From one restaurant originally named “Dwarf Grill” in Hapeville, Georgia, Truett Cathy invented a recipe for a chicken sandwich in 1964 and with that, Chick-Fil-A was born. Today, there are more than 1,900 Chick-Fil-A restaurants in 42 states (1). In 2014, the chain collectively received $5.8 billion dollars in sales, which is an average of $3.1 million per store (2). This is the highest sales per store in the fast-food industry — greater than traditional powerhouses such as McDonald’s ($2.5 million) and Wendy’s ($1.6 million), but also greater than popular newcomers such as Chipotle ($2.5 million) and Panera Bread ($2.5 million) (2). These impressive numbers lead many to wonder how Chick-Fil-A has achieved this, especially considering its company-wide policy to close on Sundays (1).
Its implied business model is to provide high-quality chicken products with superior customer service to command premium prices in the fast-food industry.
Success Story: Business Model and Operating Model Working Together
I think the company has been very successful thus far because of the alignment between its business and operating models. Specifically, I found four main areas of its business or operating models that integrate well together: superior product, unique franchise model, execution of customer service, and focus on brand building.
First, the company aims to create both differentiated and quality products. These products can command higher prices. Operationally, Chick-Fil-A has aligned with this strategy by implementing a very thorough product development program (3). This emphasis on creating a quality product began with its founder, who took years developing the perfect recipe for the original chicken sandwich (1). While Chick-Fil-A holds the exact product development processes secret, we can get a sense of how important this operation is to Chick-Fil-A by observing allocated resources. The company spent $50 million dollars and took 11 years to develop the recipe and cooking method for the new grilled chicken sandwich (3). Clearly, the new product operations seem tightly aligned with the strategy to produce a quality, differentiated product.
Original Chicken Sandwich Grilled Chicken Sandwich
Unique Franchise Model
Second, Chick-Fil-A has employed a unique franchise model to allow for controlled growth that aligns with the company’s goals. Unlike most fast-food franchises that typically allow franchisees to own their stores with up-front capital, Chick-Fil-A owns all of its operating stores. Rather than requiring franchisees to provide significant capital, Chick-Fil-A requires potential franchisees to provide $10,000 up front (versus the hundreds of thousands or millions typically required) and to go through a selective screening process (4). Chick-Fil-A reported that it receives approximately 20,000 applications per year while only selecting 75-80 new franchise operators (.4% acceptance rate) (5). This kind of selectivity allows Chick-Fil-A to differentiate between franchisees not by a minimum amount of capital, but by quality of character and fit within the organization. It looks for those committed to its mission and who will be actively involved in the day-to-day store management (5). This is important because these are the types of operators who can obtain and sustain high levels of customer service – a critical piece of the business model. Video 1 shows an operator and her commitment to the organization.
Third, Chick-Fil-A is highly committed to customer service (6). Employees undergo training to contribute to a culture of understanding and happiness – see video 2 below for a glimpse of the training.
Employees are taught to learn customers’ names, hold conversations with them, and ask if they need anything while they are sitting down to eat (7). Training on and adherence to this level of customer service is unique in the fast-food industry and directly addresses the superior service aspect of the business model.
Last, Chick-Fil-A focuses on building a strong brand with its customers. Aside from the high quality product and service in stores, every Chick-Fil-A store is actively involved in its local community in some way as part of its operations (8). In the last three years, Chick-Fil-A operators have donated $68 million dollars to more than 700 charitable or educational organizations (8). This involvement brings meaning to the work of store operators and employees, builds relationships with local communities, and reinforces the positive, happy, and caring atmosphere experienced in Chick-Fil-A stores by employees and customers alike (See Video 1).
Chick-Fil-A’s business model to provide high-quality products with exceptional service at a premium price is greatly complemented by its operations. It has built a strong competitive advantage not only by creating a superior product, but also by superior customer service. The integration and interaction of its business and operating models have led to this success.
(7) See various stories from videos http://www.chick-fil-a.com/Story/Video
Video 1 https://www.youtube.com/watch?v=7GvDYc1kJy0
Video 2 https://www.youtube.com/watch?v=xulYGHMt1FE
Pictures from chick-fil-a.com