Franchise With Low Startup Costs – Chick-fil-A receives over 40,000 applicants each year. With a Chick-fil-A franchise fee of just $10,000; initially seems like a big investment. But there are strict Chick-fil-A franchise requirements and a lengthy approval process that results in an acceptance rate of less than one percent. The franchise fee is not the only cost involved. So how much does it cost to open a Chick-fil-A franchise and is it worth it in the long run? Here are a few reasons why franchising is such a sought after commodity and why it might be a less than favorable choice.
Chick-fil-A has been rated “Best Chicken Sandwich” on many food blogs year after year. How does the business rank in terms of investment value and what are the Chick-fil-A franchise requirements? This is where things get a little confusing.
Franchise With Low Startup Costs
The initial franchise fee for a Chick-fil-A is only $10,000. That’s relatively low, as the industry average is over $40,000, for franchises like Taco Bell and McDonald’s. But when you compare Taco Bell or McDonalds to Chick-fil-A, you’re not comparing apples to apples. Chick-fil-A franchise fees are so low because the company wants to retain ownership of the franchise and make all purchasing decisions (more on this below). The initial investment is within the industry average and ranges from US$265,000 to US$2.2 million.
Low Cost Business Model
The average Chick-fil-A restaurant produces $5.3 million in gross annual sales. This is surprising given that close competitor Popeye’s costs an average of $1.5 million per franchised location, and fast food industry leader (QSR) McDonald’s costs an average of $2.7 million. That said, gross sales and net operating income are two very different things, and profit margins in the QSR industry are very, very low – often in the 5-10% range, even for the best tradespeople. Franchise Business Review’s most recent research on food franchises found that the typical franchisee in the food and beverage industry will earn an average annual income of $120,000 – and our top-rated food franchises are on average 15 to 20% higher than that. Although Chick-fil-A doesn’t publish operator earnings figures, Franchise Business Review estimates that the average restaurateur earns a very respectable income in the range of $150,000.
If you’re interested in a mostly stand-alone business where you’ll have minimal involvement in background operations, Chick-fil-A is for you. The franchisor takes care of most of the dirty work: choosing a location, buying the property, financing the construction and buying the necessary equipment. The franchisor also covers oversight of accounting, service and customer relations, maintenance and marketing.
The risk is low, which is a dream come true for any entrepreneur. The retention rate for Chick-fil-A operators (franchisees) has been 96% for over 50 years. Many Chick-fil-A franchisees love what they do and strive to keep their employees happy, too. Lynnae Schneller, owner of a location in Tacoma, Wash., said Chick-fil-A “connected her family and her community in a new way.”
There are many reasons why a franchise might not be the right opportunity: you don’t agree with their policies and morals, you don’t like the product, and the list goes on. However, the information below may present serious obstacles to prospective Chick-fil-A franchisees. Don’t let that put you off, as there are plenty of other options on the market today (as we’ll see later in this article!).
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While this may be the case for some franchises, most franchises offer the ability to own multiple locations. Chick-fil-A does not and only allows one unit per franchisee. It could mean less profit because you are limited to one location.
The company wants its franchisees to be fully active and dedicated solely to the Chick-fil-A franchise. In other words, if you’re a serial entrepreneur: this isn’t the right franchise for you. They do not give a clear reason for this, but it can be concluded that the company is not interested in creating conglomerates and favors quality over quantity.
Much has been written about the culture of a Chick-fil-A franchise. Closing your restaurants on Sunday is just the beginning. The company has a long history based on conservative and religious values. Some people find this appealing and one of Chick-fil-A’s greatest assets as a company. While others prefer to be part of a more open and welcoming culture. Company culture and values are clearly important to explore when considering any investment in a franchise.
It’s no secret that a Chick-fil-A franchise is hard to come by; even Environmental Protection Agency chief Scott Pruitt couldn’t get one for his wife Marlyn. According to a Washington Post article, Chick-fil-A only accepts 100 to 115 franchisees of the 40,000 who apply each year. This means that only 0.25% of applicants are selected (the chances of your children getting into Harvard are better!). Additionally, they will not select franchisees who:
Low Cost Franchises You Can Start With $15,000 Or Less
Chick-fil-A has one of the lowest investment requirements in the QSR industry, but that’s because as one of their operators, you don’t own the business. . In most cases, the land, building and equipment are owned by Chick-fil-A, which they lease to their operators. It really is more like renting than owning a house. At the end of your franchise contract with Chick-fil-A, you own nothing – which for many entrepreneurs is a drag.
“Chick-fil-A is a very different franchise animal,” says Eric Stites, founder and CEO of Franchise Business Review. “Sure, it’s cheap to get in, but it’s also nearly impossible, and you don’t own the business, it’s the Chick-fil-A business. For many people, the choice to go into business is to create long-term wealth through equity…to create a valuable asset that you can sell or pass on to your family.This is not the case with the opportunity to Chick-fil-A franchise.
If you’ve found Chick-fil-A isn’t the right franchise opportunity for you, here are some great alternatives, which you can find in our list of the best food franchises.
Named by Franchise Business Review as one of the best food franchises for the past eight years, Checkers and Rally’s has satisfied franchisees and unparalleled support. The franchise fee is $30,000 and the initial investment ranges from $593,000 to $820,000. Its Franchise Disclosure Document (FDD) describes a 62.2% ROI on average annual sales of $1,028,053, and veterans don’t have to pay franchise fees.
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This fast-food chain has long been an American favorite, both for its food and its franchise opportunities. The fee to open a Wendy’s franchise is $40,000 per unit (they call it the “tech support fee”), with the ability to own more than one unit. Estimated total initial investment ranges from $2 million to $3.6 million, and annual sales per unit average $1,600,525, based on 2018 franchise disclosure figures. are endless: airports, entertainment venues and even hospitals.
Donatos Pizza is a force to be reckoned with, generating over $1 million in average net sales per year, with its top performing restaurants grossing over $2 million per year. They have a total of 160 franchise locations nationwide and continue to grow! The initial investment for a Donatos franchise ranges from $375,000 to $699,900, and franchise fees are average for the industry at $30,000.
East Coast Wings and Grill is not a quick service establishment. However, the investment is a bargain compared to others in the industry. The total initial investment for an East Coast Wings and Grill franchise is in the range of $658,875 to $1,133,502, which is quite low compared to similar restaurants (Buffalo Wild Wings, for example, has an investment initial minimum of 1,997 $0.700). Franchise fees are $40,000 and average net sales (per unit) in 2017 were $1,573,714, with a net operating margin of 15%.
The food and beverage franchise industry offers many viable options for potential franchisees, many of which are profitable and manageable. Chick-fil-A is a highly sought-after franchise, and while it may suit some, it’s definitely not for everyone. We hope we’ve made your decision a little easier, and if you want to learn more about the food and beverage segment, check out our list of top food franchises.
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