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Employee Loyalty and Retention Make Chick-fil-A a Success

November 25, 2001
Related Topics: Downsizing, Retention, Featured Article
In The Loyalty Effect and Loyalty Rules, Frederick F. Reichheld highlights several companies that have built value by building loyalty among customers and employees. One of them, Chick-fil-A, an Atlanta-based fast-food chain, has exploded from one diner to more than 960 restaurants in 34 states and South Africa in the past half century.

In an industry where the average turnover rate among store operators is 35 percent, it's less than 5 percent a year at Chick-fil-A. Store-operator candidates are graduates of such places as West Point and Annapolis. They've had jobs in major management consulting firms. So why do they go to Chick-fil-A? Reichheld says, "Founder Truett Cathy has so effectively marshaled loyalty-effect economics that he can afford to let his operators earn double or triple industry average while still generating sufficient cash to grow the chain while remaining a private company."

Chick-fil-A "aligns the interests of outlet operators with those of the company, and gives the customer ultimate power over both," Reichheld says. The company offers operators the chance to earn $200,000 to $300,000 a year, with only a $5,000 up-front franchise fee. Every operator gets a $30,000 salary, and 50 percent of the store's net profits. If the store succeeds, they succeed. (And if the operator decides not to continue with the company, she gets her $5,000 back, as long as the restaurant's books are in order.) The operators "concentrate on building their store's profit pool by providing customers with the best possible value and service," Reichheld says.

The company also targets high-performers for its counter help (where turnover is a bigger issue: Chick-fil-A's is 125 percent, versus the industry average of 300 percent). The company seeks out the upper range of high-school students, "typically higher achievers and more dedicated workers who have long-term intentions of attending college." Chick-fil-A also offers part-timers $1,000 to $2,000 in scholarship money. Dozens of employees are annual recipients of scholarships of up to $18,000 for Berry College in Rome, Georgia, Reichheld says. "The firm has also created a pipeline of talent for its full-time recruiting needs; more than half of the new restaurant operators have worked previously at Chick-fil-A stores as part-timers."

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