Pecking Order

Americans are crazy about chicken sandwiches. Despite the branding around Ronald McDonald and Colonel Sanders, no fast food store makes more per outlet than Chick-fil-A.

Privately owned, Chick-fil-A makes US$4.5m in revenue per store across 2,700 locations each year. ShakeShack sits firmly in second at US$4.2m while big names like McDonald’s and Chipotle make US$2.9m and US$2.2m respectively. Now consider that Chick-fil-A is closed every Sunday while these other stores are open all week long.

What’s behind the success? The restaurant routinely ranks as having the best customer service of all competitors. Employees walk through the drive-through queue taking orders on tablets to avoid wait periods. Management is also extremely involved in each store. It costs only US$10,000 to be granted a franchise licence but Chick-fil-A owns the store, the facilities, and controls all the supply chains. Of 60,000 franchise applications annually, 100 are granted meaning only the best managers are given an opportunity to be part of the brand.

Perhaps most importantly, their product is loved. It took four years to create their signature chicken sandwich and now it’s essentially all the store sells.

You know who also loves a burger? Bill Ackman. The billionaire hedge fund manager, recently making headlines for his billion-dollar market short, is massively invested in the fast-food space. His US$10b fund, Pershing Square, is ultra-concentrated in the space. Just 7 stocks comprise the fund including Restaurant Brands (QSR), Chipotle Mexican Grill (CMG), and Starbucks (SBUX).