Chick-fil-A is one of the most successful and fastest-growing fast food chains in the United States. With over 2,600 locations across 47 states and $10.5 billion in systemwide sales as of 2020, the Atlanta-based company has built a devoted following thanks to its signature chicken sandwiches, waffle fries, and renowned customer service. Chick-fil-A‘s average unit volume of $4.5 million is the highest of any quick-service restaurant chain in the country, nearly tripling that of McDonald‘s ($2.9 million) and more than 4x Wendy‘s ($1.6 million), according to data from QSR Magazine and Technomic.
This remarkable level of per-unit sales and consistent growth, even through economic downturns and the COVID-19 pandemic, has made Chick-fil-A an attractive target for potential investors. "Chick-fil-A is the envy of the fast food industry in terms of unit economics,†notes restaurant analyst Mark Kalinowski of Kalinowski Equity Research. "If and when they do go public, it will be a feeding frenzy.†However, there‘s just one problem for those hoping to buy a piece of the chicken sandwich empire – Chick-fil-A is not publicly traded and has no plans for an initial public offering (IPO) anytime soon.
Privately Owned by the Cathy Family
Chick-fil-A has been privately held by the Cathy family since its founding in 1946, when S. Truett Cathy opened his first restaurant, the Dwarf Grill (later renamed the Dwarf House), in the Atlanta suburb of Hapeville, Georgia. Cathy went on to invent the boneless chicken sandwich and launch the first Chick-fil-A restaurant at an Atlanta mall in 1967. Over the next several decades, he slowly and steadily grew the business into a regional chain and then a national powerhouse, building it on the core values of quality food, customer service, and his Christian faith.
Today, Chick-fil-A remains under the ownership of the Cathy family, with a reported 93% of the company held by heirs of Truett Cathy and the remaining 7% owned by employees through a stock option plan. Truett‘s sons Dan T. Cathy and Don "Bubba†Cathy serve as CEO and executive vice president, respectively, while grandson Andrew Cathy recently took over as company president.
The Cathys have long resisted any suggestions of going public, with Dan Cathy once telling the Atlanta Journal-Constitution that Chick-fil-A "would be a candidate for a leveraged buyout before an IPO†and vowing that "stock market participation is not in our DNA.†In a 2014 interview with the Biblical Recorder, he elaborated on the family‘s thinking: "We will not take the company public. Basically, we feel like public companies have a hard time maintaining an identity and focus. They have a hard time dealing with shareholders and expectations and strategy. And we‘re very concerned that Chick-fil-A stays true to its purpose.â€
Why Chick-fil-A Has Resisted Going Public
There are several reasons why the Cathy family has chosen to keep Chick-fil-A privately held rather than pursuing an IPO:
1. Maintaining Control and Independence
As a public company, Chick-fil-A would have to answer to outside shareholders and potentially cede some control to a board of directors. By remaining private, the Cathys can maintain full control over major strategic decisions and ensure the company stays true to their long-term vision without short-term pressure to hit quarterly targets. "We‘re as conservative as conservative gets. We like to own everything ourselves. Going public is the furthest thing from our minds,†Don Cathy told Forbes in 2007.
2. Adhering to Christian Principles
Chick-fil-A‘s Christian identity, derived from the devout Baptist faith of founder Truett Cathy, has always been a core part of the company‘s DNA and operating philosophy. This is reflected in well-known practices like closing all restaurants on Sundays, playing instrumental Christian hymns in dining rooms, and donating millions of dollars to faith-based organizations and charities. The company‘s stated corporate purpose is "to glorify God by being a faithful steward of all that is entrusted to us and to have a positive influence on all who come into contact with Chick-fil-A.â€
Going public would likely invite pressure from shareholders and the broader market to conform to more conventional corporate practices and potentially curtail Chick-fil-A‘s religious activities. The Cathys seem to believe that independence is necessary to fully live out their Christian mission through the company. "We intend to stay the course. We know that it might not be popular with everyone, but thank the Lord, we live in a country where we can share our values and operate on biblical principles,†Dan Cathy told the Biblical Recorder.
3. Sufficient Capital for Growth
Unlike many businesses that pursue IPOs as a way to raise funds for expansion, Chick-fil-A has been able to achieve tremendous growth without tapping public markets. The company‘s phenomenal average unit volumes generate substantial cash that can be reinvested into building new locations. Franchisees, who operate the vast majority of Chick-fil-A restaurants, also provide capital to fund their own development. As a result, Chick-fil-A opens 100+ new locations per year with a 96% five-year survival rate, all without the need for outside equity investment.
Chick-fil-A has also been at the forefront of adopting modular construction techniques to lower development costs and accelerate build times for new restaurants. Since 2015, the company has built and deployed mobile "pods†that make up 80% of a restaurant‘s interior, enabling a store to be framed and finished in a matter of weeks. Chick-fil-A estimates that going modular reduces development costs by 10-20% compared to traditional building methods.
4. Drawbacks of Public Ownership
Going public comes with significant additional expenses and obligations that Chick-fil-A seems keen to avoid if possible. These include millions in underwriting fees to investment banks, higher accounting and legal costs, more onerous financial reporting requirements, and the need to hold quarterly earnings calls and annual shareholder meetings. Executives‘ time could be diverted to investor relations and governance matters rather than managing the core business.
Moreover, as a public company, Chick-fil-A would face pressure to hit quarterly earnings targets and maintain rapid growth to satisfy Wall Street, rather than making long-term investments or contrarian decisions. The company could lose the flexibility to donate large portions of its profits to charity or pay above-market wages to attract top talent. BTIG analyst Peter Saleh says that by staying private, Chick-fil-A can be "more aggressive and take more risks than a public restaurant company could. They can make decisions that don‘t need to be vetted by a board of directors or a large shareholder base.â€
The Chick-fil-A Franchise Model
Any discussion of Chick-fil-A‘s ownership and growth has to account for its unique franchise model, which has been key to its success but could be threatened by going public. Unlike other major fast food chains that award franchises to outside owners, Chick-fil-A licenses individual stores to independent operators while retaining control over the real estate and most major business decisions.
Chick-fil-A franchisees pay just a $10,000 initial fee for the right to operate a location, making it one of the most affordable and sought-after franchise opportunities in the restaurant industry. The company then fronts all the costs for real estate, construction, and equipment – typically $2-3 million per store – while the operator puts up a mere $5,000 deposit. In exchange for this arrangement, Chick-fil-A takes 15% of gross sales and 50% of net profits as rent and royalties, a much higher share than peers like McDonald‘s (~10-12% of revenue).
This model has enabled Chick-fil-A to maintain tight brand standards, operational consistency, and prime real estate locations as it has scaled across the country. It also allows the company to be highly selective in choosing operators, accepting less than 1% of franchise applicants. Chick-fil-A looks for candidates who are active in their local community, aligned with its corporate purpose and values, and willing to be hands-on in the restaurant on a full-time basis without any other business ventures.
While going public could theoretically raise capital to accelerate Chick-fil-A‘s store growth, it might pressure the company to tweak its franchise model to boost profitability for shareholders. For example, the company could face calls to raise its royalty rate even higher or to start selling stores to multi-unit franchisees who could open locations faster. Some prospective owners might balk at these changes, reducing Chick-fil-A‘s pipeline of new operators.
"Chick-fil-A‘s franchise model is a big part of what makes the company distinctive. It gives them incredible control over the business and helps them maintain brand standards, but it‘s not necessarily designed to maximize profits,†explains John Gordon, principal at Pacific Management Consulting Group. "If they went public, there would likely be some tension between franchisees and shareholders around whether the company is leaving money on the table.â€
Competitive Analysis
Any evaluation of Chick-fil-A‘s future prospects has to consider its positioning and advantages in the fast food industry. On one hand, the company faces intense competition from much larger quick-service chains like McDonald‘s, Wendy‘s, and KFC, all of which now offer chicken sandwiches and are racing to improve their technology and remodel stores. Burger King recently launched a new hand-breaded chicken sandwich, while McDonald‘s is rolling out a revamped crispy chicken sandwich and new Chicken McGriddle and McChicken Biscuit for breakfast.
At the same time, Chick-fil-A is also competing with fast-casual concepts like Chipotle and Panera that are perceived as healthier and higher-quality. These chains have been taking share from traditional fast food in recent years, especially among millennial consumers. Chick-fil-A has managed to carve out a premium niche between fast food and fast-casual, combining the convenience and affordability of the former with the ingredient quality and hospitality of the latter.
However, Chick-fil-A has several key competitive advantages that should allow it to continue taking market share and growing sales at healthy clips. These include:
1. Brand Loyalty: Chick-fil-A consistently ranks first in customer satisfaction surveys and has a Net Promoter Score (a measure of customers‘ likelihood to recommend a brand) in the 70s, far above peers like McDonald‘s (20s) and KFC (30s). The company has cultivated fierce loyalty through its friendly service, clean dining rooms, and consistent food quality. Fans rave about the original chicken sandwich, waffle fries, and handspun milkshakes, all made with premium ingredients like fresh-squeezed lemonade and hand-breaded filets.
2. Operational Excellence: Chick-fil-A is renowned for its smooth operations and ability to handle high volumes. The company‘s restaurants routinely generate 30%+ more sales than competitors in the same location thanks to efficient kitchens, well-trained teams, and tech innovations like dual drive-thru lanes and handheld tablets for taking orders in line. Chick-fil-A‘s mobile app and Chick-fil-A One loyalty program also help to streamline ordering and encourage frequency.
3. Employee Retention: Chick-fil-A boasts the lowest turnover rate in the fast food industry at under 20% (versus 100%+ for some peers), thanks in part to its selective franchisee recruitment and investment in employee training and culture. The company covers 100% of educational costs for team members who want to earn a degree or certificate, and ties manager compensation to metrics around service and hospitality rather than just financial performance. As a result, Chick-fil-A scores higher than any other fast food brand on customer service rankings.
4. Menu Innovation: While it may be known for the classics, Chick-fil-A has also shown a willingness to experiment with new product launches to drive sales and traffic. Some recent successes include the spicy chicken sandwich, Chick-n-Minis breakfast item, and seasonal Peppermint Milkshake. The company has also been testing healthier and plant-based options like the Kale Crunch salad and Cauliflower Sandwich in select markets as it looks to broaden its appeal. Breakfast remains a big opportunity, with Chick-fil-A‘s share of a.m. transactions still well below McDonald‘s despite popular offerings.
5. International Expansion: Chick-fil-A‘s domestic success has been built entirely in the United States, giving the company a long growth runway as it starts to expand internationally. Chick-fil-A opened its first Canadian location in Toronto in 2019 to record-breaking sales and now has plans for up to 20 more stores in the country by 2025. The company also has a dozen restaurants in the United Kingdom and is eyeing other markets like Australia and Asia with an appetite for fried chicken. International expansion comes with execution risks but would add a whole new layer to the Chick-fil-A growth story.
Comparison of Key Fast Food Chains:
| Company | Stores (2020) | Avg. Sales per Store | System Sales | Net Income |
|———|—————|———————|————–|————|
| Chick-fil-A | 2,598 | $4.5M | $11.3B | N/A (private) |
| McDonald‘s | 39,000 | $2.9M | $100B | $4.7B |
| Yum Brands | 50,000 | $1.2M | $49.9B | $904M |
| Wendy‘s | 6,828 | $1.6M | $11.3B | $117.8M |
Source: Company filings, QSR Magazine, Technomic
The Bottom Line for Investors
While a Chick-fil-A IPO may be an exciting prospect for investors, the company has made it abundantly clear that it intends to stay private for the foreseeable future. The combination of family control, strong cash flows, unique franchise model, and desire to stay true to its values and mission all make a public listing unlikely without a major change in circumstances.
"I think Chick-fil-A is very comfortable being a private company. They‘ve been able to achieve incredible growth without access to the public markets, and their culture is so central to their success,†says BTIG‘s Peter Saleh. "Unless something changes with the family ownership or they start facing capital constraints, I don‘t see why they would feel the need to go public.â€
For investors interested in exposure to fast food stocks, there are plenty of other options available among the publicly traded players. McDonald‘s (MCD) and Yum Brands (YUM) offer global scale and exposure to breakfast, while Chipotle (CMG) and Shake Shack (SHAK) provide faster growth albeit at richer valuations. Restaurant Brands International (QSR), which owns Burger King and Popeyes, and Wendy‘s (WEN) are other potential ways to play the broader quick-service space.
At some point down the road, Chick-fil-A could decide that an IPO is the best way to raise funds for faster expansion or to provide liquidity for the Cathy family. A new generation of management could take the reins and decide to embrace the public markets as many iconic family-controlled businesses eventually do (e.g. Walmart, Ford, Tyson Foods). Or the competitive landscape could shift in a way that forces Chick-fil-A to tap new sources of capital to defend its turf and keep growing.
But for now, Chick-fil-A seems content to chart its own path as America‘s largest family-owned restaurant company. The Cathy family has built a fast food juggernaut by staying true to their values and executing on a simple but powerful formula of quality food, great service, and strong unit economics. With plenty of runway for growth ahead and a brand that inspires intense loyalty from customers and employees alike, Chick-fil-A may not need Wall Street to achieve its goal of being the world‘s most beloved and impactful restaurant company.
