While we may differ with Chick-fil-A's owners on politics, as owners of our own self-funded business we understand why you don't want entitled clowns messing with your legacy. Running a restaurant business is tough, and entitled government officials and their families only make it tougher.
— Jason Clampet
For the last two days the extra-curricular activities of the staff of the Environmental Protection Agency’s Secretary Scott Pruitt have touched on the specialties of Skift.
On Monday it was Pruitt’s use of taxpayer-funded staff to search for a used Trump Hotel mattress (professional tip: Don’t). Yesterday it was his use of taxpayer-funded staff in pursuit of a Chick-fil-A franchise for his spouse, because, according to the Washington Post, “he was eager for his wife to start earning a salary.”
Why would anyone risk their Cabinet-level government position to get their spouse a franchise of any kind? Especially one for which, based on what we understand of Chick-fil-A and how it operates, the Pruitt family seems totally unsuitable for?
To better understand what it’s like to be a franchisee, we reviewed Chick-fil-A’s 267-page Franchise Disclosure Agreement.
Here are a few takeaways.
First note: It’s pretty competitive. According to Business Insider, less than one half of one percent of franchise applicants are accepted each year. The Atlanta-based chicken sandwich specialist wants franchisees who are hands-on, community centered, and focused on returns rather than fame built on the backs of others’ hard work.
Basically the opposite of a Pruitt who’s the focus of a record number of ethics complaints, known for skirting ethical lines for decades, has used others to buy his homes, has had sweetheart arrangements on lodging, and via both politics and policy has demonstrated himself to be wholly unconcerned for communities of both chicken sandwich eaters and non-chicken sandwich eaters alike.
We reviewed the franchisee agreement and pulled out these points which would be red flags to Pruitt and important points for anyone interested in a franchise, either with Chick-fil-A or a competitor.
Buying a franchise is a complex investment.
Indeed it is. Chick-fil-A suggests that before agreeing to the terms of the franchise agreement, people request advice from the Federal Trade Commission, which at 600 Pennsylvania Avenue, NW is a convenient 11-minute walk from Pruitt’s own office. (While it is right across the street from a Capital Grille, Darden Restaurants only focuses on international franchisees.)
The basic investment is pegged at $10,000, but it’s really less that $5,000 with the incentives and equipment leasing that the company provides. In return for a low, up-front investment, Chick-fil-A is there to provide everything including “equipment, dining area furniture and fixtures and other items necessary to operate a Chick-fil-A Restaurant.”
Franchisees are paying a small amount in order to pull a small amount from an existing business while shouldering the more challenging parts of opening, such as staffing and creating a user base. Like McDonald’s which pioneered the real estate-first method of franchising, Chick-fil-A has the scale and expertise and contract which helps it sell every element of the restaurant business to its engaged franchisees.
If you’re going to work hard and follow the Chick-fil-A plan it’s likely to work. If not?
Short story: It’s a complex investment, and not one to which you should outsource to your taxpayer-funded assistant.
Chick-fil-A does not use any public figure to promote its franchises.
This part has a section all its own, and it’s one of the smallest. It seems smart, since the company’s half-literate, plotting cows are both cheaper and less polarizing than, say, a pizza pitchman who blames all his problems on athletes before resigning right before the holidays. It also speaks to the brand’s incredible loyalty and word-of-mouth edge that it holds for so many of its diners.
Like In-N-Out or Five Guys, the chicken sandwich operator spends less than the big brands on advertising. Much less. But is that a big deal?
According to Statista Chick-fil-A spent $63 million on measured media advertising in 2016, which was equal to Starbucks but dwarfed by McDonald’s ($773 million), Subway ($434 million), and Taco Bell ($367 million).
Chick-fil-A reserves the right to charge franchisees for advertising, but according to its franchise agreement, “since June of 1989, Chick-fil-A has not charged any amount for advertising (0% of Gross Receipts) as a matter of internal policy.”
Whether the Operator candidate has good moral character pursuant to Chick-fil-A’s current criteria.
Well this is certainly political in nature when it comes to Pruitt. We would normally leave spouses out of it, but when someone uses a taxpayer-funded staffer to solitic business on behalf of said spouse we will leave them in.
Pruitt is the subject of at least ten ethics investigations in Washington, D.C. Pruitt’s multiple ethical problems are red flags at a minimum, and from Chick-fil-A’s record of rejecting the vast majority of franchisee applications it appears that red flags are an easy way to say “no.”
Although Chick-fil-A is privately held, the franchise agreement gives insight into the brand’s performance. Out of revenues of $2.64 billion in 2017, the company says it earned $426 million in profit, an increase from $363 million in 2016.
- Franchisees paid Chick-fil-A $677 million in 2017 for store leases, equipment rental, proprietary seasoning, and other mandatory spending.
- Payments to approved suppliers will make up 46-64% of franchisees’ spending.
- Chick-fil-A does not plan to open any company-owned restaurants in the current fiscal year.
- It will open 110 franchised outlets in the year, with 22 in Texas and 10 in California.
- They can terminate franchise for multiple reasons, including subjecting Chick-fil-A to “public scandal” or stay open on a Sunday or Christmas Day.
I asked Scott Pruitt a quick question about the reports he tried to help his wife become a Chick-fil-A franchisee.
"With great change comes, I think, opposition…I love, she loves [Chick-fil-A]" pic.twitter.com/gND2tdMq1e
— Jessica Smith (@JessicaASmith8) June 6, 2018