Chick-fil-A Has Some Of The Lowest Franchise Fees, Highest Sales In Fast Food: What's The Catch?

Zinger Key Points
  • Chick-fil-A charges a $10,000 franchise fee, which is significantly lower than other major food chains.
  • Chick-fil-A generated an average of $8.1 million in sales per location last year, well above most competitors.

It's pretty obvious that business is booming at Chick-fil-A with the lines wrapped around the building 24/6, but did you know the family-owned restaurant chain has one of the lowest franchise fees in the fast-food industry?

The Numbers: According to an Insider report citing Chick-fil-A's annual franchise disclosure statement, the fast-food giant generated $16.7 billion in annual sales last year through its 2,325 locations.

In order to franchise a location of your own, Chick-fil-A charges a $10,000 fee, which is significantly lower than other major food chains such McDonald's Corp MCD, which charges a $45,000 franchise fee. 

When broken down by restaurant, Chick-fil-A locations, excluding malls, generated an average of $8.1 million in sales last year, which is more than double the $4 million in sales McDonald's locations averaged just a year earlier. 

It's no surprise then why the Golden Arches considers Chick-fil-A to be its biggest competitor.

Although these figures are just startup fees, the total costs for launching these fast-food locations tell much of the same story. The franchise disclosure document indicates total costs associated with franchising a Chick-fil-A can range anywhere from about $220,000 to approximately $2.9 million.

For comparison, a McDonald's will cost anywhere from $1.4 million to $2.5 million and a Yum! Brands, Inc. YUM Taco Bell will run you anywhere from $1.3 million to $3.4 million, per Insider.

From Last Week: Big Macs, Automation, and Beyond: How McDonald's Bold Moves Are Paying Off for Investors with Impressive Stock Performance

So Why Aren't More People Franchising Chick-fil-A's? Well, there's a catch: the fast-food chain goes through a rigorous process in determining potential franchise partners, which also may be why the place always seems to have such great customer service.

"The challenge to becoming a franchisee is never going to be money. We seek to find business-minded restaurant operators who find great joy in making other people's days," a Chick-fil-A representative reportedly told Insider.

More than 40,000 candidates submit franchise applications each year, but Chick-fil-A only accepts between 75 and 80 annually. Not only do potential franchisees go through a strenuous interview process, but they also subject family members and friends to extensive questioning. 

Furthermore, if you are one of the lucky ones to be selected, you will be required to complete about 160 hours of classes and training before you can even start the process of opening your location

Along with the competitive application process, Chick-fil-A maintains high standards that require franchisees to continue to make investments via ongoing fees. 

Chick-fil-A charges a base operating fee equal to 15% of monthly sales and the company takes an additional 50% off a franchisee's bottom line. Although the privately-owned restaurant brand famous for its slogan "Eat Mor Chikin" has cheaper startup costs, franchisees actually end up paying more than comparable restaurant chains to operate the business. 

There's another big drawback. Although franchisees own the business, they are prohibited from selling it. No transfer is allowed, not even to a family member upon death: live by the chicken, die by the chicken. 

Photo: Tony Webster from Flickr.

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