrepreneurialism was one of the factors that made it successful.
Now let’s talk about their interesting franchise system. The chain actually builds and retains ownership of each restaurant. Franchisees only need to shell $10,000 to become an operator, although they pay a higher royalty fee. Because of the relative attractive economics, applications for becoming an operator are above tens of thousands per year. Their acceptance rate is less than 1%. To put that into perspective, Harvard’s acceptance rate is 4.5%. Each operator undergoes a rigorous training program. All of these factors enabled Chick-fil-A to attain 2 billion dollars in revenue in 2006. They even became the first fast-food chain to become completely trans-fat free.
The chain is overprotective of its intellectual property. They sent cease and desist letters to those who were using the “eat more” phrase. They claimed that it would create confusion and dilute the brand’s identity. In 2011, they sent a cease and desist letter to a Vermont-based artist who sold T-shirts that had “Eat More Kale” printed on them. However, the artist later trademarked his “Eat More Kale” phrase, at which point Chick-fil-A backed down.
Their religious beliefs that helped build the brand was a double-edged sword. In 2012, the CEO of the chain made negative comments on same-sex marriage that led to a number of boycotts that stalled the chain’s expansion. They opened a location in Edinburg in 2018 and one in Reading in 2019. But that Reading store closed down after their lease was not renewed amid protests over Chick-fil-A anti-LGBTQ stance. Their store in Scotland closed in 2020 for the same reason. The chain subsequently reversed their stance on the matter and actually redeemed themselves on social media.
I had hopes that the chain would go public. But Cathy required his children to sign contracts that stated the company should remain private. Do you regularly visit Chick-fil-A? What makes them unique? Would you want to become an operator of one? As always, let us know what you think.
