Chick-fil-A’s business model focuses on serving tasty food in a clean restaurant with superb customer service. The company also creates value for the customer with its employee recruitment and franchise practices.
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Franchise agreements
According to a Business Insider article, Chick-fil-A’s dominance in the competitive American fast-food industry is primarily down to its unique franchise agreements.
Unlike other companies whose franchises may own hundreds of restaurants, Chick-fil-A franchisees can only operate one store.
This ensures that the franchisee deals with customers directly and is a member of the local community they serve. The company’s screening process is also stringent, with just 0.4% of franchise applicants accepted.
Franchise owners are encouraged to participate in community groups and events and are also responsible for employee recruitment.
This strategy has enabled Chick-fil-A to establish a presence in local areas where other companies that open “faceless” franchises have struggled.
With only one store to manage, Chick-fil-A franchisees also take ownership of their stores and work hard to ensure they succeed.
Tasty fast-food
Chick-fil-A’s menu is less varied than some others in the industry, but this allows the company to focus on cooking chicken well.
The process for making its signature chicken sandwich has not changed much since 1946 and, like McDonald’s, its menu items are simple and easy to prepare.
To maintain the quality and freshness for which it is known, Chick-fil-A chicken does not arrive at the restaurant pre-cooked or crumbed.
The company also uses boneless chicken pieces which cook faster and enable employees to spend more time with the customer.
What’s more, the company marinates its chicken in pickle brine to deliver a unique and juicy texture that stands out from the competition.
Staff are required to adhere to a strict daily checklist to ensure standards are maintained, and when stores experience quieter periods, employees are redirected to cleaning jobs as required.
Chick-fil-A makes a point to keep its bathrooms clean – a common sore point for customers in restaurants – and developed its “Safe Service” program to keep diners safe and healthy in response to the COVID-19 pandemic.
It was also ranked fifth overall in over 160 categories amongst the likes of Disney and The Ritz-Carlton.
The company has developed various standards to ensure customer service standards are upheld across its franchises.
These include small touches that are not typically present in a fast-food establishment.
For example, Chick-fil-A offers free food, places flowers on tables, and directs service staff to say “my pleasure” instead of “you’re welcome”.
Recruitment and staff retention
Chick-fil-A will only recruit employees who share its passion for customer service. The company’s extremely selective franchisee recruitment process can last for twelve months or more with candidates required to attend as many as 20 interviews.
While this may seem exhaustive, it has enabled the company to retain more of its staff in an industry typically characterized by high turnover.
Chick-fil-A also invests heavily in recruiting and retaining frontline staff. To process the colossal amount of applications it receives, Chick-fil-A has automated aspects of the process such as interview scheduling where candidates can select a time that suits them.
Once employed, staff are offered career advancement within their restaurant in addition to a college scholarship program and community engagement opportunities.
Chick-fil-A vs. McDonald’s Franchising Model
While growth in opening new locations is much slower in comparison to the fast pace, players like McDonald’s, the focus is on making sure the store would be successful.
In fact, the initial fee requested from franchisees is way lower compared to McDonald’s ($10,000 vs. $45,000):
While the entry fee is lower, operating Chick-fil-A franchisees will have to pay a 15% royalty fee.
As the company explains in the franchise disclosure document as 15% of franchised restaurant sales, fewer amounts charged to franchisees for equipment rentals and business services fees, and 50% of net profits.
In short, the Chick-fil-A franchising model has the following features:
It doesn’t require a net worth, compared to other franchising operations such as McDonald’s, as it’s the company that undertakes the expenses to open up a new restaurant.
The franchising fee (entry fee) is just $10,000, compared to, for instance, McDonald’s $45,000 fee.
However, the franchisee has to pay 15% of the net sales and 50% of the net sales.
This makes sense as the franchisor and not the franchisee is the owner of the business, where the franchisee primarily operates the business.
Therefore, the Chick-fil-A franchising operations look more like a chain model, while it skews its playbook in finding the right people to operate the business. In fact, of the applicants, only a tiny percentage of those make it up to become franchisees.
Value Proposition:
Customer-Centric Approach: Chick-fil-A places a strong emphasis on customer service, offering a unique and positive dining experience. It focuses on small touches like saying “my pleasure” and cleanliness to enhance customer satisfaction.
Quality Food: The brand is known for its high-quality chicken dishes, prepared with attention to detail. The use of boneless chicken pieces and marinating in pickle brine sets them apart.
Community Engagement: Through its franchise model, Chick-fil-A actively engages with local communities, making franchisees integral members. The brand is committed to contributing positively to the areas it serves.
Simplicity and Consistency: Chick-fil-A’s menu is intentionally simple, ensuring consistent quality and ease of preparation. This simplicity is part of the brand’s value proposition.
Distribution Strategy:
Franchise Model: Chick-fil-A operates primarily through a unique franchise model. Franchisees are limited to operating one store, ensuring a direct connection with the local community.
Multi-Channel Approach: The company combines physical restaurant locations with online ordering and delivery services to reach a wide range of customers.
Marketing Strategy:
Customer Service Focus: Chick-fil-A excels in customer service, which is a cornerstone of its marketingstrategy. The company goes the extra mile to create a welcoming and pleasant dining experience.
Community Engagement: Chick-fil-A actively participates in local community events and groups, fostering a strong sense of community engagement.
Quality Food Promotion: The brand emphasizes the quality and freshness of its food, particularly its signature chicken dishes.
Exclusivity and Limited Releases: Chick-fil-A occasionally uses limited releases and exclusive menu items to create buzz and attract customers.
Selective Franchise Recruitment: The company’s franchisee recruitment process is highly selective, contributing to its strong brand image.
Key takeaways:
Chick-fil-A’s business model focuses on serving tasty food in a clean and wholesome restaurant with superb customer service.
Chick-fil-A’s franchisee recruitment process is exhaustive and stringent, with only 0.5% of applications successful and individuals limited to operating one store. This ensures that franchisees are active members of their local community and represent the company in the most favorable light.
Chick-fil-A’s business model is also built on a simple menu of quality chicken that does not arrive pre-cooked or crumbed. The company’s simple menu items are easy to prepare which frees up more time for employees to interact with customers.
Key Highlights
Core Focus: Chick-fil-A’s business model is centered around providing tasty food in a clean and customer-friendly environment while emphasizing excellent customer service.
Unique Franchise Agreements: Chick-fil-A’s franchise model is distinctive in that franchisees are limited to operating just one store. This ensures a direct connection between franchisees and customers, making them active members of the local community.
Selective Franchise Recruitment: The company’s franchise recruitment process is rigorous, with only a small percentage (0.4%) of applicants being accepted. Candidates must demonstrate a shared passion for customer service and may undergo an extensive interview process.
Customer Service Focus: Chick-fil-A excels in customer service and was ranked as having the best customer service in the U.S. fast-food industry. The company emphasizes small touches like offering free food and training service staff to say “my pleasure” instead of “you’re welcome.”
Quality Food Preparation: Chick-fil-A’s menu is focused on preparing high-quality chicken dishes. The company uses boneless chicken pieces that cook faster and marinated in pickle brine to deliver a unique and juicy texture.
Cleanliness and Hygiene: Chick-fil-A restaurants are known for their cleanliness, and the company maintains strict daily checklists to ensure standards are upheld. The “Safe Service” program was introduced in response to the COVID-19 pandemic to ensure diner safety.
Staff Recruitment and Retention: Chick-fil-A places a strong emphasis on recruiting and retaining employees who align with its customer service-oriented values. The company offers career advancement opportunities, college scholarship programs, and community engagement initiatives to its employees.
Franchise vs. Chain Model: Chick-fil-A’s franchise model differs from traditional franchising approaches, resembling more of a chain model. While the entry fee is relatively low ($10,000), franchisees are required to pay 15% of net sales and 50% of net profits. This model allows Chick-fil-A to maintain control over the business while finding the right people to operate it.
Menu Simplicity: Chick-fil-A’s menu is intentionally less varied to focus on the quality of its chicken offerings. This approach allows for easy preparation and emphasizes the company’s commitment to quality.
Local Community Engagement: Through its franchise agreements, Chick-fil-A encourages franchisees to actively participate in local community groups and events, fostering a strong sense of community connection.
Element
Description
Value Proposition
Chick-fil-A offers a compelling value proposition for its customers, including: – High-Quality Food: Serving freshly prepared, high-quality chicken and menu items. – Exceptional Service: Providing excellent customer service and a pleasant dining experience. – Consistency: Maintaining consistency in taste and service across all locations. – Menu Variety: Offering a diverse menu with options for different tastes and preferences. – Community Engagement: Engaging in community and charitable initiatives. – Cleanliness: Ensuring clean and well-maintained restaurant environments. – Speed of Service: Delivering quick and efficient service to customers. – Family-Friendly: Creating a family-friendly and welcoming atmosphere. – Health-Conscious Choices: Offering healthier menu options and ingredient transparency. – Customer Loyalty: Building customer loyalty through the Chick-fil-A One rewards program.
Core Products/Services
Chick-fil-A’s core products and services encompass: – Chicken-Based Menu: Offering a variety of chicken-based menu items, including sandwiches, nuggets, and strips. – Side Items: Providing a selection of side items like waffle fries, coleslaw, and fruit cups. – Breakfast Menu: Serving breakfast options such as chicken biscuits and breakfast burritos. – Sauces: Featuring a range of signature sauces for dipping and flavor enhancement. – Beverages: Offering a variety of beverages, including soft drinks and freshly brewed tea. – Drive-Thru and Dine-In: Providing both drive-thru and dine-in options for customers. – Catering: Offering catering services for events and gatherings. – Chick-fil-A One App: A mobile app for ordering, rewards, and contactless payment. – Customer Service: Delivering exceptional customer service with a focus on hospitality. – Community Engagement: Engaging in local community initiatives and sponsorships.
Customer Segments
Chick-fil-A serves a diverse range of customer segments, including: – Families: Attracting families seeking convenient and family-friendly dining. – Students: Engaging with students looking for quick and tasty meal options. – Professionals: Serving professionals during lunch breaks and on-the-go. – Event Planners: Catering to event planners and organizers for gatherings. – Health-Conscious Consumers: Offering healthier menu options for health-conscious individuals. – Communities: Engaging with local communities through sponsorships and partnerships. – Drive-Thru Customers: Serving customers looking for quick drive-thru service. – Breakfast Seekers: Attracting customers for breakfast options. – Loyalty Program Members: Building loyalty with Chick-fil-A One app users. – Church and School Groups: Catering to church and school groups for events.
Revenue Streams
Chick-fil-A generates revenue through various revenue streams: – Menu Sales: Earnings from selling menu items, including sandwiches, sides, and beverages. – Catering Sales: Income from catering services for events and gatherings. – Franchise Fees: Revenue from franchisees, including initial fees and ongoing royalties. – Chick-fil-A One: Potential income from the Chick-fil-A One rewards program. – Merchandise Sales: Earnings from merchandise sales featuring the Chick-fil-A brand. – Licensing: Potential revenue from licensing the brand and products. – Advertising: Income from marketing and advertising efforts. – Sponsorships: Earnings from sponsorships and partnerships with events and organizations. – Drive-Thru Efficiency: Potential revenue gains from efficient drive-thru operations. – App and Mobile Ordering: Earnings from mobile app orders and digital payments.
Distribution Strategy
Chick-fil-A employs a strategic distribution strategy to reach customers: – Physical Locations: Operating a network of physical restaurant locations across the United States. – Drive-Thru Service: Offering drive-thru service for convenient order and pickup. – Dine-In Experience: Providing dine-in options with a focus on cleanliness and service. – Mobile Ordering: Facilitating mobile app orders and contactless payment. – Catering Services: Offering catering services for events and special occasions. – Local Marketing: Engaging in local marketing efforts to attract nearby customers. – Community Engagement: Fostering community engagement through sponsorships and initiatives. – Franchise Model: Expanding through a franchise model with independent operators. – Loyalty Program: Encouraging customer engagement and repeat visits through the Chick-fil-A One app. – Social Media Presence: Leveraging social media for brand awareness and promotions.
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Starbucks is a retail company that sells beverages (primarily consisting of coffee-related drinks) and food. In 2018, Starbucks had 52% of company-operated stores vs. 48% of licensed stores. The revenues for company-operated stores accounted for 80% of total revenues, thus making Starbucks a chain business model.
IKEA, as a brand comprising two separate owners. INGKA Holding B.V. owns IKEA Group, the holding of the group. At the same time, that is held by the Stichting INGKA Foundation, which is the owner of the whole Group. Thus, IKEA Group is a franchisee that pays 3% royalties to Inter IKEA Systems.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
