Why is it important to study a company like Chick-fil-A? Do you think Chick-fil-A's strategy is sustainable?

\fPage 2 oyssas Customers had a choice of a hamburger {15 cents}, bacon and tomato sandwich {25 cenls}, smak sandwich {3U coats}, bacon and egs {3\" cents}, fried ham (25 counts), and pie [In 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. 'l'ruett remembered his big breakthrough in 1961: Jim and Hall Goode, owners of Goode Brothers Poultry, came to me in a quandary. 'l'hey had been asked by an airline to provide a boneless, skinless chicken breast dtat would t the plastic trays they used to serve meals on planes. The lISoodes met the request, but their process left boneless breast pieces that didn't meet the airline's site requirements. They were trying to develop a market for these excess pieces...] knew immediately that they had provided the answer to the chicken problem. tter the bone was removed, the chicken would cook evenly and thoroughly...'l'hen 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 nish. Cooking so quickly meant we wouldn't have to cook our products :1th and hold them in a warming cabinet or under a heating lamp. All our chicken could be served fresl't.'t Truett devised a seasoning formula of EU ingredients, put the chicken breasts between two buttered buns, and trademarked the name... Chick-l-r't, for the new sandwich. The name was intended to draw comparisons with already popular steak llets. The Chicksla 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 sis: 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 realise\" .that 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-l- breasts in the morning for the lunch crowd, then leave them sitting around for a maple ofhours. 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-El-. 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 1 could think of was to open my own restaurantsa prospect that didn't appeal to me.5 In 19:57, 'l'ruett opened his rst chain restaurant in a 384 sq. ft. space at Atlanta's Greenbriar Mall, the sarne mall where his sister lGladys operated a gift shop. The initial upfront investment was a modest $1T,, allowing him to reserve funds to develop other mail locations. The rst freestanding restaurant did not open until 19345:, nearly two decades later. Over the years, CF's menu eutpmdod to include a number of variations on the original Chick-l-. sandwich. By 20] 2, the menu included chicken nugets, sandwich wraps, numerous sides, kids' meals, desserts, and a breakfast menu corporate Strategy: A Form 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. CFA's mission was "to glorify God by being a faithful steward of all that is entrusted to us and to have a positive inuence on all who come in contact with Cl'riclr-l-A,\" and to be \"America's best quick-serve restaurant.\" To achieve these goals, Truett repeatedly stressed the importance of focusing on personal relationslips, often sacricing short-term grthh and prots for the sake of building enduring loyalty among employees and customers. The strategy was premised on his Golden Rule philosophy, which prized people over prots. ll restaurants closed on Sundays, in keeping wid't 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 treaoed, and they would reciprocate. They did. Fewer than 5% of our operators leave the chain in any given year. Uther chains tout their \"knowledge management" systems: we manage knowledge by keeping peopleand theirlrnowledge in the organization. The food tastes better with that kind of long-term operator stability? Cindi-Elm 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 wdl as their afliations 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 Ch'. n operator's {i.e., franchisee's] upfront investment in a Chair restaurant was miniscule: an initial $5,011} franchise fee; there were no minimum net worth or other personal nancial requirements, and the operator was guaranteed a base income of Elt. (ll-in. purchased the land, constructed the restaurant, bought the equipment, and took a hefty sum from the operator's revenue and prot base: 15% ofanr'rual sales revenue and Elli-\"n of net profits."- In contrast, RFC required, among other things, a franchise fee of$45, and a minimum net worth of $1.5 million {Exhibit 1}. Franchisees at {Star were required to be managers. As an operator, franchisees bad 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 ring, sEtting wages, and managing equipment and day-to-day operations. Widr few exceptions, Ch'h operators were allowEd to onus only one restaurant, and all were strongly encouraged to be consistently present, personally managing employees and the prooesses they were tasked to oversee: r'rnother key to operator loyalty lies in our decision to allow each operator to have only one restaurant In rst, this policy may seem counterintuitive. Many companies reward success by enlarging territories or bringing them into the company to oversee operations of other franchisees. ] want our best people right there Full-time in the restaurant they've built, serving the customers and team members who have become loyal to them.\" Page 4 LI vat-tats 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 CF11 consistently met its promises regarding superior customer service, quality products, and competitive prices. The income earned by the operators dEpended on their performance. In EDIE, more than half of the operators earned more than lfllljlll, and a few even topped $3flll,ll.9 Corporate lItitrlture CFA's Mission Statement read \"Be America's 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 companyisn't 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 1It'ri'inShape at Berry College in Mount Berry, Gd. 'lhe programs include classes on conict resolution and communication Family members of prospective operatorschildren, evenare frequendy interviewed so Cathy and his familyr can learn more about job candidates and their relationships at home. \"lfa man can't manage his own life, he can't 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, social1 church andfor professional organizations." Danielle Alderson, 30, a Baltimore operator, says some fellow franchisees nd that Chicksl-. butts into its workersl personal lives a bit much. She says she can't hire a good manager who, say, moonlights at a strip club because it would irk the company. 'We are watchEd very closely by CthlE-l-J'll," she says. \"It's very weird.""' Truett saw this through a different business prism: that signicant business relationships with people should be made with the same care and caution with which one might appmth one's personal relationships. \"In my rst meeting with a potential operator,l explain that our commitment is going to be like a marriage, with no consideration given to divorce. We're much more careful about selecting operators when we know we can't easily get rid of them,\" he said}I Despite 1J1is level of perceived intrusion, tit-us received thousands of applications om would-be franchisees every year. l[lint of more than lll,il applicants per year, fewer than 5f], or ll.5\"fu, became new operators. For the few who received the call, mttensive training classes into the basics of how to run a Chick- l-r't. franchise and assimilation into the company's management culture soon followed. The end result was d1at operators at Chidel-r't tended to be a tightly knit group who shared a common commitment to d1e corporate mission.\" Page 5 UV6843 The WinShape Foundation, founded in 1982 by Truett and his wife Jeannette, was a cornerstone of CFA's 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 handicap-estimated to cost approximately $500 million annually-was CFA's relatively tiny advertising budget. In 2009, the chain spent just $27 million on advertising media, compared with the nearly $1 billion Mcdonald's 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 Mcdonald's $2.3 million. Faced with such competition, Chuck Bradford, CFA's manager of media integration, said his company took on a "David and Goliath" mindset to doing business: "We're 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 effectively positioned chicken-memorably-as 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 campaign's 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, hadn't made any major shifts, additions, or changes to its menu or marketing campaign since 1996. It devoted the lion's share of the advertising budget to outdoor media, with radio, television, and print advertising distant seconds. Rated among America's 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 America's (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