Hi jacksonk,
No, the 15% "service charge" does not cover local advertising or the lease.
How is a Chick-fil-AŽ Operator compensated?
All Operators have the same contractual arrangement. Each month, the
Operator pays Chick-fil-A Inc., 15% of gross sales and 50% of net
profits. Chick-fil-A Operators are assured a minimum income of $30,000
annually. Operators do not build equity in the business, and their
contractual agreement is not transferable."
http://www.chickfila.com/OperatorFAQ.asp?index=3
>>> Advertising: the Operator is responsible for local advertising,
Chick-fil-A is responsible for national advertising.
Who is responsible for marketing and advertising?
Chick-fil-AŽ, Inc. provides catalogues of marketing materials for
purchase by the Operator and helps with marketing support through
staff Field Marketing Advisors. However, the Operator is responsible
for developing the business locally through a variety of in-store and
community-based promotions and activities. Frequently, area Operators
meet to exchange ideas, offer feedback, and provide support for one
another. Chick-fil-A, Inc. is responsible for developing all national
advertising and point-of-purchase materials that can be used by
Operators."
http://www.chickfila.com/OperatorFAQ.asp?index=9
>> Rent: Chick-fil-A negotiates the mall lease and then the Operator
sublets the restaurant.
By 1988 the company had grown into a sizable corporation with well
established procedures. Here, for example, is how Cathy described the
procedure for opening a new unit in a mall (1988, p. 130):
?New units are built from the profits of Chick-fil-A. We try not to go
into debt to expand, although we have occasionally done so in the
past. A typical expansion finds Chick-fil-A negotiating a lease while
a mall is being built. We then design and build a restaurant (about
1,800 square feet) and furnish it for about $250,000. An Operator is
selected who then subleases the restaurant and puts up a refundable
deposit of $5,000. Once the restaurant opens, the Operator pays
himself a draw of $20,000 per year, returns 15 percent of the sales to
Chick-fil-A Inc. as a service charge, then splits the restaurant?s net
figure fifty-fifty with Chick-fil-A.?
http://www.secretsofsuccess.com/people/cathy.html
?In Chick-fil-A?s arrangement, it is a limited capital investment on
the part of the franchisee because we actually build and equip the
restaurant and then in effect sublease that to the franchisee,? he
said. ?We go into business with people who want to own their own
businesses but may not already have a million dollars in the bank.?."
http://www.redcoatpublishing.com/spotlights/sl_03_05_Chickfila.asp
"A certain large fast food chicken franchise is closed everywhere on
Sundays for religious reasons. While this is all very good and noble,
it does pose a problem for those of us who just happen to need a
number one chicken sandwich combo on Sunday afternoon. I propose that
a second company, we'll call them "Chick-fil-B," partner with the
franchise, and offer to make and sell chicken sandwiches exclusively
on Sundays. They would not be in direct competition with the other
company as they do not sell any food the rest of the week. Also, since
the owners of the franchise are paying rent on the building but not
using it 14.3% of the days of the year, Chick-fil-B can sublet their
facilities on Sundays, creating a new revenue stream for the original
franchise. And for that matter, if any of the staff wish to moonlight
for Chick-fil-B, I'm sure the two companies could work out some system
to expedite such an arrangement."
http://www.halfbakery.com/idea/Chick-fil-B
Additional Links of Interest
Entrepreneur: Franchise 500Ž 2005 Rankings:
http://www.entrepreneur.com/franzone/listings/fran500/0,5831,,00.html
International Franchise Association (IFA):
http://gamma.franconnect.net/ifa/control/ifahome
I hope this helps. If you have any questions, please post a
clarification request and wait for me to respond before closing/rating
my answer.
Thank you,
hummer
Google Search Terms Used: Chick-fil-A rent sublease lease |
Clarification of Answer by
hummer-ga
on
15 Jul 2005 14:30 PDT
Hi jacksonk,
The cost of national "brand" advertising is taken out of the 15%
service fee. I'm sure there isn't an extra fee for national
advertising, if that is what you are worried about. Yes, I can see the
ambiguity of the statement you quoted and the same could be said about
local advertising as well. Have you tried speaking with an official
representative? It seems like the sort of thing that they would be
more than happy to explain. Also, a great source of information are
all of the Operators out there, try meeting one and see what he has to
say.
Startup costs can vary widely, from $6 million for a Planet Hollywood
in Athens, Greece, to a mere $5,000 for a Chick-Fil-A chicken-patty
shop in Athens, Ga. A Subway sandwich outlet ends up costing most
franchisees around $200,000 for furniture, fixtures and kitchen
equipment, which is fairly typical for the industry. You also can
expect to tithe 8% to 10% of sales annually, partly for royalties to
the company, partly for local and national ads.
http://moneycentral.msn.com/articles/banking/basics/10768.asp
"Brand Awareness: Since the chain's award-winning "Eat Mor ChikinŽ"
campaign, starring the popular Chick-fil-A "Cows," began in 1995,
Chick-fil-A's unaided brand awareness has grown 64 percent in its top
29 markets in the last five years, and its chain-wide sales have
increased 75 percent during the same period. Leveraging the popularity
of the campaign, the chain has turned the theme into a fully
integrated marketing program, which includes store point-of-purchase
materials, promotions, radio and TV advertising, and clothing and
merchandise sales (including the popular Cow calendars) of more than
$32 million."
http://www.chickfila.com/FastFacts.asp
Regards,
hummer
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