Mark Cathy, grandson of Chick-Fil-A founder Truett Cathy, told the Chattanooga Rotary Club the history and current state of the restaurant chain and the culture of the family business.
Truett Cathy and his brother started The Dwarf Grill that later was changed to The Dwarf House in Atlanta with money raised by selling his car. They knew their customers needed to get in and out quickly between shifts at the nearby manufacturing plants, so they served hamburgers, steaks and food that could be cooked in five minutes.
There was no chicken on the menu because it took too long to prepare.
Then an unexpected opportunity came along which Mr. Cathy recognized and took advantage of. This was to develop a chicken sandwich that would fit on food trays that were used by airlines. He then created his first chicken sandwich on a toasted bun with pickles. With the help of pressure cookers, and because the chicken was boneless, it could be cooked and the sandwich made quickly. They found that 99 percent of the customers liked it. The name evolved into Chick-Fil-A. “A” stood for quality.
The first restaurants that sold the sandwiches were licensed arrangements with other vendors, but the quality was not good because the sandwiches were made early and kept all day so Mr. Cathy quit licensing his product. He opened a restaurant at the Greenbrier Mall in Atlanta at the time when mall managers did not want to sell food. Mr. Cathy negotiated getting into the mall and partnered with his first owner-operator, who was a female. He helped her get the business open and, along with the consistently good food, he made sure that it was closed on Sundays. This business model is still followed today with franchise owners. The corporation sets up the location and equipment and runs the restaurant until the next franchise owner comes along.
The franchise system creates a sense of ownership for local owners, said Mark Cathy. He said the system presents both a high risk with the release of control since Chick-Fil-A is trusting someone else with their product. The system also offers high rewards, he said. It costs $10,000 to buy a franchise, but they are hard to come by. Each year there is a lot of interest with 35,000-40,000 applications. Only about 100 make it. He said the lesson here is to give ownership to your team and talk about what is most important.
The current state of the business shows huge growth from 1979 when malls did not want to sell food. Once they realized the large amount of money Chick-Fil-A brought, it became very desirable to have them as a tenant. In 1980-1981 Truett Cathy took on new lines of credit to grow the business and built a $10 million building for the headquarters, just at the economy got bad. His leadership team came up with a plan for weathering the storm during the difficult time. It was based on the question “Why are we here?” The answer has become the company’s “corporate purpose” and is on a plaque outside the headquarters: “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 into contact with Chick-Fil-A.”
In addition to local ownership, the business’s core strategy includes providing “a remarkable experience” for customers, with the goal of creating fans and an experience above what you pay for. This is so customers will tell other people about it. Making sure there is consistency of service is also important. Competition from another restaurant specializing in chicken came in 1998 and to differentiate Chick-Fil-A, Mr. Cathy concentrated on service to customers. He noticed that the service at Ritz Carlton hotels always included “My Pleasure.” That has become a motto for the restaurant and is repeated often by all employees.
Sales goals were set at $10 billion by 2020. That number was met by 2018, said Mark Cathy. The company has a 98 percent retention rate for both franchise owners and corporate employees. “We can’t get people to leave,” he said. There are restaurants now in 47 states and they are expanding internationally into the Toronto market. He said that sales per square foot are higher than sales at the Cheesecake Factory despite the fact that no alcohol is sold at Chick-Fil-A.
To fulfill his grandfather’s wish of having a positive influence an all who come in contact with the business, the Chick-Fil-A Foundation has been established to help children by providing college scholarships to employees who accumulate 2,000 work hours. A gala is also being planned this year in Atlanta that will benefit the West Side of town, which is Atlanta’s toughest area, he said.
When asked how the company balances growth with culture, the answer was that it is not easy, but since the brand has grown and it is recognizable, it has been easier to do. His grandfather once said he saw no conflict between biblical principles and business practices. An example given was about servant leadership, such as a focus on being there for your employees. Being closed on Sundays is one way to be there. The day is intended for whatever purpose that person wants to use it for. He said it provides a rest and a weekend day with your family. It just works.