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Rev. Aug. 24, 2015

Chick-fil-A: Bird of a Different Feather

In 2011, sales at Chick-fil-A (CFA), a southern U.S. restaurant chain, surpassed $4 billion, an increase of
13% over 2010. The privately held, family-run business headquartered in Atlanta, Georgia, was ranked 13th
among U.S. quick-serve restaurant franchises, second only to KFC in the fried-chicken category.1

CFAs business model varied significantly from that of most other fast-food chains. Advertising budgets
and debt loads were lower than average, and operating hours were reduced. Franchisee recruitment, financial
commitment, and management expectations also deviated from industry norms. Due to ownerships aversion
to debt, the pace of expansion was significantly slower than the fast-food-segment average. But perhaps the
most significant differences between CFA and other fast-food chains were its private, family-controlled
ownership structure and its management philosophy, which was based on biblical principles.2

In 2012, CFA came under fire for statements made by its COO, Dan Cathy, in favor of the biblical
definition of marriage.3 These statements were perceived to be critical of gay marriage, a pending legal issue
in a number of states that had been gaining popular support. Gay rights groups called for a CFA boycott;
meanwhile, CFA supporters flocked to local restaurants for Appreciation Day, for which CFA reported record
sales. Nevertheless, the controversy raised questions about the extent to which an ownerships views could
affect or even compromise an enterprises long-term viability.

Southern Roots: Samuel Truett Cathy and Chick-fil-A

The CFA story began with the humble roots of its founder, Samuel Truett Cathy, who was born in 1921
in Eatonton, Georgia, approximately 75 miles southeast of Atlanta. He was named Samuel after a respected
family friend and Truett in honor of Baptist evangelist George W. Truett, but Truett was the name that stuck.

Truett was born into a family of cotton farmers, although just prior to his birth, when the family farm failed
in the wake of a boll weevil attack, his father turned to selling insurance. To help make ends meet, the family
took in boarders, as did many during the Great Depression. The family served each guest two square meals a
day, and the entrepreneurial Truett, who had delivered newspapers and sold Coca-Cola door-to-door, helped
with meal preparation. This laid the foundation for his later entry into the restaurant industry.

1 Sam Oches, The Nations Top Chicken Concepts, The QSR 50, QSR Special Report, QSR, August 2012.
2 K. Allan Blume, Guilty as Charged, Dan Cathy Says of Chick-fil-As Stand on Faith, Family Values, Biblical Recorder, July 7, 2012.
3 Blume.

This case was prepared by Virginia Weiler, Instructor of Marketing, College of Business, University of Southern Indiana, and Peter Gerardo under the
supervision of Paul W. Farris, Landmark Communications Professor of Business Administration, and Paul J. Simko, Associate Professor of Business
Administration and Associate Dean, MBA for Executives. It was written as a basis for class discussion rather than to illustrate effective or ineffective
handling of an administrative situation. Copyright 2013 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights
reserved. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a
spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation.
Page 2 UV6843

At the age of 25, in the Atlanta suburb of Hapeville, Truett with his brother Ben opened the first restaurant,
which had only four tables and 10 counter seats, and was aptly named Dwarf Grill (later renamed Dwarf House).
Customers had a choice of a hamburger (15 cents), bacon and tomato sandwich (25 cents), steak sandwich (30
cents), bacon and eggs (30 cents), fried ham (25 cents), and pie (10 cents per slice). Over the next 15 years,
Truett tested various menu items, including fried chicken, although that item was soon removed because it took
too long to cook and presented quality assurance problems. Truett remembered his big breakthrough in 1961:

Jim and Hall Goode, owners of Goode Brothers Poultry, came to me in a quandary. They had been
asked by an airline to provide a boneless, skinless chicken breast that would fit the plastic trays they
used to serve meals on planes. The Goodes met the request, but their process left boneless breast
pieces that didnt meet the airlines size requirements. They were trying to develop a market for these
excess piecesI knew immediately that they had provided the answer to the chicken problem. After
the bone was removed, the chicken would cook evenly and thoroughlyThen I discovered the
recently introduced Henny Penny cooker, a pressure cooker that used oil and could cook a boneless
chicken breast in four minutes, start to finish. Cooking so quickly meant we wouldnt have to cook our
products ahead and hold them in a warming cabinet or under a heating lamp. All our chicken would
be served fresh.4

Truett devised a seasoning formula of 20 ingredients, put the chicken breasts between two buttered buns,
and trademarked the name, Chick-fil-A, for the new sandwich. The name was intended to draw comparisons
with already popular steak fillets. The Chick-fil-A sandwich was soon licensed to other restaurants and food
service operations. At the time, Truett had no interest in establishing a restaurant chain; his earlier expansion
attempt had ended badly when a second Dwarf House restaurant burned to the ground.

Over the next six years, however, Truett became increasingly disturbed with the chicken sandwich licensing
model, given his inability to control the quality of a product in which he took so much pride:

We began to realizethat licensing our product might not be such a good idea, for while it was one
of the easiest ways to sell, it was almost impossible to maintain consistent quality. Some restaurants,
for example, would cook all their Chick-fil-A breasts in the morning for the lunch crowd, then leave
them sitting around for a couple of hours. Hours before Braves baseball games at Atlanta Stadium,
they cooked the chicken downstairs, then put it in a refrigerator until just before game time, then sent
it upstairs to be reheated and sold as Chick-fil-A. The result, as described by Major League Baseball
umpire Ron Luciano, was a lousy chicken sandwich. Luciano disliked the sandwich so much he wrote
about it in a book years later. I needed to control the quality, and the only solution I could think of
was to open my own restaurantsa prospect that didnt appeal to me.5

In 1967, Truett opened his first chain restaurant in a 384 sq. ft. space at Atlantas Greenbriar Mall, the same
mall where his sister Gladys operated a gift shop. The initial upfront investment was a modest $17,000, allowing
him to reserve funds to develop other mall locations. The first freestanding restaurant did not open until 1986,
nearly two decades later. Over the years, CFAs menu expanded to include a number of variations on the
original Chick-fil-A sandwich. By 2012, the menu included chicken nuggets, sandwich wraps, numerous sides,
kids meals, desserts, and a breakfast menu.

4 S. Truett Cathy, Eat Mor Chikin: Inspire More People (Decatur, GA: Looking Glass Books, 2002), 7576.
5 Cathy, 7980.
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Corporate Strategy: A Focus on People

From the start, Truett was zealous about controlling not just the quality of the products, but the quality of
the people who operated the restaurants. CFAs mission was to glorify God by being a faithful steward of all
that is entrusted to us and to have a positive influence on all who come in contact with Chick-fil-A, and to be
Americas best quick-serve restaurant. To achieve these goals, Truett repeatedly stressed the importance of
focusing on personal relationships, often sacrificing short-term growth and profits for the sake of building
enduring loyalty among employees and customers. The strategy was premised on his Golden Rule philosophy,
which prized people over profits. All restaurants closed on Sundays, in keeping with the tradition of reserving
that day for worship and for operators and employees to spend time with their families. Regarding restaurant
operators, Truett stated:

We would be loyal to them, treating them as we wished to be treated, and they would reciprocate. They
did. Fewer than 5% of our operators leave the chain in any given year. Other chains tout their
knowledge management systems; we manage knowledge by keeping peopleand their knowledge
in the organization. The food tastes better with that kind of long-term operator stability.6

Chick-fil-A as a company had developed a customer base that was almost fanatical in its support, along the
way receiving numerous awards for customer service. Operators were carefully screened, often enduring a year-
long interview process, and chosen based on demonstrated management skills and talents. Of course their past
business track records were important, as well as their affiliations with church, civic, and other organizations
that could help them promote their restaurants in communities. In short, each operator was expected to
spearhead an extensive, ongoing networking campaign in his or her community, one designed to build
awareness of the brand, enhance its reputation, and encourage as many people as possible to visit CFA.

An operators (i.e., franchisees) upfront investment in a CFA restaurant was miniscule: an initial $5,000
franchise fee; there were no minimum net worth or other personal financial requirements, and the operator was
guaranteed a base income of $30,000. CFA purchased the land, constructed the restaurant, bought the
equipment, and took a hefty sum from the operators revenue and profit base: 15% of annual sales revenue and
50% of net profits.7 In contrast, KFC required, among other things, a franchise fee of $45,000 and a minimum
net worth of $1.5 million (Exhibit 1).

Franchisees at CFA were required to be managers. As an operator, franchisees had to be free from all other
business commitments to fully concentrate on managing the location. Operators were responsible for setting
up business plans for the restaurant, overseeing hiring and firing, setting wages, and managing equipment and
day-to-day operations. With few exceptions, CFA operators were allowed to own only one restaurant, and all
were strongly encouraged to be consistently present, personally managing employees and the processes they
were tasked to oversee:

Another key to operator loyalty lies in our decision to allow each operator to have only one restaurant.
At first, this policy may seem counterintuitive. Many companies reward success by enlarging territories
or bringing them into the company to oversee operations of other franchisees. I want our best people
right there full-time in the restaurant theyve built, serving the customers and team members who have
become loyal to them.8

6 Cathy, 96.
7 Yale Center for Faith & Culture, Yale School of Management, Chick-fil-A: Adding Value by Closing on Sunday?, http://nexus.som.yale.edu/chick-
fil-a/ (accessed Feb. 6, 2013).
8 Cathy, 100.
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The belief was that, once people visited the restaurants, they would be so impressed with the cleanliness,
the friendliness of employees, and the quality of the food served that they would become customers for life.
The strategy proved extraordinarily successful, and CFA consistently met its promises regarding superior
customer service, quality products, and competitive prices.

The income earned by the operators depended on their performance. In 2002, more than half of the
operators earned more than $100,000, and a few even topped $300,000.9

Corporate Culture

CFAs Mission Statement read Be Americas Best Quick-Service Restaurant. The company was known
for playing involved parent when it came to screening franchise applicants and spelling out how the
restaurants must be run, as well as how franchisees operated their personal lives:

Loyalty to the company isnt the only thing that matters to Cathy, who wants married workers, believing
they are more industrious and productive. One in three company operators have attended Christian-
based relationship-building retreats through WinShape at Berry College in Mount Berry, GA. The
programs include classes on conflict resolution and communication. Family members of prospective
operatorschildren, evenare frequently interviewed so Cathy and his family can learn more about
job candidates and their relationships at home. If a man cant manage his own life, he cant manage a
business, says Cathy, who says he would probably fire an employee or terminate an operator who
has been sinful or done something harmful to their family members.

The parent company asks people who apply for an operator license to disclose marital status, number
of dependents, and involvement in community, civic, social, church and/or professional
organizations.

Danielle Alderson, 30, a Baltimore operator, says some fellow franchisees find that Chick-fil-A butts
into its workers personal lives a bit much. She says she cant hire a good manager who, say, moonlights
at a strip club because it would irk the company. We are watched very closely by Chick-fil-A, she
says. Its very weird.10

Truett saw this through a different business prism: that significant business relationships with people
should be made with the same care and caution with which one might approach ones personal relationships.
In my first meeting with a potential operator, I explain that our commitment is going to be like a marriage,
with no consideration given to divorce. Were much more careful about selecting operators when we know we
cant easily get rid of them, he said.11

Despite this level of perceived intrusion, CFA received thousands of applications from would-be
franchisees every year. Out of more than 10,000 applicants per year, fewer than 50, or 0.50%, became new
operators. For the few who received the call, extensive training classes into the basics of how to run a Chick-
fil-A franchise and assimilation into the companys management culture soon followed. The end result was that
operators at Chick-fil-A tended to be a tightly knit group who shared a common commitment to the corporate
mission.12

9 Cathy, 99.
10 Emily Schmal, The Cult of Chick-fil-A, Forbes, March 23, 2007.
11 Cathy, 97.
12 Yale Center for Faith & Culture.
Page 5 UV6843

The WinShape Foundation, founded in 1982 by Truett and his wife Jeannette, was a cornerstone of CFAs
charitable activities and a direct reflection of the CFA culture. The foundation originally provided tuition
assistance to students attending Berry College, a small nondenominational Christian college in Georgia. Later
it sponsored other programs, including WinShape Camps, a Christian-themed camp for young people through
high school, and WinShape Homes, which operated foster homes throughout Tennessee, Georgia, and
Alabama that served children who had been abused or neglected. As stated on its website, the goal of this
program was to provide children with a place they will grow physically, spiritually, and emotionally, surrounded
by tenderness, wisdom, and structure. A place where they will be loved for life.13 Additional WinShape
initiatives included marriage retreats and international natural disaster relief support.

Marketing and CSR Approach: Send in the Cows

In addition to operating only six days a week, a perceived financial handicapestimated to cost
approximately $500 million annuallywas CFAs relatively tiny advertising budget. In 2009, the chain spent
just $27 million on advertising media, compared with the nearly $1 billion McDonalds spent. But there was a
bright side: on average, despite the smaller budget, CFA generated an annual volume per restaurant of $3
million, compared to McDonalds $2.3 million. Faced with such competition, Chuck Bradford, CFAs manager
of media integration, said his company took on a David and Goliath mindset to doing business: Were going
out to try to slay some giants, he said.14

A particular success, developed by the Dallas-based Richards Group, took advantage of the media presence
in Atlanta during the 1996 Summer Olympics. A billboard campaign depicted Holstein cows as underground
revolutionaries avoiding a hamburger fate by encouraging the public to Eat Mor Chikin. The strategy was
obvious and very effective: to position chickenmemorablyas an alternative to hamburgers. In addition, a
marketing program was developed that integrated point of purchase, merchandise promotion, direct mail, and
public relations efforts.

In the immediate aftermath of the campaigns rollout, same-store sales rose four times above the industry
average, and three times greater than the rate CFA stores had experienced before the campaign. This growth
in same-store sales was all the more impressive given that CFA, unlike most quick-serve competitors, hadnt
made any major shifts, additions, or changes to its menu or marketing campaign since 1996. It devoted the
lions share of the advertising budget to outdoor media, with radio, television, and print advertising distant
seconds. Rated among Americas most popular advertising icons in an Advertising Week poll, the Eat Mor
Chikin cows were enshrined in the Madison Avenue Advertising Walk of Fame in New York, inducted into
the Outdoor Advertising Association of Americas (OAAA) OBIE Hall of Fame, and given a Silver Lion at the
Cannes Advertising Festival.

CFA did not offer any kind of frequent-buyer card to develop relationships with customers, but it utilized
creative sales promotions quite effectively. CFA developed its customer community electronically, particularly
through its website. When opening a new store, CFA generated excitement through its First 100 promotional
event. Customers could register on the company website to receive a free meal every week for a year at the new
location, with 100 names drawn at random to receive the prize. Additionally, customers were encouraged to
upload videos and pictures that told their Chick-fil-A stories, how they connected with CFA in a special way.
For example, one grandmother posted a picture with her grandson, who was suffering from cancer, and wrote
that whenever he left the hospital, he wanted to go straight to Chick-fil-A. Another described how a couple
visited Chick-fil-A on their wedding day.

13 WinShape Foundation website.

14 Mary Sue Penn, Media Manager Outlines Brand Strategy for Students, Chicago Booth News, October 13, 2010.
Page 6 UV6843

Another highly successful CFA event was Cow Appreciation Day. Customers who went to a CFA dressed
in full cow regalia received a free meal, and awards were given out for best herd and best calf. CFA solicited
customer experiences on Cow Appreciation Day, also to be posted to the website.

The company also purchased rights to the former Peach Bowl, a college football bowl game played each
December on national television, and changed the name to the Chick-fil-A Bowl.

Compared to such quick-serve burger restaurants as McDonalds, Burger King, and Wendys, CFAs
customers were more affluent, more active, and more educated. Visitors to the Chick-fil-A website were slightly
more likely to be female, between the ages of 25 and 44, and have a college education (Exhibit 2).

Company Outlook and Finance

Forecasts called for quick-service restaurants to achieve stronger growth in 2011 after three years of
declining sales. As a whole, the quick-service segment was expected to achieve sales of more than $167 billion,
a gain of 3.3% over 2010.15 CFA posted record sales of $4 billion in 2011, an increase of 13% over 2010. This
followed a sales increase in 2010 of more than 11% overall sales and close to a 6% increase in same-store sales
over 2009. By this point, CFA had enjoyed uninterrupted strong year-over-year sales growth since its
founding.16

Ranked second among U.S. quick-serve chicken restaurants, CFAs 2010 sales revenue dwarfed that of
Popeyes and was gaining on KFC, which had struggled in recent years. KFC continues to cede a lot of market
share to privately held Chick-fil-A, wrote Mark Kalinowski of Janney Capital Markets. Lapping an easy 7%
comparison from the second quarter of last year did not help KFC U.S.17 Between 2010 and 2012, KFC
shuttered more than 400 U.S. outlets. In 2010, CFA surpassed Popeyes, McDonalds, and Burger King in total
sales growth and same-store sales growth despite having far fewer locations and closing its stores 52 days of
the year. (See Exhibit 3 for summary revenue statistics in the quick-serve restaurant industry and Exhibit 4
for a summary of financial characteristics of publicly traded competitors.)

In 2012, most of CFAs 1,600+ restaurants were located in the southeastern United States; approximately
1,100more than two-thirdswere below the MasonDixon line (Figure 1). The West Coast had fewer than
50, all in California, while New England and New York had 3. The companys growth focus was on the Midwest
and Southern California.

15 NRA Forecasts Return to Industry Sales Growth, Nations Restaurant News, February 1, 2011.
16 Chick-fil-A Continues Sales Growth Momentum in 2010, company press release, February 21, 2011.
17 Mark Brandau, Yum! Marketing: KFC, Nations Restaurant News, July 19, 2011.
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Figure 1. Chick-fil-A store locations in the United States by county, 2012.

(darker areas denote more stores)

Source: Wikimedia Commons.

CFA was also one of the worlds largest privately owned restaurant companies. By all accounts, Truett and
his sons intended to keep the business in the family, a goal stemming from their desire to maintain very tight
control over the business.

Many others have achieved our size by offering ownership in their companies to the public. We have
resisted and will continue to resist that status. In the early days, we did not offer stock for sale because
I could not predict how fast the company might grow or what dividends we might pay to anyone who
might invest. Additionally, Im afraid the directors, if we had a bad year, might tell me Im old-fashioned
and fire me.

Many people who are creating and running companies couldnt care less about anything but their
personal bottom lines. If the stock goes down the tubes after theyve sold their options, they say thats
just the risk an investor takesIf I had a widow invest her savings in Chick-fil-A and the company
didnt pay the return she expected, I would feel obligated to make up the difference to herThe value
of the stock would always be determined by the profits of the corporation, and if I cut into those
profits by giving away a bunch of the companys money, employees and stockholders might resent my
charityOur system puts the cash in the hands of the operator today, instead of sometime down the
Page 8 UV6843

road with a lump sum, and encourages them to earn all they can, save all they can, and give all they can
right now. Their focus is on todays customer.18

Though Truett, now 92, was less involved in day-to-day operations than in years past, sons Dan (COO)
and Donald (senior VP) inherited their fathers aversion to financing expansion through debt, preferring to
reinvest CFAs profits. Truett made no secret that low (or no) debt was, in part, a reaction to his childhood:
In the Great Depression, you bought something if you had the cash to buy it. We are just about debt-free right
now [2010], stretching that dollar as far as it will go. If you have debt, you have to worry about it.19

For these reasons, and because Truett was fearful of expanding too rapidly, CFA pursued a slow, steady
increase in the number of locations:

I have never tried to overextend. Im satisfied stepping from one plateau to the next, making sure were
doing everything right before moving on. Financial experts tell me our strength would allow us to open
restaurants at a much more aggressive pace than our current 70 per year. But Id rather have 70
restaurants operating efficiently and professionally than 500 restaurants where half are run well and the
other half not.20

CFAs location strategy included a significant presence in malls (320 locations as of January 2013) in
addition to its more than 1,000 stand-alone locations.

Awards

CFA had a devoted customer base and had accumulated numerous consumer and industry awards. In 2011,
CFA won the Consumer Reports Nations Top Chicken Chain award, based on a survey of 36,000 readers.
Other awards CFA accumulated included Zagats 2011 Top Large Chain in the fast-food category and Best
Value and Best Milkshakes in Zagats 2010 fast-food survey.

International Expansion

In 2011, CFA opened 92 new restaurants rather than the traditional 70 or fewer. The chain still
maintained a slow and steady attitude toward domestic expansion, as that pace could have been much quicker.
The company had a handful of restaurants in Mexico, Puerto Rico, and Canada but showed little interest in
overseas expansion. The company announced it had no plans or intention to capitalize on the slow growth of
Popeyes or negative growth of KFC. It also had shown no inclination to blunt KFCs extremely successful
expansion into China, with more than 3,000 restaurants in 650 Chinese citiesin 2011, a new restaurant every
day.

Sustainability

As a faithful steward of all that is entrusted to us, CFA had a stated commitment to being a good steward
of the environment, though it admitted to being still very early in our environmental sustainability journey.
The company boasted a number of green initiatives, including plans to retrofit 900 restaurants in 2012 with
energy efficient lighting, refrigeration, and water-saving technologies. The company continued to use Styrofoam

18 Cathy, 8889.
19 Jeremiah McWilliams, Chick-fil-A Founder Truett Cathy Dishes on Wealth, Debt, Longevity, Atlanta Journal-Constitution, June 23, 2011.
20 Cathy, 87.
Page 9 UV6843

cups because of the insulating properties but stated that its current cups were recyclable where facilities existed.
This included all 58 of its California locations as well as restaurants in Denver, Salt Lake City, and Philadelphia.
The companys goals included adding 400 more stores to its foam cup recycling initiative in 2012 as well as
chain-wide implementation slated for 2014. Additionally, as of January 2013, in 90 of its stores, all napkins, tray
liners, and kids-meal bags were recycled.

Succession Planning

Family business ownership has a 30% chance of retention by the second generation, 12% by the third, and
3% by the fourth. Yet data from the Family Business Institute relates that a full 88% of family business owners
believed that the family will still own the business in five years:

The statistics reveal a disconnect between the optimistic belief of todays family business owners and
the reality of the massive failure of family companies to survive through the generations. Research
indicates that family business failures can essentially be traced to one factor: an unfortunate lack of
family business succession planning.21

The Cathy family was an exception. To prevent CFA from being sold or carved up by succeeding
generations, second-generation stakeholders gathered four times a year, and third-generation stakeholders met
twice annually. Some family members worked directly for CFA, and each third-generation family member
oversaw a significant foundation. Every family member had to graduate from college and work outside the
company for at least two years before employment with CFA. Once employed by the company, family members
underwent the same employment channels as other applicants. According to Dan:

Despite high divorce rates and the changing mores of society, the family sees no need for prenuptial
agreements. There have been no divorces, and we are quite proud of the fact that we have stayed the
course with our values. We dont worry about future generations changing that. They are rock-solid.

John White, the son of Truetts daughter Trudy, sees no trouble with perpetuating his grandfathers values.
I think it would be unwise to seek out something else in hopes that it would work when it already works the
way it does, he said. Typically what happens in families this size is they break into segments, but we are still
meeting all as one group. I talk to my cousins frequently. Weve made it a priority.22

Controversy

Relations between CFA and gay and lesbian advocacy groups had been strained in recent years. In 2011,
CFA donations (almost $2 million in 2009 alone) to organizations such as Focus on the Family and the Family
Research Council prompted protests and boycotts among college students and others supporting gay rights.
Dan protested that the company was not anti-anybody.23 The conflict erupted into a firestorm after a Dan
Cathy interview in July 2012:

21 Succession Planning, Family Business Institute website.

22 Catherine Cobb, Successful succession in family-owned-and-operated businesses can be a complex affair, Nations Restaurant News, February 3,
2008.
23 Jeremiah McWilliams, Chick-fil-A Counters Criticism from Gay Rights Groups: Were Not Anti-Anybody, Atlanta Journal-Constitution, January

31, 2011.
Page 10 UV6843

We are very much supportive of the familythe biblical definition of the family unit. We are a family-
owned business, a family-led business, and we are married to our first wives. We give God thanks for
that.24

The article ran under the headline, Guilty as Charged, Dan Cathy Says of Chick-fil-As Stand on Faith,
Family Values. The reaction from gay rights supporters was swift and loud. Boston Mayor Thomas Merino
told the Boston Herald that Chick-fil-A doesnt belong in Boston.25 Chicago Alderman Joe Moreno vowed to
block the construction of CFA restaurants in Chicago until the company drafted an antidiscrimination policy.

In response to the criticism Chick-fil-A was receiving, former Arkansas Governor Mike Huckabee called
for a CFA Appreciation Day to be held on August 1, 2012. Customers were encouraged to show their support
for CFA by patronizing CFA on that day. Huckabee created a dedicated Facebook page, which received more
than 670,000 RSVPs to promote the awareness of the event. Appreciation Day was an enormous success.
Customers flocked to CFA locations, with many patrons waiting hours in line to be served. Although CFA
refused to release specific sales numbers, Steve Robinson, executive vice president of marketing for CFA stated
that Appreciation Day sales were record-setting.26

A counter-protest organized by gay rights activists, National Same-Sex Kiss Day, was held on August 3,
2012. It called for same-sex couples to go to a CFA and engage in public displays of affection. The event did
not achieve anywhere near the same degree of participation as Appreciation Day. In the short run, CFA
appeared to benefit from the controversy, with quarterly consumer use up 2.2% compared to the prior year,
market share up 0.6%, and awareness up 6.5%.27

24 Blume.
25 Greg Turner, Mayor Menino on Chick-fil-A: Stuff It, Boston Herald, July 20, 2012.
26 Rene Lunch, Chick-fil-A Appreciation Day: Frenzied Sales Set Record, Los Angeles Times, August 2, 2012.
27 Bruce Horovitz, Chick-fil-A Thrives Despite Gay Rights Issue, USA Today online, October 24, 2012.
Page 11 UV6843

Exhibit 1
Chick-fil-A: Bird of a Different Feather
Comparison of Franchisee Capital Investment for KFC, Chick-fil-A

Franchising Minimum Minimum Franchise

Company Established Since Liquid Capital Net Worth Total Investment Fee
KFC 1930 1950 $750,000 $1.5 million $1.3 million$2.47 million $45,000
CFA 1946 1967 None None $281,000$815,000 $5,000

Data sources: KFC website, http://www.kfcfranchise.com/requirements-investment-fast-food-franchise.php (accessed Mar. 5, 2013) and Franchise
Direct website, http://www.franchisedirect.com/foodfranchises/chick-fil-a-franchise-07431/ufoc/ (accessed Mar. 5, 2013).
Page 12 UV6843

Exhibit 2
Chick-fil-A: Bird of a Different Feather
Chick-fil-A Website Visitor Demographics

Percentage of
Demographic Customers
Age
18 and under 18%
1824 11%
2534 22%
3544 24%
5564 7%
65+ 3%

Gender
Male 43%
Female 57%

Household Income
$0$50,000 13%
$50,000$100,000 26%
$100,000$150,000 31%
$150,000+ 30%

Education
No College 38%
College 47%
Grad School 15%

Ethnicity
Caucasian 74%
African American 16%
Asian 4%
Hispanic 5%
Other 1%

Data source: Adapted from Quantcast data display,

http://www.quantcast.com/chick-fil-a.com (accessed Mar. 5, 2013).
Page 13 UV6843

Exhibit 3
Chick-fil-A: Bird of a Different Feather
Select Competitor Revenue Summary, 2010

Percent
U.S. Sales 2010 Change From Percent Change From 2009 Number
(in millions) 2009 (same-store sales) of Stores
CFA $3,582 11.37 5.92 1,606
Popeyes $1,635 2.5 2.6 1,977
McDonalds $24,075 4.4 5. 32,737
Burger King $9,070 (2.5) (2.3) 2,376
KFC 4,710 (3.9) (3.0) 5,200

Data sources: Company annual reports and 10-K filings; Fastest Growing Limited-Service Chains > $200 Million,
Technomic Information Services, http://www.technomic.com/Resources/Industry_Facts/dyn_10_limited_sales.php
(accessed Feb. 18, 2013).
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Exhibit 4
Chick-fil-A: Bird of a Different Feather
Select 2011 and 2010 Quick-Serve Restaurant Financial Data Summary
(in millions of dollars)

McDonalds Wendys Yum!Brands

MCD WEN YUM
2011 2010 2011 2010 2011 2010
Sales 18,293 16,233 2,127 2,079 10,893 9,783
Franchise revenues 8,713 7,841 305 296 1,733 1,560
Total sales 27,006 24,075 2,431 2,375 12,626 11,343
Cost of sales 14,838 13,060 1,816 1,757 9,140 8,120
Gross profits 12,168 11,015 615 618 3,486 3,223
Gross profit % 45.1% 45.8% 25.3% 26.0% 27.6% 28.4%
Financing costs 493 451 114 118 156 175
Net income from cont. ops. 5,503 4,946 18 18 1,319 1,158
Profit margin 20.4% 20.5% 0.7% 0.8% 10.4% 10.2%

Operating cash flow 7,150 6,342 247 226 2,170 1,968

Investing cash flow (2,571) (2,056) (58) (113) (1,006) (579)
Financing cash flow (4,533) (3,729) (225) (194) (1,413) (337)

Assets 32,990 31,975 4,301 4,733 8,834 8,316

Stockholders equity 14,390 14,634 1,996 2,163 1,916 1,669
Long-term debt 12,500 11,505 1,357 1,572 2,997 2,915

Store count
Company-operated 6,435 6,399 1,417 1,394 8,024 7,796
Franchised 27,075 26,338 5,177 5,182 29,097 30,039
Total 33,510 32,737 6,594 6,576 37,121 37,835

Dividends 2,610 2,408 32,366 27,621 481 412

Shares outstanding 1,021 1,054 390 418 460 469
Price per share 101.33 77.10 5.42 4.64 59.61 49.30
Market cap (billions) 103.5 81.2 2.1 1.9 27.4 23.1
Market-to-book 7.2 5.6 1.1 0.9 14.3 13.9
Price-to-earnings 18.8 16.4 117.9 107.2 20.8 20.0

Data source: Company 10-K filings and case writer calculations.