Chick-fil-A, the No. 2 fast-food chicken chain, builds its brand on both its business principles and family values.
By SCOTT BARANCIK, Times Staff Writer
© St. Petersburg Times, published October 23, 2002
OLDSMAR -- By many business measures, the Cathy family is a success.
Their company, Chick-fil-A Inc., is the country's No. 2 fast-food chicken chain, with 1,055 restaurants and $1.2-billion in revenues last year. Another 500 stores are planned by 2006. Even Warren Buffett stopped by the Atlanta company's offices recently for a chat.
But Chick-fil-A has a higher calling than just chicken. "We're here to glorify God," said president Dan Cathy, who was in town this week to celebrate the opening of a $2-million store in Oldsmar.
Since 1967, Chick-fil-A has juggled profit and prayer. Founder and CEO Truett Cathy, Dan Cathy's 81-year-old father, makes no bones about the fact that it's a company built on Christian principles. Chick-fil-A is the only major fast-food chain that is closed on Sundays. It spends millions each year on foster care homes, college scholarships and summer camps. Prayer is not unwelcome at the company's headquarters or stores.
"I see no conflict between biblical principles and good business practice," Truett Cathy told NBC Nightly News in July.
In a country of many religious flavors, that attitude can cause trouble. On Monday, a Muslim man in Houston filed suit against Chick-fil-A, claiming he was fired for refusing to participate in a group prayer that invoked Jesus. Dan Cathy said he doubted the suit's merit and that it was the first such claim he knew of against the company.
For the most part, however, Chick-fil-A's religious inspiration has served it well, perhaps never more so than during the corporate scandals of the past year. In testimony before Congress, at President Bush's economic forum in Waco, in numerous television interviews and his recently published autobiography, Truett Cathy has told the story of his humble beginnings and religiously-inspired success with evangelical zeal.
"He has a little Barnum & Bailey hormone inside him," said Dan Cathy, who plays trumpet for his church band and says "dadgummit" a lot. "He's not beyond promoting the brand."
A Web site created to promote the elder Cathy's new book, Eat Mor Chikin', Inspire More People, includes dust-jacket praise from the likes of former President Jimmy Carter, audio clips of the author's spoken wisdom and standard-issue public relations pablum.
"Horatio Alger inspired millions of readers by writing fictional rags-to-riches stories of people who succeeded while maintaining their principles of honesty and hard work," promotional materials say. "Truett Cathy ... didn't have to employ such fiction in writing" his book.
Ethics and charity are not the only arrows in Chick-fil-A's quiver. QSR Magazine recently ranked its drive-through service No. 1 in the industry. It is using cash, not loans, to finance its current growth plan, though it still has some bank debts left over from the 1990s. It possesses one of the better known icons in the fast-food world: a cartoon cow who humorously tries to save his own skin by encouraging customers to "eat mor chikin'." (Chick-fil-A does not serve hamburgers.)
Except for a couple hundred licensed stores in airports and on college campuses, Chick-fil-A owns its restaurants. Each one is run by a separate operator who shares the profits, but not the equity, with the chain. Operators like Gus Mir, who runs a store in Lakeland, put up a refundable $5,000 investment and are guaranteed a minimum income of $30,000 per year. The chain takes 15 percent of the gross revenue and half the profit. The average operator of a mall store earns roughly $70,000 a year, Dan Cathy said, while operators of stand-alone restaurants typically earn double that.
Cathy said his opposition to franchising is simple. He'd rather do business with a hungry entrepreneur than a wealthy investor who is unwilling to "interview 16-year-olds."
Though institutional investors like Warren Buffett may want a piece of Chick-fil-A, the company is not interested in selling at the moment. Amid an ill-fated effort to go international in the mid-1990s, the Cathys did meet with several investment bankers about the possibility of selling stock to the public but never pursued it, Cathy said.
Chick-fil-A's plans for the future are mildly aggressive. The chain will add about 80 new stores in 2003, most of them self-standing, half a dozen in malls, and about 15 on college campuses. Many will be built in the Southeast, where the chain is already strongest, though some will be built in the high-growth Phoenix and San Diego areas. The Tampa Bay area will get four to six more stores over the next two years.
After the failure of the chain's three South Africa stores last summer, Cathy is more cautious about opening stores abroad. If and when the company expands internationally again, it will go to European or perhaps Japanese cities where other American chains have already established an infrastructure and customer base. "In South Africa, we were competing with street vendors," he said.
In the meantime, Chick-fil-A will introduce new menu items, such as fresh-squeezed lemonade smoothies and a spicy salad.
And rather than kowtow to Wall Street's whims, it will continue, as Lakeland operator Mir said Tuesday, "to hand the business to God."
-- Scott Barancik can be reached at firstname.lastname@example.org or (727) 893-8751.
Headquarters: Atlanta, Ga.
Ownership: Private (the Cathy family)
Cuisine: Fast-food chicken
Corporate purpose: "To glorify God"
Founder and CEO: Truett Cathy
President and COO: Dan Cathy
2001 revenues: $1.2-billion
Rank among fast-food chains, by sales: 16th
Rank among chicken chains, by sales: 2nd (to KFC)
Locations, as of 7/02: 1,040 stores in 34 states and Washington, D.C.
In Florida: 100+
Average sales per store, 2001: $1.5-million
New stores to be added, 2003: 80 (est.)
Typical location: suburban mall, stand-alone building
Charitable work: foster care, summer camp, college scholarships
Source: Chick-Fil-A Inc., QSR Magazine.