Are Chick-fil-A franchisees getting a free lunch?

As a business broker, every once in a while somebody will call me asking about the Chick-fil-A franchise. The appeal is obvious -- all you have to pay is a $10,000 franchise fee. This compares very favorably with other similar business opportunities, that will require $1M or more in capital. So, are Chick-fil-A franchisees getting a free lunch? Well, here are some things to consider: 

1. Chick-fil-A takes royalties of 15% of sales, and 50% of profits, from the franchisee. Similar opportunities only have royalty fees in the range of 4% to 8%. (Although in fairness, their revenues are also the highest, so there is a lot of money to go around! More specifically, average yearly revenue per store is $4.2M at Chick-fil-A, while only $1.2M at KFC and $2.8M at McDonald's.) Do the higher sales overcompensate for the higher royalties and profit-sharing? You do the math . . . . (or if you need help, call me)

2. Chick-fil-A operators are expected to run the business directly and full-time on a day-to-day basis. The corollary to this being that they aren’t permitted to run any other business. At the same time, growth opportunities and leverage are capped, because they aren’t permitted to have multiple locations.

3. Chick-fil-A pays for everything and and retains ownership of everything (real estate, equipment, inventory, etc). If you want to retire, become incapacitated, or simply want to do something else, you can't sell what you don't own. (But again and in fairness, you only paid $10,000. What did you expect?)

So, are Chick-fil-A franchisees "business owners" or "managers"? You be the judge . . . . . 

If you want more details, here are two excellent articles: 

5 Things You Need to Know Before Investing in a Chick-fil-A Franchise

https://www.entrepreneur.com/slideshow/307000

Why it only costs $10k to ‘own’ a Chick-fil-A franchise

https://thehustle.co/why-it-only-costs-10k-to-own-a-chick-fil-a-franchise/

- Sal

Sal Acosta

Business Broker

Buy or Sell a Business

Cell Ph: 484-358-9470

Email: [email protected]

www.dhirubhai.net/in/SalAcosta

www.LandonAndAcosta.com