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The Unconventional Franchise Model Behind Chick-fil-A’s Success | The Economics Of | WSJ - YouTube
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(playful music)
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- [Narrator] This is the
Chick-fil-A chicken sandwich,
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which according to
multiple industry surveys
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is America's favorite fast food.
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Visit a Chick-fil-A anywhere
in the United States
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and you're likely to see
a long line of customers,
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patiently waiting to order
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the restaurant's flagship menu item.
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- There you guys go.
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- Thank you so much.
- My pleasure.
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Y'all have a great rest of your day.
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- Thank you.
- My pleasure.
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- [Narrator] In part thanks
to its famous chicken,
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today Chick-fil-A is the third
largest US restaurant chain
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by domestic sales.
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- We're still seeing a tremendous
growth in our business.
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So far this year, we're up about 20%.
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- [Narrator] So how did
this private Atlanta-based
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fast food chain become one
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of the most popular
restaurants in America?
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This is "The Economics of Chick-fil-A."
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(upbeat music)
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Chick-fil-A has long had a
unique approach to business
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that the company credits with its success.
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From the beginning, Chick-fil-A's business
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was built on a recipe.
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After testing hundreds of methods,
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restaurateur Truett Cathy
developed a faster way
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to cook boneless chicken
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using a pressure cooker and peanut oil.
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- It's perfect and so we've
kept that locked away in a vault
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and we'll continue to
use that same recipe.
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- None of the employees have access to it,
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so it is still shrouded
in a lot of mystery.
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There are recipe sites where
you can try to recreate it
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but they have never put it out officially.
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- [Narrator] The original chicken sandwich
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is the same today as in 1967.
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A breaded breast of chicken,
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two pickles, both placed
on a buttered toasted bun.
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♪ Hey, Chick-fil-A today ♪
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♪ Chick-fil-A ♪
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♪ The boneless breasted
chicken we're famous for ♪
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- [Heather] Chick-fil-A
has long taken pride
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for its commitment to
selling high-quality product.
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- [Narrator] In fact, Chick-fil-A's name
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is a take on chicken filet
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with a capital A at the end
symbolizing top-quality.
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While other fast food chains tend
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to expand their menu offerings over time
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to attract new customers,
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Chick-fil-A's business model
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has always been to maintain a small menu,
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focused on chicken sandwiches.
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- They like to say it's simple.
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So they want to keep customers knowing
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what's on that menu
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to be able to easily
decipher what they want.
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- We think about the way
that we serve guests.
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That consistency is really important,
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that we get hot sandwiches,
and cold salads,
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and just tasty products.
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- [Narrator] Customers seem to agree.
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Since its creation in 2015,
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the American Customer Satisfaction Index
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has been dominated by Chick-fil-A.
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- Chick-fil-A often rates very high.
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Even though the service in
the drive-thru can be slower,
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people are very happy with the quality
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and the service they get in general.
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- [Narrator] Today, many
Chick-fil-A restaurants
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use a practice known as upstream ordering
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where an associate will
take a customer's order
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while they're still waiting in line.
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- This started before the pandemic
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but has really proved very important
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to the pandemic when they
closed their dining rooms,
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which really meant the drive-thru
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is the major channel of sales.
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So if you go to a Chick-fil-A now,
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in many locations, you
will see workers out
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in the drive-thru with tablets.
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And so instead of speaking
into a speaker box
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and kind of mumbling your order
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and it maybe getting screwed up,
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you're telling this person
directly next to your car
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what you want.
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- [Narrator] To ensure that quality
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in every one of its location,
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Chick-fil-A uses a
different franchise model
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than most other fast food chains.
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Unlike most chains where
the franchisee covers most
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of the costs of opening the restaurant,
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Chick-fil-A owns every
one of its locations.
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The company also selects the locations,
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and builds the restaurants.
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- We really think that
that's a key differentiator
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in the way that we operate.
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We're not looking for a financial investor
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or people that wanna buy a big market
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and open a bunch of stores.
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- [Narrator] Chick-fil-A
states on their website,
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"Franchising is not an opportunity
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for passive financial investment,
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working from the sidelines,
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or adding to a portfolio
of business ventures."
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Franchisees are called operators,
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and each operator is hand
picked by Chick-fil-A
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after a rigorous interview process.
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- Chick-fil-A likes to
say it's about like going
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to Harvard MBA.
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It can take anywhere from
12 months, 24 months.
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So you really have to want to do this,
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and be willing to go through
the initial paperwork
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but then extensive interviews.
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- [Narrator] Out of the
more than 8,000 applicants
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Chick-fil-A receives annually,
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the company only selects about
130 new operators a year.
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That's an acceptance
rate lower than Stanford.
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- One of the skills
that we really look for
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is somebody that's really
good at developing people.
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A lot of the stores
have over 100 employees.
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They've gotta be really, really good
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at pouring in and developing people
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in teams and leadership teams.
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- [Narrator] If selected,
Chick-fil-A franchisees
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needs only an initial
investment of $10,000,
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which covers the franchise fee
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to become an operator.
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That's much lower than the startup costs
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for a McDonald's franchise,
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which requires a $45,000 franchise fee,
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as well as 1.3 to $2.3 million
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of additional investment.
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- If they have 10 or 15 locations,
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it's hard to have that market presence
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and to really know their team members
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and the communities that we serve.
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And we've got a lot of
interest to become operators,
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and feel like that model
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is gonna be really important.
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It's what's gotten us to where we are.
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- [Narrator] Chick-fil-A
credits this hands-on approach
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with the success of its restaurants,
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which on average, make far
more off of each location
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than their competition.
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For years, Chick-fil-A's footprint
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was mostly in the southeast,
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but today, it can be
found across the country.
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- They have about 2,600 restaurants
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throughout the country.
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They're also located in Canada
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and they're opening in Puerto Rico.
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- We're opening about 100
stores a year right now
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and we've got a lot of
growth potential here
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just domestically in United States
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but we're also looking
at international as well.
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- [Narrator] Since 2007,
Chick-fil-A's nearly doubled
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its restaurant count to 2,598.
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- Compared to a lot of other chains,
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that's still slow.
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Like a Chipotle is opening
200 restaurants a year.
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- [Narrator] No matter
which Chick-fil-A location
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you eat at,
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the company says its values are reflected
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in its day-to-day operations.
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- It is a very close culture.
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They're also invested in its values,
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which they do say are based
on Judeo-Christian values,
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which you don't have to be
a Christian to work there
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but they do take some
of these basic values
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of humility and generosity,
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and if you wanna go to a prayer
service while you're there,
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you certainly can.
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- [Narrator] From its inception,
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founder Truett Cathy's Christian
faith played a major role
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in the company's business strategy.
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It's why Chick-fil-As
are never open on Sunday,
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not just so workers can attend church
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but also so they can rest in general.
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- We feel like we make up for the sales
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in the Monday through Saturday,
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and that anticipation of I
can't get Chick-fil-A today,
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so I wanna make sure to go
first thing Monday morning.
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- [Narrator] It's also
the reason the company
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has never gone public.
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- I don't think we'll ever,
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actually, I know we'll never go public.
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And there's not a real
benefit for us to do that.
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We've grown conservatively,
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and so we don't need a lot of investors
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or extra cash to go
and to build new stores
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or new businesses.
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- [Narrator] Part of Cathy's values
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are reflected in how employees are treated
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and how they're expected
to treat customers.
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- Thank you.
- My pleasure.
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Y'all have a great day.
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- [Narrator] Although you
won't see it in restaurants
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where the employees are masked up,
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Chick-fil-A has long asked employees
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to greet customers warmly with a smile.
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- Even if it's just in a
very small interaction,
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you can share a lot by just the smile
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the team member has with guests.
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It's just a small little thing
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that we can do that makes a difference.
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- [Narrator] Occasionally,
Chick-fil-A's values
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have attracted scrutiny,
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especially when the
company's foundation donates
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to conservative groups or causes.
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- There's been some groups
perceived as anti-gay
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and this has attracted attention
from progressive groups.
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The company's foundation last year
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has focused its charitable giving
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on three different areas:
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homelessness, hunger and education.
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- I think the most important thing for us
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being in the restaurant business
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is that we serve everybody.
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My grandfather, I love how he
talked about it with politics.
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He would say, "I'm not
right wing or left wing,
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I'm the whole chicken."
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- When you go to headquarters in Atlanta,
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there is this rock with
a quote from Truett
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that is displayed prominently
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that says what Chick-fil-A's
corporate purpose,
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it says, "To Glorify God
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by being a faithful steward of
all that is entrusted to us.
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To have a positive influence on all
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who come in contact with Chick-fil-A."
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I do think that reflects
this very higher noble sense
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of company self they have.
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They believe they do more
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than just serve chicken sandwiches.
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- Thank you so much.
- My pleasure.
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Have a nice one.
- Bye.
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(lively music)
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