Chick-fil-A Leads in Store Sales & EBITDA
Here are US average annual sales (AUV) and estimated average store level EBITDA as a percentage of sales for select chicken quick service restaurant brands in 2010 as collected by our firm.
Keep in mind that earnings before interest, tax, depreciation and amoritization (EBITDA) is prior to depreciation and debt service. For franchisee units, royalties must be subtracted from a company operated level, which can be calculated if not disclosed.
Some chains are privately held so information is more difficult to obtain and estimate.
Yum Brands, which is a publicly-held company, sees international (YRI Division) and China Division sales for a KFC store as MUCH higher than its U.S. stores. These numbers are also not easily obtained. That' because YUM does not breakout U.S. brand performance and it has an elaborate ritual that must be unwound to estimate sales per store and EBITDA for individual brands.
- Chick-fil-a: AUV $2,318,000, estmated EBITDA 20% plus
- El Pollo Loco, AUV : $1,397,000, app. EBITDA 4%
- KFC, US, AUV app. $750,000, estimated EBITDA 6-9%
- Popeyes, AUV $1,368,000, app. EBITDA 13-15%
- Bojangles: AUV :$1,511,000. No EBITDA immediately avaiable, but the chain is growing.
- Church's: AUV: $697,000. No EBITDA avaialble.
Chick-fil-A does not operate with a traditional franchising model. That is to say OPM utilized and units owned by franchisees. The company focuses solely upon single unit operators who manage and operate a unit for a small initial buy-in fee, and in return receive a percentage of store profits. However, Chick-fil-A owns the land, building and equipment. The company now has approximately 1545 units in the U.S.
John A. Gordon, restaurant analysis and advisory, PacificManagementConsultingGroup.com
John A. Gordon is Principal and founder of Pacific Management Consulting Group, which provides chain restaurant sales, profitability, earnings and economics research and special analytical projects to those in, or who need to know about the restaurant sector. Among others, we support franchisees and those supporting franchisees.
Gordon has a long background in chain restaurant operations and financial management roles, such as cost analyst, financial analyst, manager of planning and analysis and CFO, and has been consulting since 2000.
He is passionate in providing independent, creative, detailed and useful perspective, with no conflicts of interest. Email him or call (619) 379-5561.
Comments
This is a joke.
"The company focuses solely upon single unit operators who manage and operate a unit for a small initial buy-in fee, and in return receive a percentage of store profits. "
Great so the owners basically bought themselves a job and cannot use any entrepreneur ambition to run "their" business. The so called franchisor owns everything, read the agreement.
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What's so funny?
Guest says, "Great so the owners basically bought themselves a job and cannot use any entrepreneur ambition to run "their" business. The so called franchisor owns everything, read the agreement."
There's a huge difference between an entrepreneur and a business person.
Business people who buy franchises aren't looking to reinvent the wheel. They are buying into a support system and a business model that works. Granted there are many scams in franchising; however, Chick-Fil-A is not one of them. Here the franchisor has demonstrated their concern for the franchisees success by strictly controlling their franchise growth model and maintaining significant skin-in-the-game. Other systems, such as, Dunkin' Donuts could care less about their franchisees success.
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I know what you mean. I own
I know what you mean. I own several franchises. Sure peopel that have bought into Chick-Fil-A have made money and some have lost money, just like any franchise out there. I'm not saying its a scam but this is no different than getting a job. The franchisor tells you what to do, how to fold your napkins and run your business. You are not truly running your own business. This is no more than buying a job for yourself.
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Chick-Fil-A leads in store sales and EBITDA
Great series of back and forth comments on the Goldman Sachs analysis of Yum Brands and the QSR chicken segment. Goldman should do the same review of the other major chains and really open investor's eyes to what has happened in the U. S. restaurant industry since the heydays of the 70's, 80's and 90's. Regarding the ebitda figures and description: are your ebitda percentages for franchisee owned units or company owned units? In franchisee owned units, royalties usually appear above the earnings level on the P&L so they are accounted for in the "e" part of the final ebitda number. Chick-Fil-A's structure doesn't sound like a franchise system comparable to the major chains where franchisees are responsible for all capital expenses and upgrades, have full control of the income and expenditures for the restaurant, and are frequently on a triple-net lease agreement. is there an actual franchise agreement, or just a management contract with a minor investment for a minor share of unit profits? Also, in today's world, everybody's margins have declined 5% or more over the past several years with cost pressures and a tough sales climate; if Chic-Fil-A is really doing around 20% ebitda today they are truely outstanding and beating everyone from McD's on down.
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QSR Franchisor Sales and Profitability Reporting
Just a brief note that the Chicken QSR subsector AUVs and EBITDA are estimates. We took reported company profitability and adjusted for royalties. The rent issue (that some company stores have zero rent) is not adjusted for, but can be roughed out concept by concept.
No franchisor aside from McDonalds periodically, releases franchisee profitability. Most do release same store sales trends, but same store sales is only partially indicative of profitability changes, and does not speak to absolutele level of franchisee profitability.
As I wrote in the July 2011 Restaurant Finance monitor (www.restaurantfinance.com/archive.php), with some franchisors essentially 100% franchisee owned, reasonable desired disclosure for stockholders, investors, potential franchisees and others, call for a level of reporting. Our idea is average weekly net sales, and franchisee EBITDA, before G&A, is doable.
John A. Gordon
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Thanks, John. I am just now already recomending Chick-fil-A
to my returning Vets from Iraq and Afghanistan. This is good reassurance.
Truett Cathy has always had my respect for integrity and good management sense. Isn't it gret to see that actually work positively.