Chick-fil-A has established itself as one of the most successful and beloved fast food chains in the United States. With over 2,700 locations across 47 states, Chick-fil-A generates more revenue per restaurant than any other fast food chain – over $4.5 million per location on average in 2021. The immense popularity and consistent growth of Chick-fil-A has many entrepreneurs and investors wondering: is Chick-fil-A a franchise, and if so, how much does it cost to open one in 2022?
The short answer is yes, Chick-fil-A does operate on a franchise model and offers franchise opportunities for qualified candidates. However, Chick-fil-A takes a unique approach to franchising that is quite different from most other major fast food chains. In this comprehensive guide, we‘ll break down everything you need to know about Chick-fil-A‘s franchise costs and what it takes to become a Chick-fil-A franchisee.
Chick-fil-A‘s Franchise Model: How It Works
Like most fast food chains, Chick-fil-A relies on a franchise business model to fuel its growth and expansion. However, Chick-fil-A‘s franchise model is unique in several key ways:
Franchisees are "operators", not owners. When you become a Chick-fil-A franchisee, the company considers you an independent contractor or "operator" of the restaurant, not the outright owner. Chick-fil-A maintains ownership of the restaurant building, equipment, and brand.
Lower upfront costs for franchisees. While most fast food franchises require the franchisee to make a substantial upfront investment to cover real estate, construction, equipment and other startup costs, Chick-fil-A covers most of these expenses itself. Franchisees are only responsible for paying a $10,000 franchise fee.
Intensive vetting and selection process. Chick-fil-A is extremely selective in awarding franchises. Less than 1% of franchise applicants are ultimately chosen. Candidates go through multiple rounds of interviews and the company does in-depth background checks and reference checks before selecting franchisees.
Hands-on, full-time commitment required. Chick-fil-A expects its franchise operators to be actively involved in running the day-to-day operations of the restaurant full-time. Most franchisees can only operate one location, though some high-performing multi-unit operators are allowed to open additional locations.
Franchisor takes a larger revenue share. In exchange for covering most of the upfront costs, Chick-fil-A charges a higher royalty fee than most franchises. While the standard royalty in the fast food industry is around 5-10% of gross sales, Chick-fil-A charges 15% of sales plus 50% of any profit remaining after expenses.
So in summary, the Chick-fil-A franchise opportunity has a lower barrier to entry in terms of startup costs, but the company maintains more control over the business and takes a larger share of ongoing revenue than a typical franchise arrangement. Operators also don‘t build equity by owning multiple locations like they can with other fast food franchises.
Next, let‘s take a closer look at the specific costs involved in opening a Chick-fil-A franchise location in 2022.
Chick-fil-A Franchise Cost Breakdown
According to Chick-fil-A‘s franchise website and Franchise Disclosure Document (FDD), here are the costs a franchisee can expect to pay to open a new Chick-fil-A restaurant:
Initial franchise fee: $10,000
This one-time fee grants you the right to operate a Chick-fil-A franchise for 20 years and use the Chick-fil-A brand and business systems. The fee is lower than most other major fast food franchises, which typically charge $20,000 to $50,000 or more.
Real estate and construction: $0
Chick-fil-A purchases real estate and constructs the restaurant building at its own expense. According to its FDD, the average cost to develop a new traditional Chick-fil-A restaurant is $1.5 to $2 million, including real estate. But the franchisee is not responsible for these costs.
Equipment and signage: $0
Chick-fil-A also covers the cost of all restaurant equipment, fixtures, furnishings and signage, typically valued at $300,000 to $500,000 for a new restaurant. The franchisee may be required to pay a refundable $5,000 security deposit on the equipment.
Inventory and supplies: $15,000 – $25,000
The franchisee must purchase the initial inventory of food, beverages, paper goods and cleaning supplies to begin operations. Chick-fil-A estimates this will cost between $15,000 and $25,000.
Training expenses: $0
Chick-fil-A provides all required training for franchise operators and staff at no additional cost. This includes a multi-week program at the company‘s headquarters in Atlanta to learn all aspects of operating the business.
Additional funds (working capital): $75,000 – $150,000
Chick-fil-A recommends franchisees have at least $75,000 to $150,000 in liquid assets to cover living expenses and any unexpected costs during the initial startup phase until the restaurant reaches profitability.
So in total, the upfront out-of-pocket costs for a Chick-fil-A franchisee range from about $100,000 to $200,000, including the franchise fee, inventory, and working capital. This is significantly lower than other fast food franchises, which often require a total upfront investment of $1 million to $2.5 million when costs like real estate and construction are included.
However, it‘s important to note that in exchange for fronting these costs, Chick-fil-A charges higher ongoing fees than a typical franchise. Chick-fil-A operators must pay 15% of gross sales as a royalty to the franchisor, plus turn over 50% of the monthly net profits remaining after operating expenses are paid. These ongoing fees are a key reason Chick-fil-A‘s average revenue per restaurant is lower than other top fast food chains.
How Much Money Do Chick-fil-A Franchisees Make?
According to Chick-fil-A‘s FDD, the average revenue per franchise location in 2021 was $4.8 million. This is lower than close competitors like McDonald‘s ($3 million/store) and Panera Bread ($2.7 million/store), but significantly higher than the fast food industry average of around $1.5 million.
After expenses, the average Chick-fil-A franchise generated net profits of about $250,000 in 2021. Under the 50/50 profit-sharing agreement, the franchisee would take home about $125,000 of that amount, with Chick-fil-A corporate receiving the other half. By comparison, franchise owners of McDonald‘s, Taco Bell and other major chains tend to earn net profits in the range of $200,000 to $400,000 per store. But they also had to make a much larger upfront investment to receive those returns.
It‘s also important to note that, as with any business venture, financial success is not guaranteed. About 15% of Chick-fil-A franchises do not turn a profit in any given year, according to company data. Factors like location, local market conditions and the operator‘s management skills can have a large impact on sales and profitability from store to store. On the high end, the top earning Chick-fil-A restaurants can generate over $8 million in annual sales and $500,000 in net profits to the operator.
Opening a Chick-fil-A franchise requires a relatively modest initial investment compared to other fast food chains, but the potential financial upside is somewhat limited by the company‘s royalty structure and restrictions on multi-unit ownership. However, for the right entrepreneur who is passionate about delivering exceptional service and is willing to be hands-on in growing the business, a Chick-fil-A franchise can still provide a solid income and the chance to be part of a beloved brand.
The Pros and Cons of Owning a Chick-fil-A Franchise
So now that you know how much it costs and what‘s involved in opening a Chick-fil-A franchise, let‘s weigh some of the key advantages and disadvantages of becoming a Chick-fil-A operator:
Pros:
- Lower upfront investment and risk compared to other franchises
- Strong brand recognition and customer loyalty
- Streamlined business model and excellent franchisor support
- Industry-leading average unit sales volume
- Opportunities for hands-on operators to build a successful business
Cons:
- Highly competitive and selective application process
- Franchisor takes a large share of revenue and profits
- Limited ability to scale and build equity through multi-unit ownership
- Need to be comfortable with franchisor maintaining ownership and control
- Locations are closed on Sundays, limiting revenue potential
Ultimately, owning a Chick-fil-A franchise can be an excellent opportunity for the right entrepreneur, but it‘s not for everyone. If you have strong people skills, a head for business, a passion for service and are willing to commit to being hands-on in running the restaurant, it may be a great fit. But if you‘re more interested in a semi-absentee investment where you can own multiple locations and build long-term equity, other franchise opportunities may be a better match for your goals.
How To Open a Chick-fil-A Franchise In 2022
If you‘re interested in applying for a Chick-fil-A franchise in 2022 after weighing the costs and benefits, here are the key steps in the process:
1. Submit an online application. The first step is completing Chick-fil-A‘s online franchise application on the company‘s website. You‘ll need to provide details about your background, work experience, financial situation and reasons for interest in Chick-fil-A.
2. Interview with Chick-fil-A. If your application is selected, you‘ll be invited to participate in several in-depth interviews with the Chick-fil-A franchise recruitment team. Be prepared to discuss your leadership experience and provide specific examples of your business acumen and passion for service.
3. Background and reference checks. Chick-fil-A will conduct comprehensive credit, background and reference checks to verify your qualifications and ensure you meet their standards for character and financial stewardship. The company may reach out to past employers, colleagues, friends and family members.
4. Meet with executive leadership. If you pass the initial screening process, you‘ll have a chance to meet with Chick-fil-A‘s executive leadership team for a final round of interviews before a decision is made.
5. Review the franchise agreement. If you‘re ultimately selected as a franchisee, you‘ll receive Chick-fil-A‘s franchise agreement and FDD to review in detail. It‘s wise to have an attorney experienced in franchising review these documents with you before signing.
6. Attend training. Once your franchise agreement is signed, you‘ll attend several weeks of training at Chick-fil-A‘s corporate headquarters in Atlanta to learn all aspects of running the business. You‘ll also receive ongoing training and support from Chick-fil-A‘s field consultants.
7. Prepare for grand opening. After your training is complete, Chick-fil-A will finish construction on your restaurant and help you hire and train your staff in preparation for opening the location. The company‘s grand opening teams will be on-site to ensure a strong launch.
The Chick-fil-A franchise application and awarding process is lengthy and highly selective, taking anywhere from 12 to 24 months from initial inquiry to opening a location. The company receives over 60,000 franchise inquiries each year, but only selects 70-80 new franchisees from that pool. So while the costs of entry may be lower than other franchise opportunities, the bar to actually become a Chick-fil-A operator is set very high.
Conclusion
In summary, owning a Chick-fil-A franchise is a unique opportunity that can be highly rewarding for the right entrepreneur. The upfront costs to open a Chick-fil-A are lower than almost any other major fast food franchise, with an initial investment of around $100,000 to $200,000 required in 2022. However, Chick-fil-A gets more than 60,000 applications each year and selects fewer than 100 new franchisees.
Accepted franchisees go through extensive training and have the chance to operate a location for one of America‘s fastest-growing and most profitable fast food chains. The average Chick-fil-A restaurant generates almost $5 million in annual sales and nets the operator about $125,000 in profit after expenses and fees.
However, Chick-fil-A‘s franchise model does have some potential drawbacks to consider. Chick-fil-A maintains ownership of the restaurant and exercises more control over the business than a typical franchisor. Operators also don‘t have the ability to own multiple locations in most cases. And Chick-fil-A takes a larger share of ongoing sales and profits than most fast food franchisors.
Ultimately, becoming a Chick-fil-A franchisee requires a big commitment – personally, professionally and financially. The company looks for candidates who are purpose-driven, service-oriented and willing to be hands-on in running the business. In return, franchisees have the chance to be part of an iconic brand, make a difference in their community and earn a solid income. While it‘s not a fit for everyone, for the right entrepreneur, owning a Chick-fil-A franchise can be a life-changing opportunity.
