In this episode, the host delves into the remarkable success of Chick-fil-A, emphasizing the company's strategic focus and steady growth. Chick-fil-A's founder, S. Truett Cathy, is celebrated for his missionary approach to business, prioritizing a cause over profit, which has led to unparalleled year-on-year sales growth for 76 years. The host admires Chick-fil-A's decision to grow slowly, maintain a simple menu, and uphold strong company values, such as closing on Sundays, which aligns with Cathy's Southern Baptist faith. The franchise model is also highlighted, where operators are deeply invested in their single locations, fostering a culture of exceptional service. These strategies have resulted in Chick-fil-A outperforming competitors like McDonald's and Starbucks in per-restaurant sales while operating with a fraction of their menu items. The host draws lessons from Chick-fil-A's focus, long-term vision, and compounding growth, applying these principles to his own business endeavors with acquisition.com.
"Chickfila makes more money than McDonald's, Starbucks, and subway combined. [...] They make over 5 billion." "Chickfila makes more per restaurant than McDonald's, Starbucks, and subway combined. [...] They make about $5.2 million per restaurant, top line."
These quotes highlight Chick-fil-A's impressive financial performance in comparison to other fast-food giants, emphasizing its exceptional revenue both overall and on a per-restaurant basis.
"Esther Cathy, the founder, who started it 76 years ago [...] he sold them for 68 straight years of his life." "The sales of the company have never gone down year to year. They have literally only gone up and to the right for 76 straight years." "Esther Cathy is one of those pure examples."
These quotes describe the founder's lifelong commitment to his business and his success in achieving consistent sales growth, illustrating the effectiveness of his mission-driven approach.
"They decided to grow slower." "He wasn't thinking on a five or a ten year time horizon. He literally sold chicken sandwiches from the time he was 25 until the day he died."
These quotes underscore the deliberate choice of Chick-fil-A to prioritize long-term stability over rapid expansion, reflecting the founder's vision of lifelong commitment to the business.
"They have twelve [products on the menu]. And they don't iterate that menu." "They follow Preto's principle of 80 20."
These quotes highlight Chick-fil-A's strategic decision to offer a refined menu, which contributes to operational efficiency and aligns with the founder's business beliefs.
"He owns every single location. All right? Corporate owns all the locations." "They get 60,000 applications a year to open a chickfila." "You own the franchise, you are an operator, except you can get fired and you can't sell it, and you don't get the profit."
These quotes explain Chick-fil-A's unique franchise model, which emphasizes corporate ownership and provides a pathway for employees to advance to franchise operators, albeit with certain restrictions that align with the company's values and long-term goals.
"52 weeks, 5.2 million, $100,000 a week. Now, Chick-fil-A corporate gets 15% of top line. So $15,000 every week gets clipped straight to corporate. That's what they get off top line. 15%."
This quote explains the revenue structure of Chick-fil-A, where corporate takes a 15% cut of the weekly revenue generated by each franchise.
"So the Royalty, if they were in an inferior franchise or inferior business, would be the entirety of the profit. But because their stores are so darn profitable, they can do it this way."
The profitability of Chick-fil-A allows it to maintain a high royalty fee without consuming all of the franchise's profits, which would be the case for less profitable franchises.
"And then after doing all that stuff, because that's also making corporate money, there's profit left over. Now you're like, okay, so that goes to the franchisee. Half of that profit still goes to corporate."
After royalties and expenses, remaining profits are split, with half going to the franchisee and the other half to corporate, illustrating the shared profit model.
"And the beautiful thing is that they actually have a compounding vehicle of wealth within their business."
Chick-fil-A's business model is designed to compound wealth by reinvesting profits into the business to fuel growth.
"If you have a business model that works... Every year you can double."
The quote illustrates the potential for doubling the number of store locations annually through reinvestment, showcasing the scalability of a successful business model.
"So if you're somebody who comes in mopping floors, you have the potential, if you're exceptional, to someday be able to make 200 to 250,000 a year operating your own Chick-fil-A location, which I think is awesome."
This quote highlights the upward mobility within the Chick-fil-A franchise system, where even entry-level employees can aspire to high earnings as franchisees.
"So when I'm looking at businesses that I want to own for a really long time, I want things that compound in and of themselves."
The speaker emphasizes the importance of investing in businesses that have the inherent ability to reinvest and compound profits over time.
"There's a wonderful book called the little book that beats the market by, I think, Joel Rosenblatt... He gets 20% a year."
The quote references an investment strategy focused on companies with strong fundamentals, specifically high returns on capital and low price-to-earnings ratios, as a path to substantial returns.
"Desire is created through lack. You only want something you do not have."
The speaker explains the psychological aspect of Chick-fil-A's operational strategy, where limiting availability increases customer desire.
"Values matter more than just about anything, in my opinion, if they are true to the founder, true to the business, and they operate in that way."
This quote emphasizes the importance of aligning business operations with core values and principles, which has been key to Chick-fil-A's success.
"And they practice what they preach, pun intended, with all of their workforce. And if they were to say, we believe in these values, we have this christian backing, and then they were open on Sundays, after they were to reverse it, it would seem like they were swapping their values for a little bit more money."
This quote emphasizes the importance of a company's adherence to its stated values, suggesting that Chick-fil-A's decision to close on Sundays reinforces their authenticity and may contribute to their success on other days.
"The only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."
Esther Cathy is requesting listener support to grow the podcast's reach, which in turn aims to assist entrepreneurs in succeeding in their ventures.
"I wasn't hired here to do the same thing that the other 80% are doing. I'm hired to do what the 20% are not doing, not to just compete, but to create a competitive advantage."
This quote highlights the strategic focus on differentiating Chick-fil-A from competitors by concentrating on unique service aspects that other fast-food chains may not prioritize.
"It wasn't until the CEO himself changed his own language patterns that it then permeated through."
The quote illustrates the top-down approach to cultural change within Chick-fil-A, showing that leadership behavior can significantly influence company-wide adoption of new practices.
"Because if we change nothing about this business, we sell the same twelve items. You just get better and better and better at the same thing."
This quote conveys the philosophy that specializing and refining a core product or service over time leads to mastery and competitive advantage.
"And he built an empire, and he built a mission behind it that I think millions of people are happy and frequent every day compared to their alternatives that were just mercenaries that were just in it for the money."
The quote underscores the success derived from having a strong mission and values, which can lead to greater customer satisfaction and financial success over time.
"Number one is that they sold chicken sandwiches for 76 straight years, and I don't think they're going to stop."
This quote highlights the company's dedication to their core product and the belief that long-term focus and incremental improvement are key to success.
"And for me, honestly, that's my dream. My hope is that whatever we build can continue and not only just stay alive, but grow beyond us."
The quote reflects Esther Cathy's personal aspiration to build a business that endures and thrives beyond the involvement of its founders, driven by a strong mission.
"The fact that they don't let anyone have more than one store. I think there's a lot of wisdom to this."
The quote suggests that Chick-fil-A's policy of single-store ownership per franchisee ensures a high level of commitment and quality control, contributing to the overall success of the brand.
"And he has profit sharing. Now, mind you, he doesn't share the whole profit, but after he takes his pieces off, they have an ability to make more money."
This quote highlights the strategy of incentivizing employees through profit sharing, which allows them to earn additional income based on the store's performance. It's an approach that motivates employees by giving them a stake in the success of their specific location.
"And imagine how hard it is to say no, because in the beginning, he had to say no to an extra 13%."
The quote illustrates the difficulty in rejecting significant revenue increases in order to stay true to company values. It exemplifies the commitment to values even when faced with substantial financial gain.
"Esther Cathy noted that when he wanted everybody in his team and his company to start saying my pleasure, when someone said thank you to them for doing something, that it didn't change until he changed how he spoke."
This quote demonstrates that behavioral change within a team begins with the leader's example. It underscores the impact of a leader's actions over their words in influencing team culture.
"And so chick fil A has a compounding vehicle of capital within their business."
The quote refers to Chick-fil-A's method of reinvesting generated profits back into the company to fuel expansion and further financial success. It highlights the concept of using a business's own operations to generate increased returns over time.
"Ruthless prioritization on the essential few items that they need to sell."
This quote emphasizes the strategic choice to focus on a limited number of offerings to ensure quality and consistency, which has proven successful for Chick-fil-A. It suggests that entrepreneurs should concentrate on perfecting a few key products or services rather than diversifying too broadly.
"Chick fil A's chicken sandwich. It's chicken, bread, butter, two pickles. That's it."
The quote illustrates Chick-fil-A's commitment to simplicity in their product offering, which allows for operational efficiencies and a consistent customer experience. It highlights the benefits of a simplified product in terms of preparation and ingredient management.