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The Rise Of Chick-fil-A

Chick-fil-A. It's a fast-food chain with chicken sandwiches said to

be so good, even McDonald's wants to steal them.

And it has a reputation so controversial, entire cities have banned

the restaurant from their airports.

Critics say Chick-fil-A has a history of supporting and donating

millions of dollars to anti LGBTQ organizations,

which has drawn the ire of lawmakers and civilians alike.

Chick-fil-A's values are not Chicago values.

But it also has its share of ardent supporters.

Whatever you think of the company's politics, Chick-fil-A's sales

are on a tear.

As of June 2019, it is the third biggest restaurant chain in the

U.S. by system-wide sales.

And it generates the most sales per store of any other fast-food

restaurant in the country.

The ascent is so rapid, that even McDonald's and Popeye's are

taking note.

In July 2019, McDonald's franchise owners demanded the company

add a Southern style chicken sandwich to its menu in order to keep

pace with Chick-fil-A.

A month later, Popeye's debuted its own chicken sandwich on a

buttered roll with pickles, the first to be sold by the chain

nationwide.

Chick-fil-A is

also eating market share from giants in the chicken category like

KFC and Wingstop.

So how is it that a restaurant that's ensnared in controversy, and

closed on Sundays, is next in line to overtake Starbucks and

McDonald's?

It all started in Atlanta, Georgia, where Chick-fil-A's founder,

Truett Cathy was raised and where the company is now headquartered.

Cathy grew up watching his mother prepare chicken in traditional

southern fashion.

In 1926, the 25-year-old and his younger brother cobbled

together about $10,000 to open a diner called Dwarf

Grill.

Legend has it, that's where Cathy invented Chick-fil-A's original

chicken sandwich, fried in peanut oil and served on a bun with

pickles.

The menu item regularly sold out.

So in 1967, he opened the very first Chick-fil-A

in the Greenbriar Mall in Atlanta.

From the outset, Cathy implemented a policy still in place to this

day.

All stores would be closed on Sundays.

A devout Christian, he reasoned that Sundays were for spiritual

worship.

Cathy carried those Christian values with him to Chick-fil-A's

flagship store, which featured an upbeat logo of a bright red

chicken.

Cathy said the A of the company's name represented grade A

chicken.

He was one of the first to envision putting fast food in malls,

and as malls began to grow in popularity, Chick-fil-A was taken

along for the ride.

Between 1971 and 1974, Chick-fil-A

tripled in size, expanding into the rest of Georgia and the

Carolinas and continuing through the south and southwest.

In 1986, Chick-fil-A decided to grow beyond malls by opening

its first freestanding restaurant.

By 1993, its 500th restaurant had opened.

But this pushed it into competition with established chicken

focused fast-food chains like KFC, which also opened in the

south fifteen years before Chick-fil-A.

Chick-fil-A didn't

have as much money as those companies to spend on advertising, so

it decided to make a splash another way.

In 1995, it put up huge billboards on the side of

highways in the south east.

The first billboard featured a pair of cows scrawling "eat more

chicken" to try to get people to stop eating beef.

The campaign went viral and it worked.

In 2000, the privately held company hit one billion dollars

in sales, doubling its performance from when the billboards first

debuted.

It also rose to the third largest fast food chain in the chicken

category behind KFC and Popeye's.

That was also the year Kathy and his three children signed a

covenant promising to uphold Chick-fil-A's principles.

The agreement included staying closed on Sundays and never taking

the company public.

The company culture is very unique and has clearly led to

a lot of success and culture...it's

all interlocked.

Like you pull one strand of it and the whole blanket can

unravel. And sometimes if a company is public,

someone might want to pull out a strand and might not realize

that's the strand that could unravel the whole blanket here.

Chick-fil-A's fast paced growth was also fueled by a few key

innovations in its operating structure.

Each franchise is owned by an independent operator who usually has

just one unit and no other business ventures, a model that's still

relatively unique in the fast-food business.

This allowed franchise owners to be focused on the restaurant and

truly connected to the community.

Employee makeup is another differentiator for the brand.

Chick-fil-A has

said that two thirds of Chick-fil-A employees have grown up working

for the company, doing shifts in high school and college, and

ultimately returning for a career with Chick-fil-A after

graduating.

Chick-fil-A is

extremely selective of who is even allowed to become an

operator. That structure has created a network of experienced

franchise owners who are loyal to the brand.

It's the main reason why they're successful because they have these

people that are in the stores every single day.

They've gone through a heavy training process.

They believe very strongly in the brand and they're

interacting with customers.

So they are interacting with the employees.

They are interacting with everybody, and it really works.

The franchise agreement also allows operators to start restaurants

for an extremely low cost.

The initial fee is just $10,000 .

In comparison, the fee at McDonald's is $45,000 and

Wendy's is $40,000.

Unburdened by the debt of a large initial fee, Chick-fil-A

franchisee operators are able to put more of their funds into

growing and improving their store.

The closed on Sunday policy also applies to the Chick-fil-A's

operating in stadiums.

It's Mercedes Benz location even remained closed when the Super

Bowl was held there in 2019.

Analysts say the policy comes with a hefty price tag.

If you do the math, I think it works out to roughly $1.7

billion dollars in system-wide sales that are

lost by being closed on Sunday.

Now, again, that's assuming you just opened up on some days and

everything else works normally.

But they also say being closed might actually help the chain

provide better service.

Every employee can look forward to time off no matter how hard

they're working Monday through Saturday.

And sometimes the rest and relaxation can do a

person real good.

On top of that, you know, the guests like the better get to the

Chick-fil-A restaurant before Sunday comes because if they find the

time on Sunday and they have that craving that Sunday and they show

up on Sunday, not get any food from that Chick-fil-A restaurant.

In 2018, there were 2,352 Chick-fil-A's

in business with 234 in malls,

264 on college campuses and 73 at

hospitals, businesses or airports.

The culture of Chick-fil-A today still focuses on the Christian

values that Cathy founded the chain on.

Outside its Atlanta headquarters, a plaque with Chick-fil-A's

mission statement still hangs.

Analysts point to the chain's religious backbone as a driving force

behind the company's number one rank in customer service for four

years from 2015 to 2019.

In a 2013 survey of drive through s, Chick-fil-A employees were

reported to have smiled 91.4%

of the time, while employees of the next

highest chain, KFC, smiled 78.5%

of the time.

Basically, you're starting to see that they're almost a little bit

of a lifestyle brand , you come in and its an experience.

From the minute you walk in you've got that fresh-face kid who's,

you know, greets you, "thank you," you know, they're polite.

They're walking around helping you etc, its beyond just a

transaction, ita an entire experience.

And I think you're starting to see some of the bigger brands,

really trying, trying, you know, as much as they can to mimic that

and trying to give you an experience.

Chick-fil-A's christian values have also been a source of major

controversy in recent years.

In July 2012, Chick-fil-A came under fire after Truett Cathy's

son and the company's current president, Dan Cathy, publicly

expressed his views on gay marriage.

He told the Baptist Press that he was guilty of supporting the

biblical definition of a family unit.

The comments incited backlash in the form of boycotts, an

LGBT kiss-ins at Chick-fil-A restaurants around the country.

According to a brand's satisfaction measurement from YouGov, the

company's rating dropped to its lowest level in two years following

the comments the day of Dan Cathy's first comments.

Chick-fil-A's rating was 65, 19 points above average.

But four days later, the chain had fallen to 47.

Even though the comments hurt the brand's reputation, the company's

annual sales improved.

In 2012, the company saw $4 billion dollars in system-wide sales,

a 13 percent increase from the $3.6

billion dollars a year earlier.

It also grew 7.4

percent in average sales per unit.

Dan Cathy said in 2014 that he regretted publicly commenting on gay

marriage and that he would stay out of political debates.

But in 2017, reports revealed that Chick-fil-A foundation had

donated millions to what critics say are anti LGBT

groups.

Such as donations to the Fellowship of Christian Athletes, a sports

ministry that believes homosexual misconduct is unnatural in the

eyes of God.

Again, sales remained unharmed.

Chick-fil-A pulled

in $8 billion dollars in system-wide sales in 2017, up

15 percent from the previous year.

And the company has still not redeemed itself among LGBT

supporters.

During the 2019 Pride Parade in New York City, attendees taped a

large X over one of Chick-fil-A's storefronts.

Between 2017 and 2018, system-wide sales improved

12.8 percent from $8 billion dollars to $9 billion dollars.

Its sales per store is higher than any other fast-food chain at $4

million dollars.

McDonald's generates $2.7

million dollars a unit.

And in 2019, it became the third largest restaurant chain in

America by system-wide sales.

It surged past Wendy's, Burger King, Taco Bell and Subway in just

one year.

Since 2007, Chick-fil-A has doubled its number of stores to

2,400 restaurants.

The majority of its restaurants are still in the south and

southwest. Texas, for example, tops the chart with

391 restaurants, while Georgia has 218.

From its history of store openings, however, it seems the company

is slowly working to expand its foothold in other regions.

Between 2011 and 2018, for example, the company grew from having

one location in New York to having 17.

25 years ago, this was a regional concept that was much

smaller.

And today, know depending on what source you use, it

very much is the third biggest restaurant concept in the whole

country.

And they're still under-penetrated some of those heavily populated

parts of country.

They aren't all open on Sundays at all.

So they're a big player.

The chain is also a growing threat to other fast food chains.

Technology estimates that Chick-fil-A tallied over $10 billion

dollars in revenue in 2018 and grew 13.5

percent, while McDonald's grew just 2.5

percent.

In July of 2019, a group of McDonald's franchise owners signed a

joint letter asking the company to add a southern style chicken

sandwich to its menu

The company is an especially big threat to other chicken focused

restaurants. Between 2009 and 2018, Chick-fil-A

grew from owning 19.3

percent of the chicken fast-food market to

38.5 percent.

Their chicken venue doesn't change.

We are experts in chicken and we will occasionally give you

something additional spicy chicken, or like I said, finish or

whatever it is.

But by being maniacally focused on what they do,

it allows them to then be focused on all those extras ...the

service, the atmosphere.

You know, they're not always searching for: What's that next big

LTO.

The energy of their brand and what they do day to day

is just, once again, growing their brand from the perspective of

excellence.

So is there a ceiling for Chick-fil-A?

Truett Cathy passed away in 2014, leaving his three children to

inherit the company and the $11 billion family fortune.

Dan Cathy is now the company's chairman and CEO, while his brother

Bubba, is an executive vice president.

The private company declined to comment for this piece, and is

secretive about its financial information and goals.

But analysts say that if Chick-fil-A manages to maintain its

growth, there are major regions that the chain has yet to take

over.

Chick-fil-A plans to open its first international location in 2019

in Toronto, and plans to open at least 15 more locations in

Canada.

Looking ahead, they just need to make sure that, you know, they

have the the management infrastructure

because, you know, as any company gets bigger and bigger, it just

becomes that much more challenging to make sure the quality of work

remains high.

So, you know, if I had to guess, will they achieve that?

Yes.

But there's no 100 percent certainty in the

future, and I'm sure they're aware of that and trying to work as

hard as they can to make sure the odds of success for them are as

high as they can be.