Chick-fil-A's second generation aims to go 'the second mile'

By Kathryn Levy Feldman

Company president Dan Cathy and his siblings hope to perpetuate their father’s mission to ‘have a positive influence on all who come in contact’ with their company.

It is 1p.m., and the lunch hour is in full swing at a Chick-fil-A fast-food restaurant in the Philadelphia suburbs. A balding, middle-aged gentleman in a shirt and tie walks to the center of the freestanding eatery, removes a trumpet from a battered leather case and sounds “Reveille.”

“We’re so glad you’ve chosen to enjoy your lunch at Chick-fil-A,” he announces to the startled diners, all of whom have stopped eating. “Is anybody here celebrating a birthday this month?” Three volunteers sheepishly step forward, and he asks their names. “This is Sanj, Dave and Tom,” he instructs his audience. “When we reach the part in the song when you say someone’s name, use theirs.”

With that, Dan Cathy, president and chief operating officer of the Atlanta-based $2 billion quick-service chicken restaurant founded by his father, plays a spirited rendition of “Happy Birthday” on his trumpet, accompanied by a chorus of restaurant diners. Satisfied, he returns the trumpet to its case and greets the patrons who stop by to shake his hand. Later, he addresses the local employees who are responsible for promulgating his family’s brand. “You don’t think that each person who was here is going to tell their friends that a bald man played the trumpet while they ate their lunch at Chick-fil-A?” he asks rhetorically. “People eat here and they have a story to tell.”

Dan, 54, has made it his personal mission to ensure that customers of the more than 1,300 Chick-fil-A eateries in 37 states and the District of Columbia have an exceptional dining experience, a concept the company calls “going the second mile.”

“The first mile is what you pay for—a transaction—a clean counter and waffle fries,” Dan says. “The second mile is what keeps you coming back, like social graces—a relationship. We want to assist our employees in going that second mile.” He points with pride to the “extras” found in all freestanding Chick-fil-A outlets, like a pepper mill on the condiment bar and staff who carry customers’ trays to the tables, pull out a chair for them and even greet diners at their cars with an umbrella when it’s raining. “Our goal is to exceed even the highest expectations of a typical fast-food restaurant and rebuild the service model,” Dan says. “We want the second mile to be second nature.”

To that end Dan, a licensed pilot, spends Tuesdays through Thursdays of most weeks traveling around the country to the chain’s growing family of restaurants, interacting not only with Chick-fil-A restaurant operators and their team members but also with customers. “I need to be where things are happening,” he says, “and I draw my energy from our customers.”

Most of his visits involve participating in grand opening ceremonies for new Chick-fil-A restaurants, about 75 of which opened in 2006. Ninety locations were expected to open by the end of 2007—the company’s 40th anniversary—predominantly in California and Arizona. Last year, Dan spent 23 nights camped out in parking lots with customers vying for a chance to win free Chick-fil-A food for a year, a promotion the chain offers to the first 100 customers at each of its new restaurants. “I slept with more customers than my own wife on Wednesday nights,” he quips. “I’m having the most fun I’ve ever had at Chick-fil-A.”

Dan’s father, S. Truett Cathy, built his business based on fun. “Cooking chicken is fun,” says the 86-year-old chairman, who says he still works an average of 50 to 60 hours a week. “Our people, from our restaurant operators to the team members they hire, enjoy their work,” Truett Cathy says. “If our employees enjoy what they’re doing, they perform at their best, and that feeling naturally spills over to the customer.”

In the introduction to Eat Mor Chikin: Inspire More People, a book by Truett Cathy, business strategist Frederick F. Reichheld, known for his research on loyalty, wrote that the way Chick-fil-A conducts business has generated “a degree of loyalty among its customers, employees and restaurant franchise Operators that I had never imagined possible, particularly in the quick-serve restaurant business.”

Truett Cathy calls it “The Golden Rule” and is but one of the many biblical precepts that guide his life and his company. Devoutly religious, he lives his life and runs his company based on the principles of hard work, fellowship and service. A large bronze plaque (a gift from the employees) next to the front door of the corporate headquarters underscores the strength of these convictions as it defines the twofold corporate purpose of Chick-fil-A: “To glorify God by being faithful servants of all that is entrusted to us and to have a positive influence on all who come in contact with Chick-fil-A.”

Is it risky in this era of political correctness to mix business and religion? Perhaps. But in the case of Chick-fil-A, what the Cathy family believes is so closely aligned with how they do business that it might have been riskier for them not to spell it out.

“We’re not just ringing the cash register,” Truett says. “It costs nothing to be kind to one another. We teach our employees to treat each other the way they would like to be treated, and we outperform our closest competitor by kindness.”

Truett, the second youngest of eight children, learned the importance of loyalty and commitment during his childhood in the West End section of Atlanta. His mother ran a boarding house to supplement the meager income his father collected from selling life insurance during the Depression. Her chicken—seasoned overnight in a refrigerator and cooked quickly in a pressure cooker to retain its moisture—inspired the original Chick-fil-A sandwich that Truett created in the early 1960s. That sandwich, hand breaded and served on a toasted, buttered bun with two dill pickles, is still the most popular item on the restaurant chain’s menu; the recipe remains a closely guarded secret.

“The name literally just came to me, with the capital A —for top quality—on the end,” Truett wrote in Eat Mor Chikin.

At age eight, Truett began his business career by operating a Coca-Cola stand in the front yard. “I realized that I could buy six Cokes at the grocery store for a quarter, sell them for a nickel each and recognize a five-cent profit,” he recalls. The Coke stand led to a paper route in Atlanta’s Techwood Homes, the country’s first federally funded housing project. “The key to succeeding with a paper route—and the restaurant business, I would later learn—is to take care of the customer,” wrote Truett, who started delivering papers at age ten. “I had to do the job whether I felt like it or not ... my customers expected their papers to be delivered. To keep my customers—and it’s always easier to keep a customer than to replace one—I did more than sling the paper haphazardly toward the front door. I put it where the customer asked me to put it.”

In 1946, Truett and his brother Ben opened their first restaurant, the Dwarf Grill (later renamed the Dwarf House), a 24-hour diner. It was small enough to be operated by a waitress, grill man and dishwasher, with a limited menu (breakfast items, hamburgers and dessert), so the customer could get in and out in about 20 minutes. Since Ben was married with a child, Truett rented a room in the house next door to the Dwarf Grill to be on call around the clock in case a grill person or waitress didn’t show up. By 1951, the brothers had opened their second Dwarf House restaurant in Forest Park, another Atlanta suburb. In 1960, that location burned to the ground, giving Truett what he refers to as “an unexpected opportunity” to explore the concept of self-serve restaurants, which was just beginning to get off the ground.

Coincidentally, this was also the beginning of the “malling of America.” The era offered Chick-fil-A the opportunity to expand quickly while minimizing real estate costs during the boom ’70s and ’80s. Truett’s sister Gladys, who ran a gift shop in the Greenbriar Shopping Center (Atlanta’s first enclosed mall), suggested he sell chicken sandwiches there. That first store, all 384 square feet of it, featured elements still present in today’s Chick-fil-A outlets: cooking in front of the customers, red shingles, refrigerated desserts and salads displayed on the counter. The store, built on an investment of $17,000, was an immediate hit. “We were soon paying five or six times our base rent because of our tremendous sales,” Truett wrote in his book. “I cannot explain why the fast-food giants did not catch on to the idea of a chicken sandwich—some say it was divine protection—but for many years we had the market to ourselves.”

During their first week of business, Truett and Ben decided to close one day a week for worship and rest. “Our decision to close on Sunday was our way of honoring God and directing our attention to things more important than business,” Truett explains. “Through the years, I have never wavered from that position.”

Chick-fil-A still gives all employees Sunday off, a practice unduplicated in the fast-food industry. Yet, according to Reichheld, “Chick-fil-A units achieve higher sales per square foot than McDonald’s et al. despite the fact that Chick-fil-A stays closed on Sundays, one of the biggest sales days for restaurants.” In fact, Chick-fil-A has recorded sales increases with its core freestanding restaurants for 39 consecutive years and is the nation’s second-largest quick-service chicken restaurant chain, behind KFC. In 2006, the company generated sales of $2.275 billion, a 15.16% overall increase and an 8.52% jump in same-store sales over its 2005 performance.

The practice of closing on Sundays has kept Chick-fil-A out of some lucrative venues, like sporting arenas and malls that require tenants to be open seven days a week. Yet in a May 11, 2007, interview in the Atlanta Business Journal, Truett stated that closing on Sundays is one of the best business decisions he ever made. “It’s very important that we are consistent in our convictions. We dare not vary from it,” he remarked. “I think people respect you for that and eat more often with you.”

There are currently 11 Dwarf House restaurants in the Atlanta area. They offer table and counter service as well as self-service dining and a drive-through window. At about 6,000 square feet, Dwarf Houses are a bit larger than freestanding Chick-fil-A outlets. Their menu is also larger, including hamburgers, steaks and salads.

A few years ago, Dan Cathy; his brother Donald, known as “Bubba” (Chick-fil-A’s senior vice president and president of Chick-fil-A Dwarf House); and their sister Trudy Cathy White (director of WinShape Camp for Girls, a Christian summer camp run by the family’s foundation) signed a covenant in which they pledged to uphold Chick-fil-A’s major tenets. They would never open on Sundays, would remain privately held, would make decisions cooperatively and would maintain the values and principles that had shaped the organization.

“My parents were deeply touched,” Dan says. The importance of remaining a privately held company is intrinsic to Truett’s philosophy of business. “I’d rather have 70 restaurants operating efficiently and professionally than 500 restaurants where half are run well and half not,” Truett says. “I have tried never to overextend.” He also never wanted to be beholden to investors. “If I had a widow invest her savings in Chick-fil-A and the company didn’t pay the return expected, I would feel obligated to make up the difference to her,” he says. (And, of course, it would be tough to keep Chick-fil-A closed on Sundays if it were a public company.)

Remaining private allows Chick-fil-A to control the speed of its growth and to hand-pick the operators who will benefit from that growth. “It is easier to get a job with the CIA than to be awarded a franchise with CFA [Chick-fil-A],” quips Dan. He says the company receives 1,000 résumés per month and selects just 100 operators per year, a process that Truett supervised until recently. “In my first meeting with a potential operator, I explain that our commitment is going to be like a marriage, with no consideration given to divorce,” Truett wrote in his book. “We are much more careful about selecting operators when we know we can’t easily get rid of them.” He says Chick-fil-A has a 97% retention rate.

One reason for the high demand for franchises is that the agreement, which Truett has not changed since the first franchise opened in Atlanta’s Greenbriar Mall in 1967, is generous. It calls for the operator to pay Chick-fil-A 15% of gross sales plus 50% of the restaurant’s net profits each year as a service charge. In return for a $5,000 “security deposit” from the operator, Chick-fil-A buys the real estate, builds the restaurant (a $2.5 million investment for a free-standing location), supports the operator with technology and training, and guarantees a base income. “The bottom line depends on the operator’s honesty, integrity, commitment and loyalty to customers, and to us,” Truett says. “I don’t know any other restaurant company that places so much responsibility in the hands of its franchisees. The operator is the CEO, manager, president and treasurer of his or her own business.”

While the company is reluctant to divulge earnings of its operators, Dan notes that executives have left the corporate office to become operators because the opportunity can be so lucrative. According to Dan, more than 60% of Chick-fil-A’s operators “were nurtured within the corporate culture.” He notes with a smile, “Many started out cleaning tables.”

Each operator is permitted to run only one restaurant and is expected to be on site during its hours of operation. “Our operators are mayors of their communities,” Dan explains. “We expect them to be visible, modeling quality interaction between their customers and the community.”

It’s labor-intensive work, as Dan admits, but therein lies the challenge of what he calls his “ministry.” “It’s easier to add a new product than it is to teach 16-year-olds to say, ‘My pleasure,’” he acknowledges. “But this is the platform God has given us—1,300 restaurants across the country, through which we have the opportunity to change society.”

Operators are encouraged to teach etiquette and courtesy to teenage employees. “We have to teach them the words and the gestures, like how to assist someone to a chair or how to pull out a chair for a customer, because social civility in this country is at an all-time low,” Dan says.

There are incentives for learning civility, not the least of which is the company’s extensive scholarship program. In 1973, Truett founded the Team Member Scholarship Program to encourage Chick-fil-A restaurant employees to further their education. Any employee who works for Chick-fil-A for more than two years and meets the eligibility criteria can receive a $1,000 college scholarship. To date, Chick-fil-A has awarded more than $22.5 million to more than 22,000 restaurant employees who have attended 2,138 educational institutions throughout the country.

The WinShape Foundation, created by Truett Cathy and his wife, Jeanette, runs Christian programs to help “shape winners.” Foundation activities include boys’ and girls’ camps, foster homes, a wilderness team-building program, a marriage-enrichment retreat and an international program. The foundation also provides scholarships to Berry College in Rome, Ga.

Don (“Bubba”) Cathy, 53, oversees many of the company’s philanthropic endeavors along with Truett’s Grill, a “family café” that is establishing a presence in the Greater Atlanta area. Like Dan, he remembers scraping gum off the tables at his father’s original Dwarf House restaurant and singing Dwarf House jingles on the radio. While attending college at Samford University in Birmingham, Ala., he worked for his younger sister, Trudy, who had taken her sophomore year off from the same college, to run the second Chick-fil-A franchise in the Birmingham mall. “I worked for her, doing manual labor, but she did all the managing,” Bubba says. His early years with the company also included work as a construction apprentice. Trudy, now 51, runs the WinShape girls’ camping program.

About three years ago, the siblings attended a family business program at Harvard Business School and brainstormed about the future leaders of Chick-fil-A, whom they call “Gen 3.” The experience led to a new policy that requires third-generation members to work elsewhere for two years before entering the family business. “It gives them a certain amount of self-confidence and relying on their own income to survive,” says Bubba. It also gives them the opportunity to make “mistakes on someone else’s payroll,” adds Dan with a laugh. Both brothers admit to feeing the “eyes of the company upon them” as sons of the boss and say they hope to take some of the pressure off their children.

Dan and his wife, Rhonda, have two sons; Bubba and his wife, also named Trudy, have six children; Trudy Cathy White and John White have four children. Dan’s oldest son, Andrew, 28, is a former Chick-fil-A operator; he has now moved to the corporate side of the business and works in human resources. Bubba’s oldest son, Mark, 26, is a Chick-fil-A operator in California. Both worked elsewhere before joining the company. “Our kids have no choice on ownership issues—it is theirs by birthright,” says Dan. “We wanted to give them a choice when it came to management.”

At the moment, all is well in the Chick-fil-A dynasty, but the siblings know all about the pitfalls that can occur in the third generation. They hope their children will write them a covenant similar to the one they drafted for their parents; if they do, Dan says he would consider it “a significant touchdown.” Regardless, says Bubba, “We want the third generation to be happy and follow God’s will, whether that includes Chick-fil-A or not.”

Kathryn Levy Feldman is a freelance writer based in Bryn Mawr, Pa.

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Winter 2008

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