Church’s Chicken Franchise No Longer Viable? (2024)
Church’s Chicken is a fast-food chain that specializes in fried chicken and is headquartered in Atlanta, GA. As of 2017, Church’s Chicken had more than 1,700 locations in 26 countries. Initially, Church’s Chicken was a single walk-up establishment that only sold fried chicken, and two pieces of chicken and a roll cost 49 cents.
How is Church's Chicken Franchise Positioned in the Food and Beverage Industry?
The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. Around 1.46 million people get employed in this industry. Food franchises make up 36% of the total franchise establishments in the USA and it is expected to create 1.6million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x.
Church’s Chicken competes in the Food and Beverage market against big brand companies such as KFC and Popeye’s. Church’s Chicken franchisees also compete against other nearby Church’s Chicken locations.
How Much is a Church's Chicken Franchise?
The initial Church’s Chicken Franchise Fee is $25,000. You have to pay this upfront fee when opening a Church’s Chicken franchise. This includes a Franchise Fee of $15,000 and a Development Fee of $10,000.
Church's Chicken Franchise Cost
The estimated total investment necessary to begin the operation of a Church’s Chicken Franchise ranges from $1,192,202 to $1,543,117. The following costs are part of the upfront costs included in the initial investment for a Church’s Chicken. Many of these are one-time fees that are needed to launch the franchise. Review the chart below to see how much it costs to buy a Church’s Chicken franchise in 2022.
| Type of Expenditure | Low Amount | High Amount | To Whom Payment is to be Made |
|---|---|---|---|
| Development Fee | $10,000 | $10,000 | Cajun |
| Initial Franchise Fee | $15,000 | $15,000 | Cajun |
| Real Estate (purchase or lease) | Variable | Variable | Lessors/vendors |
| Site Work | $202,957 | $257,490 | Vendors |
| Building and Improvements | $526,196 | $656,828 | Vendors |
| Equipment and Signs | $358,899 | $372,499 | Vendors |
| Fees, Misc., A&E Services, Deposits | $50,000 | $150,000 | Vendors, consultants, municipalities |
| Insurance | $7,500 | $10,000 | Insurance company/broker |
| Utility Deposits | $5,000 | $15,000 | Utility companies/lessors |
| Business Licenses | $300 | $600 | Government agencies |
| Additional Funds – 3 Months | $10,000 | $20,000 | Employees/suppliers |
| Total Investment | $1,192,202 to $1,543,117 (excluding Real Estate) |
Church's Chicken Franchise Requirements
Owning a Church's Chicken Franchise Requires Ongoing Fees
Royalty: 5% of Gross Sales
How much do Church's Chicken franchise owners make?
2021 Church’s Chicken Median Franchise Sales: $1,606,904
| Initial Investment (midpoint) | %Profit margin of average franchise sales | Estimated profits | Time to recoup investment |
|---|---|---|---|
| $1,367,659 | 10% | $160,690 | 10 years |
| $1,367,659 | 15% | $241,035 | 7.25 years |
Based on the median sales provided by Church’s Chicken’s franchise locations, at an average of a 15% profit margin it will take around 7.25 years to recoup your investment. This is slightly longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Food and Beverage stores; the extent of market penetration and brand awareness that Church’s Chicken stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
Is the Church's Chicken Franchise Profit Worth the Franchise Cost?
To assign a valuation multiple for Church’s Chicken franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
- Estimated Selling Price = Net Sales * 0.55
When you go to sell a Church’s Chicken franchise based on the median multiple of .55 and net sales in 2021 of $1,606,904 it would sell for $883,797. This is significantly lower than the midpoint investment of $1,367,659.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
Church's Chicken (Franchisor) Income Statement Key Insights:
Cajun Global LLC and Subsidiaries
– Consolidated Statements of Operations (In Thousands)
– Consolidated Statements of Operations (In Thousands)
| Successor | Predecessor | ||
|---|---|---|---|
| Period From September 15, 2021 to December 26, 2021 | Period From December 28, 2020 to September 14, 2021 | Year Ended December 27, 2020 | |
| Revenues | |||
| Sales by company-operated restaurants | $36,561 | $95,941 | 129,938 |
| Franchise revenue | 14,754 | 36,655 | 48,173 |
| Rental and other income | 2,627 | 7,898 | 10,805 |
| Total revenues | 53,942 | 140,494 | 188,916 |
| Operating costs and expenses | |||
| Company-operated restaurant expenses: | |||
| Food, beverage, and packaging | 10,939 | 29,546 | 40,687 |
| Payroll and benefits | 10,535 | 25,469 | 34,443 |
| Other operating expenses | 9,852 | 24,406 | 32,423 |
| General and administrative expenses | 2,988 | 11,669 | 6,935 |
| Depreciation and amortization | 3,611 | 13,010 | 18,125 |
| Impairment, special charges, and loss on asset dispositions | 348 | 697 | 1,788 |
| Total operating costs and expenses | 38,273 | 104,797 | 134,401 |
| Operating income | 15,669 | 35,697 | 54,515 |
| Interest expense, net | 12,398 | 22,564 | 30,896 |
| Income before income taxes | 3,271 | 13,133 | 23,619 |
| Income tax expense | 984 | 1,581 | 2,106 |
| Net income | $2,287 | $11,552 | 21,513 |
Church’s Chicken is a very profitable business for the franchisor with retained earnings of $9.148 million in 2021. Compared to $21.513 million in 2020, they saw a decrease of 57% from 2020 to 2021. This is not great news for the company overall but they are still turning a profit as a franchisor.
How many Church's Chicken units have opened and closed?
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 920 | 885 | -35 |
| 2020 | 885 | 854 | -31 | |
| 2021 | 854 | 849 | -5 | |
| Company-Owned | 2019 | 165 | 165 | 0 |
| 2020 | 165 | 160 | -5 | |
| 2021 | 160 | 161 | +1 | |
| Total Outlets | 2019 | 1,085 | 1,050 | -35 |
| 2020 | 1,050 | 1,014 | -36 | |
| 2021 | 1,014 | 1,010 | -4 |
Over the last three years, the company has been in decline. Both franchising units and company-operated stores have decreased. Over the last three years, franchises have closed at a rate of 24 units a year. This is an indicator that these stores may not be performing well or their franchise term is up and they are not renewing it. The following is an example of a restaurant that is now for sale but used to be Church’s Chicken location:
Fast food w/drive thru and Gas station w/NO fuel contract
| Paris, TX (Lamar County) |
|---|
| Asking Price: | $495,977 | Gross Revenue: | N/A |
Conclusion
Church’s Chicken is in a peculiar position in the industry. While it has a reasonable enough payback period, franchises are declining very fast. We recommend talking to at least 3 – 5 franchisees before signing with Church’s Chicken.
While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage Industry.
