Earlier this week, the Atlanta-based Chick-fil-A revealed plans for its growth in the U.K. The company plans five locations over the next two years and will invest $100 million over the next decade to make that market work.
Growing in the U.K. is a key moment for the company. It has already established a beachhead in Canada. But getting across the pond with its successful franchising strategy is an important psychological move for its burgeoning international efforts.
Yet succeeding outside the U.S. will not be easy. The international market is increasingly competitive, thanks largely to fast-growing home-market competitors.
It’s also just difficult. In just the past couple of years, U.S. brands have had to pull out of a once-promising Russian market over its invasion of Ukraine. They’ve faced geopolitical challenges over the Middle East conflict. They are now dealing with issues in China, where a weak economy and competition are hurting sales for some companies.
Major brands like Starbucks insist their efforts are important and that many of these markets are more than worth their growth. But the simple fact is, international success is as difficult as it’s ever been.
Chick-fil-A has thrived in the U.S. Its sales have grown 75% since 2019. The company has less than half the domestic locations of No. 4 Taco Bell but about $7 billion more in total sales. Chick-fil-A is a phenomenon.
It is not the same story internationally. Fewer than half a percent of its location count at the end of 2023 was outside the U.S., all of which is in Canada. Among the 20 largest chains, only Sonic—with zero—has fewer international stores as a percentage of their total unit count.
On average, Top 20 chains operate 30% of their restaurants outside the U.S.
International growth can work wonders on some brands. Chains with a heavy presence outside the U.S. effectively benefit from a hedge on the domestic economy—or their own domestic problems.
To wit: KFC has struggled in the U.S. for decades. Once the country’s largest chain, it is now the 15th-largest brand domestically and the third-largest chicken brand. But it is a monster outside the U.S. Only McDonald’s has more international restaurants. China is by far KFC’s biggest market. Colonel Sanders is more recognizable in Beijing than he is in Baltimore.
(This is also, as I’ve said before, evidence of why you should maintain your domestic market as you grow internationally; KFC would be the world’s largest restaurant chain right now if it had, but I digress.)
And, after all, there are more people outside the U.S. than inside, which makes international growth a natural next step.
U.S. brands have long been the dominant players in the global fast-food world. But investors have been pumping money into internationally-based competitors—and more of them are furiously expanding and generating customers with lower prices.
Luckin Coffee in just a few years became China's largest coffee chain. | Photo: Shutterstock.
Mixue Group, which started as a small ice cream shop in Zhengzhou, is opening thousands of locations every year. It now operates more than 36,000 locations, largely in Asia and most of them in China.
Luckin Coffee opened its first location in China in 2017. It is already the largest coffee chain in the country, both by unit count and revenue. It finished the second quarter with more than 19,000 locations. It is now spawning multiple competitors, all of which are furiously opening new locations, pricing their coffee at low rates and taking share from what had been the country’s largest player.
That player was Starbucks, which has been operating in China for two decades but which now finds itself fighting for sales and customers. Same-store sales last quarter declined 14%. The company has now shuffled its executive team there and is actively pondering a spinoff of the corporate market.
These chains are already pushing into other international markets. And if they can do it for ice cream and coffee, it won't take long before we see similar competitors in chicken, burgers, pizza or whatever.
Meanwhile, geopolitical issues have given U.S. brands all kinds of headaches around the world, forcing changes in ownership, sales of entire markets and lawsuits against the corporate parent over growth projections.
None of this is to say that Chick-fil-A, or Chipotle, Sonic, Panera Bread or any other major brand with little international presence, should simply stay home and ignore global markets. The business world is hard, and if it was easy everybody would do it. International markets are entirely too lucrative, and a brand cannot live on one market alone.
Chick-fil-A does have some baggage, however, in the form of protests over former CEO Dan Cathy’s comments on gay marriage. Those protests had a clear role in the quick decision by a landlord for its first U.K. location to decide not to renew its lease five years ago.
The chain has clearly overcome those concerns in Canada, where it is generating long lines despite protests and expects 20 locations by the end of this year. It may be a different story farther from home in Europe. Either way, Chick-fil-A’s U.K. expansion should come with an extra helping of public relations. And a lot of patience.