How has Chick-Fil-A‟s corporate culture had both a negative and positive impact on the company‟s success? By: Amy Ratliff Approximate word count: 1,498 Ratliff 1 Acknowledgements First, I would like to acknowledge and thank Mr. Eric Kuchan for sharing his knowledge and experience with me in regards to Chick-Fil-A. Without his willingness to help me, I would not have been able to thoroughly understand the company and all of its principles and views. Secondly, I would like to thank my International Baccalaureate business and management teacher, Mr. Magenbauer, for his assistance throughout the assessment process. I would also like to thank my parents for transporting me to and from Christiansburg, Virginia for the interview. Ratliff 2 Table of Contents Acknowledgements……………………………………………………………………………..1 Table of Contents……………………………………………………………………………….2 Background of the Company…………………………………………………………………..3 Objectives and Research Methodology………………………………………………………4 Discussion and Analysis………………………………………………………………………..5 Conclusion and Recommendations…………………………………………………………...7 Works Consulted………………………………………………………………………………..8 Appendix A……………………………………………………………………………………….9 Appendix B……………………………………………………………………………………..10 Appendix C……………………………………………………………………………………..11 Appendix D……………………………………………………………………………………..12 Ratliff 3 Background of the Company Truett Cathy opened the first in-mall Chick-Fil-A restaurant in 1967 in Atlanta in relation to his creation of the boneless chicken sandwich. The first full service Chick-Fil- A Dwarf House opened in 1985 in Jonesboro, GA. Chick-Fil-A surpassed one billion dollars in system-wide sales in 2000. Chick-Fil-A, as of January 10, 2005, had 1,178 restaurants operating in 37 states and DC as shown in figure 1. Cathy is the founder, chairman, and Chief Executive Officer of Chick-Fil-A with Jimmy Collins as president. Cathy established Chick-Fil-A in order to inspire and influence both the customers and the employees. Chick-Fil-A is a privately owned corporation that has operators for independent franchises. Eric Kuchan is the operator of an independent Chick-Fil-A franchise in Christiansburg, Virginia. Figure 1 Ratliff 4 Objectives 1. To analyze Chick-Fil-A‟s corporate culture and identify its key elements 2. To understand how Chick-Fil-A packages and communicates corporate culture 3. To identify current weaknesses of and threats towards Chick-Fil-A 4. To explore suggestions that would improve the success and minimize the negative aspects of the corporate culture at Chick-Fil-A Research Methodology I spoke with and interviewed Eric Kuchan, the operator of an independent Chick- Fil-A franchise is Christiansburg, Virginia. I also referred to the textbook entitled Business Studies and used various materials, including a marketing newspaper for Chick-Fil-A and profit and loss accounts, offered to me by Eric Kuchan. Moreover, I consulted Chick-Fil-A‟s website and an article by QSR magazine. (see Works Consulted page 9) Ratliff 5 Discussion and Analysis Corporate culture, as defined by Business Studies, is a set of values and beliefs that are shared by people and groups in an organization that allows workers to identify with other employees and increases commitment. Chick-Fil-A‟s concept of being closed on Sunday has rewarded the company by attracting a higher caliber of people who find that a priority. The consistency of keeping it simple and the values present in the company motivate employees. Being privately owned has allowed them to communicate their values more effectively. While consistency is important, sometimes Chick-Fil-A is slow to change; for example, they do not accept credit cards. Another complaint among customers is slow service, in Christiansburg in particular, due to long lines. A more complete SWOT analysis, or synopsis of the strengths, weaknesses, opportunities, and threats of Chick-Fil-A and its corporate culture, appears in appendix A. Opportunities and threats will be addressed later in the discussion. In terms of corporate culture, Chick-Fil-A can be described as a communal organization, which has shared values that the organization tries to preserve and uphold. Chick-Fil-A holds values regarding religion, helping the community, providing for those in need, and promoting generosity for all that come in contact with the company. They recruit employees that share these values as well as leadership ability. Every year, Truett Cathy holds a seminar for around 3,000 of the company‟s operators and employees where they are offered opportunities to improve their leadership and other elements. He also offers all employees a Team Member Scholarship program to promote education. Negatively, a communal organization lacks individual creativity. Mr. Kuchan mentioned that “there are times when I have my personal interest that I want to look out for. I‟d rather, for instance, when chicken prices get really high, I would like to explore changing prices. As a corporation, they won‟t allow me to do that.” A communal organization also must recruit employees that fit into their culture. In Chick- Fil-A‟s case, being religiously based could deter people from working for the company. Chick-Fil-A packages its corporate culture through the usage of their “Eat Mor Chikin” campaign and their signature cow mascots. The cows have “almost turned into rock stars” according to Mr. Kuchan. A group called the Richard‟s Group out of Dallas, Texas created the campaign around 1997. The customers love the cows, and the campaign has received a multitude of awards in relation to its success. In order to communicate its corporate culture, Chick-Fil-A is closed on Sundays because Cathy “wanted to ensure that every Chick-Fil-A employee and restaurant operator had an opportunity to worship, spend time with family and friends, or just plain rest from the work week.” The company‟s priority “has never been just to serve chicken. It‟s to serve a higher calling.” Mr. Kuchan explains that Chick-Fil-A is simply using chicken as a “cover-up” for what they are really trying to do, be a positive influence and give back to the community. Each spring in Atlanta, the company holds the Chick-Fil-A Charity Championship. The company also has a title sponsorship agreement with the Peach Bowl, and in 2004, the Bowl raised $400,000 for charities and $2.2 million for the two participating universities. Also, Cathy founded the WinShape Centre Foundation comprised of WinShape Homes and the WinShape Centre Scholarship Program for Berry College in Rome, GA. Cathy has adopted and cared for around 120 children and funds eleven foster homes. Communicating Chick-Fil-A‟s corporate culture through public relations allows the company to generate a positive community exposure for their Ratliff 6 restaurants, attract new customers, drive traffic to their restaurants and increase sales, build the Chick-Fil-A brand, and develop customer loyalty. For their entire span of existence, Chick-Fil-A has excelled with thirty-seven straight years in sales growth. Figure 2 shows the yearly revenue from 1994-2003 and the number of restaurants currently active during that year. A steady increase in both aspects is demonstrated each year. The company reached one billion in sells by 2000 and now, in 2005, the company will reach two billion in sells doubling what it took them forty-three years to accomplish. Mr. Kuchan attributes the success to being closed on Sundays, consistent leadership, a great founder with an impressive set of values, and the fact that they don‟t change their menu that often. Figure 2 Despite their immense growth, in 1982, the company was not the successful stronghold that it appears to be today. Truett Cathy was about to sell the corporation to Kentucky Fried Chicken. At that point, the executive board established the company‟s corporate purpose stating that Chick-Fil-A exists “to glorify God by being a faithful steward of all that is entrusted in [them] and to have a positive influence on all who come in contact with Chick-Fil-A.” This put the fate of the company in God‟s hands. Since establishing this corporate purpose, the company has been extremely successful. Chick-Fil-A‟s next goal and opportunity is to reach ten billion in sales by 2010. They are now beginning to compete with casual dining restaurants, a contradiction with their goal of consistency. Mr. Kuchan says that “over the next three or four years, [their] number one priority is going what [they‟re] calling „the second mile‟ and that‟s going into the dining room.” However, Wendy‟s new concept of substituting sides for the same price is a threat, according to Mr. Kuchan, that Chick-Fil-A is going to have to address. Ratliff 7 Conclusion Chick-Fil-A is very effective at communicating their corporate culture. However, there are several aspects of their approach that could be modified in order to create better customer satisfaction and make them more productive. Community service and scholarships are very important to the success of Chick-Fil-A, but when exercised in moderation, the company could devote more of their earnings to expanding and marketing at a higher level. According to Mr. Kuchan, Chick-Fil-A is rarely able to use marking strategies on the regional and national levels due to the large amount of funds put into charities and scholarships. Recommendations 1. Adopt credit card usage to develop more customer satisfaction and become more competitive. 2. Give more freedom to operators in decisions involving menu prices and promotions. 3. Create a substitution option for combos similar to Wendy‟s new concept, but, through size or amount, create sides that are similar in price in order to keep the prices of combos the same as they are currently. 4. Open on Sunday from 1:00 PM until 5:00 PM to allow for morning and evening worship while still accumulating more revenue. The hourly sales activity (appendix B) of the Chick-Fil-A in Christiansburg for March 15, 2005 shows that the restaurant brought in $1,240.18 during the hours of 1:00 PM to 5:00 PM. Assuming this would be accurate for Sunday during these hours, this Chick-Fil-A would raise $1,240.18 more each week, $4,960.72 more each month, and $64,489.36 more each year while still keeping religious aspects in mind. In the profit and loss account (appendix C), the Chick-Fil-A in Christiansburg raised $1,665,487.86 in 2004. Being open from 1:00 PM to 5:00 PM on Sundays would have accumulated 3.87 percent more revenue in 2004, which is nearly a fifth of all earnings during a five year period (19.35 percent). 5. Set aside one tenth of the previous year‟s earnings to be used for community and scholarship activities. With the remaining earnings, expand and create new restaurants in areas that do not currently have access to the restaurant and market on the regional and national levels. Build up the brand nationwide by drawing upon the customers‟ love of the cows. Ratliff 8 Works Consulted Chick-Fil-A Marketing News. November-December 2004. Volume 10,Issue 6. Hall, Dave, Rob Jones, and Carlo Raffo. Business Studies (Second Edition). Ian Chambers and Dave Gray, eds. Ormskirk: Causeway Press Limited, 2002. Kuchan, Eric. Personal Interview. 16 March 2005. “Public Relations Benefits.” The Chick-Fil-A PR Flight Path: Public Relations Flying Co- Pilot with Operators for High-Soaring Media Success. 2005 edition. Stephens, Erica. “Divine-And Bovine-Intervention.” QSR Magazine Online. April 2001. 22 February 2005. <http://www.qsrmagazine.com/issue/interview/cathy_collins_print.html>. Ratliff 9 Appendix A SWOT Analysis S = Strengths Consistency Being privately owned Values/morals Keep it simple, serve different choices involving chicken Attract a higher caliber of people through being closed on Sunday. Most employees find that a priority. Don‟t go with fads such as creating a low carb menu W = Weaknesses Sometimes too resistant to change Don‟t accept credit cards Slow service at times O = Opportunities Competing with casual dining restaurants Reaching ten billion in sales by 2010 Room to expand nationwide (refer to figure 1) T = Threats Wendy‟s salads and new concept of substituting sides Ratliff 10 Appendix B Ratliff 11 Appendix C Ratliff 12 Appendix D Interview with Eric Kuchan, operator of a Chick-Fil-A franchise in Christiansburg, Virginia. 1. What type of company is Chick-Fil-A? (corporation, partnership, family- owned)? It‟s a privately owned corporation. One man owns it. His name is Truett Cathy. He is our founder and CEO. He has operators, or partners, which is what I am, which are referred to as franchisees. We are a privately held company and each operator is an independent franchise. 2. What is your position at Chick-Fil-A? Owner/operator 3. Were you informed of any goals of the company when you came to work for Chick-Fil-A? I started in 1996 and at that point, I think our biggest challenge or goal was we were going to achieve one billion in sells by the year 2000 and we did. This year, 2005, we expect to get to 2 billion, so we‟ve doubled our sells in 5 years. 4. What do you think sets Chick-Fil-A apart from other similar companies? Our number one thing is we‟re closed on Sundays. Makes a stand that most people don‟t. Sets you aside and sets a benchmark, especially for our industry, that says “hey, we‟re willing to shut everything down on Sunday because that‟s the most important thing to us” and we‟ve been blessed on it ever since. 5. Corporate culture can be defined as a set of values and beliefs that are shared by people and groups in an organization. Does this definition match your view of a corporate culture? In my opinion, in today‟s business world, there are not many people, companies in particular, that have value. It‟s been shown time and time again in recent years, that the value is the „ole mighty dollar. We hold a value that most companies don‟t even want to come near. Our corporate purpose is a pretty bold statement in today‟s society. I just don‟t think there are many people who actually stand behind what it is that they put down on paper and I think that Chick-Fil-A is one of the few who does. If your gonna be someone who glorifies God, then that‟s a pretty bold statement. 6. What do you believe are the key elements of Chick-Fil-A’s corporate culture? Consistency. Being privately owned is probably the most critical at this point. If we were to go public tomorrow, the first thing they would ask is for us to open on Sunday. Chick-Fil-A has 37 consecutive years of sell growth. Our youngest running person on our executive board has been there 25 years or more. He started when he was about 20 years old and he‟s the last one to join the executive board. There are nine members on the executive board. We just don‟t change. Ratliff 13 7. Have any of these elements been poorly communicated at any point between the senior management and the employees? No. Absolutely not. 8. Do you disagree with any elements of Chick-Fil-A’s corporate culture? As an owner/operator, there are times when I have my personal interests that I want to look out for. I‟d rather, for instance, when chicken prices get really high, I would like to explore changing prices. As a corporation, they won‟t allow me to do that, but usually, the long-term consistency of trying to do the right thing for our customers is the better way of looking at things. So as an operator, the short term is easy to disagree with. Chick-Fil-A traditionally will not make the customers pay the fee. They suck it up when chicken prices get really bad like they did this past year with record highs. But Chick-Fil-A very rarely will raise their prices and you gotta get those nine guys to all agree that it‟s the right time to raise prices. That is just about the only time that I would disagree. 9. What are the strengths of Chick-Fil-A’s corporate culture? Consistency, value/morals. We have carved out our own niche. We don‟t feel like any of the other quick-service restaurants are even in our league and we‟ve said that we are just up here in our own league. We have a hard reputation sometimes to follow. People just know that Chick-Fil-A is just better. 10. How do you think packaging the company’s corporate culture in the form of the “Eat Mor Chikin ®” slogan and campaign and the symbol of the cows has affected Chick-Fil-A? The cows have almost turned into rock stars. Every time we bring the cows out, kids stop what they are doing and they just run to the cows. We started this campaign in 1997 or 1998. We thought that it was going to be a one year thing and its now 2005. I don‟t think in the anywhere near future, will they ever be removed. They have become so popular; the customer will not let us remove them. The “Ear Mor Chikin” campaign has gotten us several awards as the most dynamic campaign for obvious reasons. A group called the Richard‟s group out of Dallas, Texas is the one that created this campaign for us and they have continued on since 1997. 11. How does Chick-Fil-A go above and beyond other quick-service chains? You don‟t see burgers or roast beef in our restaurants. People say, “What do you serve?” We serve chicken. We keep it simple and we do it really well. Our team is probably the most vital element of that, the quality of people that we try to go after. Number one reason people filled out an application is almost always because we‟re closed on Sundays, so that brings a higher caliber of person. They just find that a priority. The other key element, besides closed on Sundays and attract better people, is to consistently stay with a great product and we keep it really simple: great food, great people, clean restaurant. We‟re trying to put our customers way upon a pedestal and take care of them the way they should be. What our goal is now is to go after all the casual dining people. We‟ve decided that we don‟t have anymore competition here with the quick-service restaurants. Over the next three or four years, our number one priority is going what we‟re calling “the second mile” and Ratliff 14 that‟s going into the dining room. We‟re doing pepper grinders, flowers on the tables, just taking the experience to something you wouldn‟t expect. 12. Has the owner, Truett Cathy, taking money from the company for educational programs, such as foster homes and scholarships, helped or hurt the success of Chick-Fil-A? The only problem I could have is that he could use that money to make more stores, but that‟s not what it‟s all about. The whole thing about Chick-Fil-A is that we‟re using chicken as a cover-up for what we‟re really trying to do. We‟re really trying to glorify God and be a positive influence on all we come in contact with. We just use chicken as a front, very rare situation. He, himself, has legally adopted and taken care of some 120 children and that‟s not to mention his 11 foster homes that he fully funds. It‟s led into other things, like Berry College, a private school in northern Georgia. He offers those kids around $20,000 in yearly scholarships. Through Chick-Fil-A, through the individual teams, he has given around 13 or 15 million dollars for workers. He offers WinShape, which is camps. 13. The official statement of corporate purpose states that Chick-Fil-A exists “to glorify God by being a faithful steward of all that is entrusted in [them] and to have a positive influence on all who come in contact with Chick-Fil-A.” Do you think that this, as well as being closed on Sundays, promotes religion and ties church and work too closely together? Yes it does, but we‟re making a statement saying “what‟s wrong with that?” They‟ve taken it out of schools and just about everything they can take it out of. No, it‟s not a tie too closely. 14. Do you think that the religious nature of Chick-Fil-A could deter possible employees from pursuing the company? Yeah, I would say sure. There‟s plenty that think we‟re just religious freaks, but we‟re normal people. We just make it a priority to stop and get our priorities straight. I‟m sure it has but those aren‟t normally the kind of people we want to attract. We‟re not a religious company; we‟re a company based on religious principles. We try to keep it low key, we‟re not shouting out to people about the bible. We have had people come to know Christ just by coming to work there because they get around other people that find that as a priority as well and usually that‟s a positive influence and that‟s what our corporate purpose is. 15. You recently attended a conference in San Diego in relation to Chick-Fil-A. How did this conference relate to Chick-Fil-A’s treatment of its employees and its corporate culture? Every year we get together at what we call our seminar at a different location every year. They offer what we call learning and skill development where they offer us opportunities to be better leaders, to improve your marriage, to improve your religious life, to improve your physical life. They offer us so many opportunities to get better every year. Truett Cathy pays for us. We have like 3,000 people so it needs to be a pretty big place that we go. Ratliff 15 16. Chick-Fil-A received J.D. Power and Associate’s highest overall satisfaction index ranking in the South in 2004, which is a Restaurant Satisfaction Study of quick-service and family dining concepts. Chick-Fil-A also received the top ratings in two of four categories – meal and service. Do you think that this ranking was in direct relation of Chick-Fil-A’s corporate culture? Why or why not? Yeah, you just keep it simple, do the right thing, and we‟ve being blessed for it. We‟re just not doing anything fancy. We‟re just now getting to the point where people know who we are. You go down around Georgia and everyone knows what Chick-Fil-A is, but once you go away from Atlanta, the farther away, people don‟t know who we are. We are still considered the second in chicken behind KFC. 17. As of February 1, 2005, Chick-Fil-A had 37 years straight in sales growth, which is its entire span of existence. What do you believe has caused this success? It‟s not magic; it‟s closed on Sunday, consistent leadership, great founder with an impressive set of values. We don‟t change our menu that often. People think you have to change it all the time. I think that if you‟ve got something, do it really well and don‟t change it. We didn‟t get nuggets until 1984 after we opened in 1967. It‟s the same thing; we just don‟t change things 18. Do you think that the company’s corporate culture had any impact on this success? Yeah, I think it‟s everything to do with it. If you meet people within Chick-Fil-A, they are just the nicest group of people you‟ve ever met. That‟s just the way it should be. 19. What do you think could have hindered this success? 1982 was the year that corporate purpose was established. They had a conference of the nine guys on the executive board and at that point, they set that corporate purpose on paper after a retreat that basically the company was about to go under. At that point, they turned the business over to God. They said it was in your hands to do with the business what you see fit. They were lost and just about under. The costs of chicken were really trouble. That was a really key year for us. 20. Do you think that the corporate purpose caused it to come back up? Yeah, I think that most of the guys in the leadership all believed that way but we didn‟t think that we really needed to make it that much of an emphasis. We were already closed on Sundays, but I don‟t think we really ever just put it in his hands. Now every decision we make, everything we do, we want to make sure that we are glorifying God. I think our thoughts we‟re kinda chaotic and we weren‟t sure what we were doing or where we were going or what the future held, but since then, things have been really smooth. That was a rough time for a lot of people. Truett almost sold it to KFC, but he made a stand not too and it‟s been the same ever since. 21. Can you name some strengths and weaknesses of the company? The weaknesses: sometimes we‟re a little slow to change; I think that would be our huge Achilles‟ heel. We‟re like the only restaurant that doesn‟t take credit cards. It‟s become a paperless society. We‟re very resistant to change which has been a Ratliff 16 strength but can also be a weakness. We don‟t go with fads; for example, with the low carb stuff. So consistency is just the number one thing that rings out to me. 22. Can you name any companies, ideas, people, etc. that are currently a threat the company? Wendy‟s salads are about the only one. If you look at their salads, they‟ve got a dynamic package that they‟ve put together, but if you look at it closely, you gonna see that the two of us are going at it right now. We‟re copying one another. It makes us better. They‟re really the only one even remotely close to us. 23. So you don’t think KFC is a threat since they are number one in chicken? It‟s hard to say, they‟re number one chicken, but I can‟t even think of the last time that we ate there. No, it‟s just a matter of time before we put them under, I hope. 24. What opportunities are available for Chick-Fil-A in the future? It took us 43 years to get to 1 billion in sales, and it‟s gonna take us 5 to get to 2 billion. So we‟re gonna double our sales that took us 43 years to get to. So in another 5 years, where do you think we‟ll be, 10 billion? That‟s kinda our next target: to get to 10 billion in sales by the year 2010. That‟s scary but on the flip side, I think we just got over 1200 stores. McDonald‟s has 29,000 stores, we‟re just a blip on the radar. We‟re opening up about 65-75 stores a year and each year that we do that, we finance it by not borrowing a dime from the bank. Each store floats on the profits of another one. We don‟t even go to the bank anymore. That‟s after the foster programs and other programs. It‟s all done by one man; it‟s one checkbook. 25. Has the Chick-Fil-A restaurant that you are currently employed at received any complaints recently? Absolutely. Nobody‟s perfect. All kinds, number one is slow. Big lines, can‟t them through quick enough so we have to work on that. We‟ve built a reputation and people are rewarding us for it. Why aren‟t you open on Sundays? Big issue is that Wendy‟s has come up with the whole thing that you can substitute. They‟ve brought a new concept to the table and it‟s a good one and we‟re gonna have to address that one. But they raised their prices to incorporate you to be able to do that. We‟re not comfortable doing that with our guests. Credit cards, that‟s a huge one. Slow service, that‟s something that we really need to work on.