re: Chick-Fil-A Operator Income

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t's then 50 percent of the net profit.

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Are you sure on this? Are you saying if net profits are $450k the owner pays CFA half and keeps the other half?

DBF, as said, this is how more and more successful franchises are going. No more McDonalds model where the owner keeps large portions of the profits. There is no reason for the franchise to do that model unless they absolutely have to, and they can usually get investors at the corporate level to buy the new stores and just throw in local management.

I also think part of the reason to not allow "owners" is to maintain control. There's been multiple Franchise models where you get a couple owners that own vast amounts and get quite a bit of power, enough so that their opinion can alter corporate decisions especially when acting together.

Many a mcdonalds just a decade ago did $1M+ thats why you had to go to class to buy one, you literally fly up north and study with mcdonalds before given one. I don't think they do too well today in general but as I said, its all location, and I have a burger king that won many sales awards, so its tough to generalize.

Subways make less bc the total investment involved is nominal but all the big ones from the old days: Taco Bell,Burger King,KFC require substantial investments and experience. Almost anyone can buy a subway franchise, the fees are low and they dont require much expertise.

The model today if you look at Chipotle,Shake Shack, and all the other hot new ones is definitely keep the store bc what is the point of selling them and getting a few % points of royalties in exchange for millions of dollars of long term profits. The concept of a franchisee taking that was great in the old days bc it meant rapid expansion, but smarter people today are about the long term retained earnings.

It's incredibly difficult to buy any type of franchised business if you try, the net worth requirements + liquid cash + experience required keep many out. How many people have cash but no experience? A lot. How many have experience but lack cash? A lot. They don't want investment groups, they want owner operators most of them.

I love twin peaks here in Houston and I wanted to take it to Miami, there's a few locations on the beach and in downtown where I felt it would work. I did a phone interview with corporate and they wanted a commitment of 5 stores and a net worth of $7.5M to go through, with a significant chunk of that liquid. I was fine with 2 stores, but 5 is a rather large commitment in such a small city, obviously not all at once but within a 5 year period.

Yeah, they are a totally different kind of animal - in many ways.

CFA locations especially in high traffic area sure seem to print money. Not uncommon to see 20-30 cars in drive thru at lunch hour and get through the line in 5 min. Their prices are not very cheap, either - especially for fast food. Plus, I would imagine their labor costs are pretty high compared to other fast food places. There are always a ton of employees in the store, and given the, shall we say, demeanor of the employees, my guess is that they pay them a little better as well.

CFA also has a relatively stream-lined menu which certainly helps turnaround and out the window time.

Kind of spitballing here... but I could easily see a "busy" store running 2500 individual orders a day through. (i.e. an individual order being one combo meal, for example). Avg selling price of say $6 per meal would mean $15,000 a day in sales. If they could keep labor to 20 percent and food/materials to 30 percent, you would be looking at $7,500 a day before overhead, PPE, royalty/advertising fee, and owner draw. If you could keep that to 35% of gross - a reasonable assumption, I think, you would be looking at another $5,250, which puts you cash flowing $2,250 a day. 6 days a week gets us $13,500 a week, gets you about $700K a year in cash flow.

I think the difference in our completely hypo example are two-fold... 1) the CFA "experience" doesn't come in a true franchise way, and 2) with the CFA model, all the risk is with CFA, none with the franchise. If you are as successful in business as you say you are... you fully understand how risk is rewarded.

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Kind of spitballing here... gets you about $700K a year in cash flow.

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Well that's pretty spot on a $200-300k gross income for an operator at roughly 35% take home.

The McDonald's location next to where I live easily did $2 million a year.

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The franchise fee is one of the lowest in the industry

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You also get no say on where the restaurant is placed (so where you will work), and you own no part of it. Im fairly sure there is no franchise fee because of that. If I want to start a McDonalds, I'm going to pay a bunch of money up front to McDonalds Corporation as a franchise fee, but I get to make most of the decisions and I own every part of my franchise location. Plus they give additional opportunities to own more than one location. Being a Chick Fil A operator is essentially a glorified general manager, while owning a real franchise can build a fortune for generations if you're successful. Look at the Valluzzos, they've turned a couple stores when McDonalds started franchising into a fortune for their entire family with more wealth building every day. Of course, I've seen quite a few McDonalds fail, while I've never seen a Chick Fil A without 10 cars in line

did you do it? If so congrats on the cash

I've sold all of my PM and MO, they're great companies but with where the yields are, i've moved on. Im not really in need of the dividend income so I've moved to a heavier allocation of google,amazon as my staples and I figure those will pay dividends way later down the road at much higher share prices.

curious what this trump news recently would do to the markets since we've run up mostly on his behalf

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You also get no say on where the restaurant is placed

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You hardly get that choice with any of them, actually. Large restaurant chains do market research and will only allow a franchise in an area they've already approved. If an area doesn't meet their specs, you aren't going to be allowed to put one up.

Chik Fil A is more stringent about where they will build than most.

If you truly want to be able to choose your own location, you should probably look at gas station chicken like Chester Fried.

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Most only care about vehicles per day, they usually want something high like 25,000+, I actually own a nice piece of land in north houston that is in the suburbs and its only 16,000 vehicles per day and I've been shot down multiple times.

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There's a reason for that, why would you want to place a store somewhere that has 60% of the traffic as their minimum requirement?