CEO's Corner: Chick-fil-A's Dan Cathy on Rising Food Costs, Family Values


It has been a busy year for fast food chain Chick-fil-A. The company announced earlier this year that its 2010 sales jumped 11.4% to more than $3.5 billion and are still going strong, and it's in the process of opening 90 new locations this year. On the downside, it has also been heavily criticized for supporting groups opposed to same-sex marriage.

If you're one of the loyal customers who has powered the chain's growth -- and if you have a cow costume -- Friday was your lucky day. For it's annual Cow Appreciation Day, Chick-fil-A gave away free entrees to customers dressed from head to hoof in cow gear. The company said it expected a turnout of more than half a million for the event this year.

While I was a bit tempted to craft some type of cow costume, there's so much more that I wanted to inquire about, including rising food costs, industry trends and the economy, so I tracked down Chick-fil-A CEO Dan Cathy.

Costs for nearly everything are on the rise. How is this affecting Chick-fil-A, and will you eventually have to pass these costs on to consumers?
Dan Cathy:
Whenever we see rising costs in any area, we try to do everything we possibly can to maybe save costs in other areas that don't affect the customer's experience. Even a lot of the international trade areas affect the costs of Chick-fil-A. For instance, we ship a tremendous amount of product overseas to Asia and also to Eastern Europe for dark pieces of chicken, which helps offset the cost of production. So thank goodness there is a strong demand for those other parts of the chicken.

Sponsored Links

About 80% of the cost of that bird is going to be built into corn prices. So those things do affect us. But as I said, there might be other areas that we could eliminate doing. But the bottom line is that we have to drive the value for the customer -- make sure that they feel that they're getting a really good deal.

So as long as we can maintain our prices, even short term if it's going to cost us some profit margin, then we're willing to forgo that on a short-term basis because many things are fluctuating up and down. But, if those trends are sustained over a longer period of time then we know eventually we're going to have to adjust our prices.

Chick-fil-A restaurants are closed on Sundays to allow employees to practice their religious faith. Do you ever get concerned about how much revenue you may be losing?
Well that's a question that's often asked: How much money do we lose by being closed on Sunday. On the surface, you'd simply think that Sunday is one of the most popular eating out days of the whole week. So you can kind of make a guesstimate as to how much business we might generate if we were open Sunday. But there are many more underlying elements that are a great benefit that frankly offset the fact that we're closed on Sunday.

We know that it directly affects our customer service because we can rest and be with our families and team members can worship if they so choose. We know even that drives value systems and attitudes of compassion toward others, and hospitality toward others.

What are the chances of Chick-fil-A ever going public?
We feel like it's an extremely expensive cost of capital. And in a business, you want to have the lowest operating costs you possibly can. So there other forms that cost much less like borrowing money through banks and that sort of thing. We've done bank borrowing in the past. However, in the past 11 years now, we've not been borrowing any more money than we'd already established in the 1990s. And in fact, we've been paying it down and we'll be completely debt-free within less than a year.

Some fast food chains have begun to serve alcoholic beverages ranging from wine to beer. Is this something that you'd ever consider?
The only alcohol products that we carry in our restaurants are in our first aid kit. I don't think you'll ever expect to see that on the menu of a Chick-fil-A restaurant. I think the value system that we portray and the wholesome family-friendly atmosphere that we promote and the culture within Chick-fil-A is such that it would never be necessary for us to serve those alcoholic products.

As a businessman, how would you rate the current administration's policies as they related to business?

I think it's an incredibly complex set of issues that our government has had to deal with today as it relates to the economy. I think the recession that we've had for the last two to three years -- on one hand has been incredibly valuable for our economy because it cleaned out a lot of frivolous spending by the consumer sector that was overspending, overextended.

I think we've all been to school now and learned the lessons of what happens when we have ambitions that exceed our ability to pay. I hope federally we learn that same lesson. We're headed for a train wreck here with our federal budget. If we don't get a better grip on our spending, we're going to be as foolish as some of the other countries over in Europe that are facing the consequences of endless spending and thinking that a few are going to be able to pay the excesses of the many.