Chick-fil-A Restaurant Franchise

Financing Details

Chick-fil-A, Inc. provides indirect financing to its franchisees primarily by leasing or subleasing the restaurant premises and equipment. Franchisees make monthly rental payments to Chick-fil-A for the premises and equipment. For non-traditional units such as captive venues, delivery kitchens, and food trucks, Chick-fil-A subleases or sublicenses the use of the premises and/or equipment, and franchisees are responsible for the associated payments. Chick-fil-A also offers extended payment terms for certain pre-opening expenditures. The franchisor retains a security interest in any franchisee-owned business equipment. Additionally, Chick-fil-A indirectly finances the franchisee's retention of Base Profit and Extra Profit if the franchised Chick-fil-A Restaurant business does not generate enough Aggregate Operating Profit to cover these amounts. Beyond these specific arrangements, Chick-fil-A, Inc. does not directly or indirectly offer other financing options or guarantee franchisee obligations to third parties.

Litigation Summary

Chick-fil-A, Inc. has been involved in six recent class action lawsuits. One case, David Stephens and Kaitlyn Strawn v. Chick-fil-A, Inc., filed in March 2023, alleged that Chick-fil-A failed to protect personally identifiable information of its Chick-fil-A One program users after a cybersecurity attack. This case was settled for $210,000, with funds distributed to the plaintiffs and their legal counsel, and was dismissed in December 2023. Five other cases (Mayheu, Pittman, Ukpere, Goldstein, and Ortega), filed between May 2021 and September 2022, were consolidated for settlement. These lawsuits claimed that Chick-fil-A, Inc. misrepresented delivery costs by charging a delivery fee without disclosing higher menu prices for orders placed through the Chick-fil-A mobile application or website. Chick-fil-A, Inc. denied liability but agreed to a class action settlement in July 2023, which received final court approval in February 2024. Under this settlement, Chick-fil-A, Inc. paid $4,400,000 into a fund, covering class counsel fees, lead plaintiff awards, cash payments to qualifying class members, and electronic gift cards for others. The remaining funds were donated to hunger relief organizations. In all these lawsuits, only Chick-fil-A, Inc. was named as a defendant, not any of its franchisees.

Renewal Conditions

Chick-fil-A, Inc. franchisees have no explicit requirements to renew, as renewal is automatic for one-year periods unless either party gives written notice of non-renewal at least 30 days before the term ends. However, Chick-fil-A, Inc. may choose not to renew if the franchisee is in material default, has an unresolved dispute about finances, has attempted an unauthorized transfer, has not dedicated full-time efforts to the business, or if other grounds for termination exist. Additionally, Chick-fil-A, Inc. reserves the right to change the terms and conditions of the franchise agreement upon renewal, with 45 days prior written notice. If the franchisee does not accept these new terms within 15 days, it is considered an election to terminate the agreement.

Staffing Notes

Chick-fil-A requires its Operators (franchisees) to dedicate their full time and personal best efforts to directly supervise their Chick-fil-A Restaurant business, aiming for the highest possible sales and profits. The Operator, as the franchisee, is solely responsible for all employment matters, including hiring, setting compensation and benefits, establishing schedules and duties, training, managing, supervising, promoting, disciplining, and terminating employees. This means that Chick-fil-A does not act as an employer, co-employer, or joint employer for the restaurant staff. The Operator must manage staffing levels, tasks, and workplace health and safety rules for their employees, who are considered solely their responsibility.