December 12, 2007
Chick-fil-A Sticks to Tried and True Plan
The purpose of being in business is to make money. Still, there are companies such as Chick-fil-A, as some would see it, that intentionally walk away from making as much as possible by closing restaurants on Sundays and other such practices.
Despite being open only six days a week when competitors never close, Chick-fil-A’s 1,300 locations in the U.S. generated $2.28 billion in sales last year. That number was up 15 percent from the year before. Over the next year, the company is looking to open up to 70 new restaurants.
Truett Cathy, the founder of the Chick-fil-A, told Reuters that the company is able to open locations unfettered as well as close on Sundays because it doesn’t have to answer to stockholders and analysts.
Mr. Cathy also said that being privately held enables Chick-fil-A to run its business based on what he called “biblical principles.” In short, that means employees are asked to treat customers as they would wish to be treated.
Discussion Questions: How much does Chick-fil-A being a “good” company factor into its success? Would Chick-fil-A perform appreciably better if its restaurants were open on Sundays? Do you agree with Truett Cathy that Chick-fil-A is a stronger entity because it is privately held versus being publicly traded?
Discussion Questions
Poll
BrainTrust
Recent Discussions
More Discussions
Will an In-Store Retail Tech ‘Confidence Gap’ Create Winners and Losers?
A new survey suggests that in-store retail tech could be a major factor in retailer success…Walmart’s Next CEO Era: From McMillon to Furner
Walmart CEO Doug McMillon will soon be replaced by John Furner. What’s next for the retailer?Which Brands Are Missing the Boat on Advent Calendars?
Advent calendars appear to be trending upward in popularity, with potential to move to other holidays…
Chick-fil-A is a great story, and the fact that they make their model work for the balance sheet is even more amazing. The fact that they are a private company, and can operate the company the way they see fit, does make them that much stronger. That being said, I think the days are gone when customers visited Chick-fil-A due to the fact that they are a “biblical” company.
The fact is, people visit the stores because they love the food. I know a lot of people who will drive miles out of their way to get to a Chick-fil-A, and enjoy their quality fast food product. The fact that the company is run by good Christians, with great Christian values is certainly a plus, and brings an added respect to the company. But I also believe that if the company were to open its stores on Sunday, they would not lose any of their existing customers, and would certainly gain some new ones.
This doesn’t mean they should change their values, nor change their strategy. If they want to remain closed on Sundays, more power to them. That being said, the day will come when this policy will change. It might not be in the next 5 years, or 10, but the day will come when the family sells the chain to a larger food chain or investment group, and the Sunday closings will be a part of Chick-fil-A lore.
Even religious people need a waffle fry fix on a Sunday!
I have several clients who are privately held and operate on similar principles. They are a joy to work with. Companies like Chick-fil-A are a huge threat to large publicly held companies because there is no greed factor to compete with. I can name about a dozen small privately held supermarket chains that drive the publicly held chains nuts because they won’t raise their prices and they get the best employees. Chick’s model works well because their ultimate goal is not to make the CEO and board of directors zillionaires.
Businesses in my community fell to pressure (real or perceived) to open on Sundays some time ago. Regardless of the reasoning, it’s less of a community and more like everywhere else. It’s gone from a community where the headline on the 11 O’clock news had more to do with a crop being early or late than a drive-by shooting, murder, or other serious crime report.
Mind you, I don’t blame that on opening the grocery stores, restaurants or other retail establishments on Sunday. It is, however, a factor in a steep, irreversible decline into its current state. Decisions we make have impact and consequences. Some of the consequences are serious, yet deniable by some who place little value on the intrinsic moral and principled ground in which we live.
Chic-fil-A does well mostly based on their product. If they didn’t have good chicken, we’d likely not be talking about their Christian values. It’s much the same way with Starbucks. If you couldn’t stomach the coffee, few would likely rave about the experience. While Starbucks would cringe at the notion that they operate on ‘Christian’ principles, they would strongly argue that much of their success is due in part to the principles in which they operate. Much like Chic-fil-A, they work diligently to protect them and stick to them. It’s a factor, but not the only factor. Both are examples of success with principle.
Apparently, I’ll be playing Devil’s Advocate here – in every sense of the phrase – but I suspect the laudatory comments have less to do with admiration for CFA’s piety and more to do with the fact that the Sunday closing policy is uncontroversial and relatively unobtrusive. Would people be as pleased if their interpretation of “Biblical Principals” precluded serving unbearded men? Mixed-race couples? Unveiled women?… I doubt it. So, while the How-would-Jesus-run-a-business model has a superficial appeal, I don’t see it being widely adopted.
Not to get too quantum here but we are coming to realize that everything in our universe is a form of energy. When you look at an eco-system (that is a system or an alignment of energies designed and managed by nature–dare we say God –itself) “rest” is a key component to it reaching its ultimate possibility. Everything in nature takes a break every once in a while. Volcanoes rest, so do trees and animals, even oceans. And so do the folks at Chick-fil-A. The majority of us continue our frenetic obsessive pace mistakenly thinking that the faster we go the more we get. The truth is you can tell when your organization is in decline when you seem to be working more but producing less.
We are at our most productive and innovative selves when we and our minds slow down. That’s why your best ideas come in your sleep, on a country walk and in the shower. I’m trying to get executive teams to stop talking so much, take a deep breath and use silence as a decision-making tool. Needless to say that’s not going well. I’ve just returned from speaking to a national sales team at a beautiful resort in Cancun and even there every waking moment was scheduled, no rest allowed apparently. Too many of us learn how to rest while recovering from our heart attack.
Here’s an idea for a Chick-fil-A bumper sticker and we should all take the advice: “Take-a-rest/Beat-the-rest!”
A company, as well as a person, functions as they truly believe and project. Many companies don’t; many people don’t. Chick-fil-A cuts through that fog and their customers reward them. Stay closed on Sunday C-f-A and let the world beef and eat some….
Chick-fil A has been well served by standing its ground. As to how many people understand or empathize with its Biblical underpinnings, who knows? But those of us living in Blue States (physically or psychologically) have to remember how many people actively believe. There’s a reason the Iowa Republican caucuses may very well select an under-capitalized Baptist minister as their pick for the White House. Given a choice, I’m betting most of those kinds of folks would rather “Buy Christian” if they had the option.
Chick-fil-A is a stronger entity because it conducts business based on biblical principles from a stronger entity.
Truett Cathy, Chick-fil-A founder, had a vision in 1967 that continues to this day. For those familiar with the Chick-fil-A restaurant chain, Truett Cathy needs no introduction. Credited for introducing the chicken sandwich concept to the quick-service industry, his company has created “Raving Fans” by consistently delivering a great product at a fair price. His leadership is based on Biblical Principals that are reinforced by the companies actions in the marketplace and by the atore operators. By the way, they are the highest paid in the fast food industry.
Truett Cathy also is a model for generosity; he truly gives back to the community and is an inspiration to anyone wondering about What Faith Says About Business. As of October 2007, the chain has over 700 such units and revenue is in excess of $3.5B. If history repeats itself, I believe President Dan Cathy, will continue to grow the business the way it was modeled to him. I have been eating Chick-fil-A since 1983!
Truett Cathy’s Five–Step recipe for Business Success
1. CLIMB WITH CARE AND CONFIDENCE
2. CREATE A “LOYALTY EFFECT”
3. NEVER LOSE A CUSTOMER
4. PUT PRINCIPLES AND PEOPLE AHEAD OF PROFITS
5. CLOSED ON SUNDAY
I’m a Christian, and I have high respect and appreciation for Chick-fil-A’s stand on this issue, but the main reason I eat there is because of the high food quality and consistently excellent customer experience.
They are able to charge fairly high prices (compared to most of their fast-food competition) because of this quality. Were the food and service less than it is, a “Closed on Sunday” policy would mean little to nothing.
And there have been more than a couple of Sunday afternoons when I’ve been on the road or otherwise pressed for time and wanted to stop in for my favorite chicken sandwich and realized “Oh crud, that’s right – they’re closed!”
I would wholeheartedly agree with those who understand the value of down time. The benefits gained from that one regular day off is highly valued by service employees, regardless of why it is given. Dollars gained by retention, moral, better customer service, etc. etc. could result in more than being the same ol’ same ol’ open on Sunday.
Major problem for all fast food restaurants: employee turnover often exceeding 100% annually. Chances are Chick-fil-A has lower staff turnover than many competitors because folks like to take Sundays off, regardless of their religious convictions. Lower staff turnover = less stress on everyone at Chick-fil-A, so customer service and morale are likely to be better than other fast food chains. Hobby Lobby is another closed-on-Sundays privately-held successful national retailer.
Like it or not, a private company can do whatever they want, whenever they want. If Chick-fil-A wants to close on Tuesdays and Thursdays and be open on Sunday they can do that. If the company wants to close Sunday and leave an additional 15 percent of sales on the table more power to them. However, that 15 percent additional sales could be the most profitable sales of the week as the infrastructure is paid for and any sales generated would result in the highest margin revenue of the week.
In reality, the consumer will eat somewhere else, on Sunday, as the rest of the food court and other competing restaurants are open. I don’t necessarily think that the consumer is put-off by the closing as this structure has been in place for many years and the consumer is used to it. And really, we can all live without a serving of Chick-fil-A on Sunday.
However, this policy does create a unique value proposition should the company ever be sold or taken public. Obviously, this revenue and profit stream has yet to be realized and could favorably impact valuation of the business considering almost any buyer would change the policy.
Certainly a commendable moral decision, but perhaps a tragic business one.
Operating a company on biblical principles; wow how refreshing!
Congratulations to Chick-fil-A for having the guts to stand by their principles. Opening on Sunday may gain substantial revenue but it also may be a downside on the retaining of employees. They have executed well following their business plan and listening to customer input. It would be interesting to evaluate their employee turnover vs. McDonald’s!
Not everyone emotionally associates to Chick-Fil-A’s biblical principles, but I do believe that most folks respect them for it and they earn points as a company by sticking to what they believe in–no matter what the financial impact. Sure, they’d make more money if open on Sundays. But their behavior shows that they are willing to give up some financial gain to be the kind of company that is rooted in personal principles. No way could they do this if publicly traded and I sure wish more companies followed their example–especially in the fast food vertical.
Growing up on the Lower East Side of New York City, the Jewish retail community closed on Saturday and made plenty of profit the other 6 days of the week. Chick-fil-A has a quality product and a loyal following. Their ability to demonstrate that they are a company with values only makes them more attractive and authentic. There really doesn’t seem to be a downside and the upside potential is present on many levels that may be hard to understand but clearly have an emotional resonance.