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Challenges await Chick-fil-A heir

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By The Atlanta Journal-constitution
Saturday, Nov. 16, 2013, 9:00 p.m.
 

The new CEO of Chick-fil-A shares his father's ability to connect with customers, often delighting at being the first face they see at the opening of a new store.

But when Dan Cathy takes the reins of the Atlanta-based chicken chain 92-year-old Truett Cathy started a half-century ago, he'll confront challenges that go beyond filling his famous father's shoes.

Experts say Dan Cathy will have to control tendencies to speak out about personal views that have thrust the private company into the culture wars and made eating at Chick-fil-A a wedge issue for some.

He will face strategic decisions on international expansion as the chain seeks to sustain its lofty growth.

Chick-fil-A announced last week that Truett Cathy, who has led the company since its inception, will step down as CEO, handing the title and job to Dan Cathy, 60.

His father's son

Industry experts expect Dan Cathy to navigate his role as CEO and chairman well. While he is perhaps most widely known for public comments disapproving of gay marriage — creating backlash for the company — Dan Cathy's business acumen reflects lessons learned at his father's feet.

That means anyone who expects the company to go public, or to open stores on Sunday, will be disappointed, experts say.

“What changes do I anticipate? Not much, not many,” said Don Sniegow-ski, editor of the site Blue MauMau, which provides news for franchise owners. “My impression is it will be same-old, same-old.”

It would be foolish for the growing company to mess with success, said Robert Wagner, president of NetFinancials, which provides tax and accounting services to restaurants. Being private has allowed Chick-fil-A to grow at its own pace, pay higher employee wages to attract strong workers and avoid cutting corners to meet Wall Street expectations.

Dan Cathy, though, is a less cautious businessman than his father. When it comes to expansion — especially internationally — he has long wanted to move faster and may use his new stature to grow the company beyond the United States.

The chain, in 39 states, has been adding about one state a year. Before too long, the company will have to look abroad to sustain growth, said Ken Bernhardt, a Georgia State University marketing professor who consults for the company.

Long time coming

“Dan's been thinking about this a long time,” Bernhardt said. “The long-term future growth is going to have to eventually come from outside the U.S. Looking down the road, international will make sense.”

Truett Cathy got burned on international expansion after opening and closing stores in South Africa that never became profitable. But the company has licensed some international stores on college campuses, Bernhardt said, and Dan Cathy may be ready to revisit the issue of standalone stores in other nations.

In the United States, there is heated competition in the quick-service restaurant industry, particularly where chicken is involved.

Chick-fil-A and others need to continue innovating to maintain sales against fast-casual sit-down competition, said Harry Balzer, chief food analyst with NPD group.

Still, Chick-fil-A's sales volume is “unreal,” said Sam Oches, editor of QSR Magazine, which follows quick-service, or fast food, restaurants. He said the opportunities in international markets are “enormous.”

Clear leader

Chick-fil-A makes about $2.7 million in annual revenue per store, said John Gordon, a restaurant consultant and principal of Pacific Management Consulting Group. That's about equal to McDonald's per-store haul — and McDonald's is open seven days a week.

Other quick-service chicken competitors make between $700,000 and $1.2 million per store, Gordon said, making Chick-fil-A the clear revenue leader in the industry.

“It's a phenomenally run business,” Oches said. “They have this down so well. It's impressive to watch.”

Oches noted that Dan Cathy has held leadership roles as president and chief operating officer for some time. In recent years, Truett Cathy has taken less of a day-to-day role, signing off on decisions of the management team.

Much of Chick-fil-A's success has stemmed from both Cathys' gregarious personalities. Both enjoy shaking hands with consumers, asking about their families and getting one-on-one feedback on menu suggestions.

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