Chick Fil A Licensed Units: Chicken Franchise (2021 FDD Review)

Written by: Patrick Findaro
Last Updated: August 16, 2022
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This article is based on its most recent FDD.

Chick Fil A principal business is the development of a system of retail quick-service restaurants specializing in a boneless breast of chicken sandwich. Most of these restaurants are operated by franchised operators who are independent contractors.

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What is Chick fil A?

Its a Georgia corporation formed on March 23, 1964 and uses the trade name Chick-fil-A. S. Truett Cathy, the Founder opened his first restaurant, the Dwarf Grill, in Hapeville, Georgia, in April 1946. Dan Cathy now is the Chief Executive Officer since November 2013 and was the Assistant Secretary since June 2001.

This article provides insight about Chick-fil-A’s licensed units. There are currently 382 domestic Licensed Units and 2,111 domestic company-operated and franchised operator Chick-fil-A restaurants.  Licensed units are typically on college campuses, hospitals, and airports.

chick fil a

Chick Fil A Initial Franchise Fee

$0

Chick-fil-A does not charge you an initial license payment or fee to obtain a license.

Licensed Franchise Cost

The total investment necessary to begin operation of a Licensed Unit ranges from $255,500 to $2,684,000.

Chick Fil A Additional Cost Breakdown:

Additional Cost Breakdown

Initial Franchise Fee$0
Opening Inventory – Paper Supplies$11,500 – $65,000
Utensils and Other Small Wares$5,000 – $18,000
Equipment / Signage$50,000 – $300,000
Build – out$25,000 – $1,250,000
Architectural, Mechanical, and other Drawings$15,000 – $100,000
Additional Funds$149,000 – $951,000

The costs have variability depending on location and existing status of retail space. Chick-fil-A‘s estimate is based on its own experience in establishing similar operations.

chick fil a

 

Chick Fil A Ongoing Franchise Costs and Fees:

Royalty: License Fee: 10% of “Gross Receipts”, except in transportation venture which is 7% of Gross receipts (Paid Monthly).

Handling Fee: 7.25% of your purchase equipment or signage (Paid as Incurred).

Additional training: $800 per employee (Paid as Incurred).

Local Advertising Payment:  Itss not required to spend any certain amount on advertising in your geographic area or at your Licensed Site(s). Under the License Agreement, Chick-fil-A does not charge you advertising fees or require you to contribute to advertising fees to a local or regional fund.

 

Chick Fil A License Sales Figures:

There are 382 domestic Licensed Units. However, the 357 domestic Chick-fil-A Licensed Units that had been open for at least one full calendar year as of December 31, 2019 and their annual sales volumes are the subject of these Financial Performance Representations below.

College or University Campus Sales Figures (280 Licensed Units):

Median Sales: $966,096.

Average Annual Sales Volume: $1,115,606-.

-39% of franchises did better than $1,115,606 in annual sales-.

-47% of franchises had sales volumes in excess of $1,000,000 in annual sales-.

Hospitals, businesses, airports or industries (77 Licensed Units):

Median Sales: $1,683,606.

Average Annual Sales Volume: $2,354,881-.

-39% of franchises did better than $2,354,881 in annual sales-.

Income Statement:

Consolidated Statements of Comprehensive Earnings Year Ended December 31, 2019, 2018 and 2017

 201920182017
Revenue and income   
Income from restaurants   
Base operating and business service fees$1,687,768,627$1,444,979,758$1,235,210,544
Additional operating service fees754,102,047641,162,823573,638,081
Rental income897,441,035637,440,008549,780,435
 3,339,311,7092,723,582,5892,358,629,060
Other sales, including sales from company operated restaurants294,905,377218,216,503202,750,120
Other income159,669,70660,914,23079,521,138
Total revenue and income3,790,886,7923,002,713,3222,640,900,318
    
Costs and expenses   
Cost of sales, including cost of sales from company-operated restaurants201,865,424148,677,870135,897,271
Selling, general, and administrative expenses2,251,276,5621,916,816,6541,623,797,051
Depreciation and amortization395,047,922324,512,479279,699,876
Interest48,152,03012,391,7371,823,627
Total costs and expenses2,896,341,9382,402,398,7402,043,217,825
Earnings before contributions, scholarships, and income taxes894,544,854600,314,582597,682,493
Contributions and scholarships38,509,24341,452,61555,120,520
Earnings before income taxes856,035,611558,861,967542,561,973
Income taxes185,915,210124,358,50299,027,078
Net earnings670,120,401434,503,465443,534,895
    
Other comprehensive (loss) earnings, before tax   
Pension plans(2,920,346)8,408,382(15,423,961)
Postretirement medical plan(20,956,170)15,449,244(7,287,440)
Foreign currency translation(234,204)350,474(17,907)
Derivate financial instruments(5,780,760)(2,695,630)
Other comprehensive (loss) earnings, before income taxes(28,891,480)21,512,470(22,729,308)
Income taxes6,963,000(5,145,000)5,455,000
Other comprehensive (loss) earnings, before income taxes(22,928,480)16,367,470(17,274,308)
Comprehensive earnings647,191,921450,870,935426,260,587

 

chick fil a

Income Statement Key Insights:

It is very profitable business for the franchisor with retained earnings of $647 million in 2019. Compared to $451 million in 2018, Chick-Fil-A saw an increase of 30% from 2018 to 2019. This is a good indication of high growth as a company overall.

Chick Fil A Competition:

Competes in the fast-food market against big brand companies such as McDonald’s, Burger King, Wendy’s, and KFC.

Conclusion:

Chick-Fil-A offers licenses to prospective Licensees who have access to certain non-traditional locations such as schools, workplaces, universities, airports, hospitals and other similar captive audience locations (“Licensed Sites”) to sell Chick-fil-A brand products at these locations.

While this may be the business for you, make sure to also check out other businesses offered on Vetted Biz and in Food and Beverage Industry.

Analysis Provided by: Brooks Gammill Vetted Biz Intern.

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