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Does Chick-fil-A’s growth have a ceiling?

RB’s The Bottom Line looks at what it would take for the chicken concept to overtake McDonald’s and Starbucks to be the country’s largest restaurant chain.
Photograph courtesy of Chick-fil-A

the bottom line

In 2009, restaurant analyst Mark Kalinowski predicted that Chick-fil-A would one day overtake KFC as the country’s largest chicken chain, and at the time, the notion seemed far-fetched.

After all, Louisville, Ky.-based KFC was the dominant chicken player in the market and was 70% larger than its Atlanta-based rival at the time.

Fast forward 10 years and, of course, Chick-fil-A is the dominant one, more than twice the size of the bone-in concept.

The question now is whether Chick-fil-A can move even further up the list of the country’s largest restaurant chains and ultimately overtake the two largest concepts on the ranking, McDonald’s and Starbucks, to become the biggest.

The basic answer is this: Not for a while. And a lot would probably have to happen.

First off, as the below chart shows, Chick-fil-A remains considerably smaller than either of the two larger chains. With estimated system sales of $10.2 billion, it is slightly more than half the size of Starbucks ($19.7 billion, according to Technomic's Top 500 Chain Restaurant Report). It is less than a third the size of McDonald’s, long the industry’s top dog and which generated system sales of $38 billion last year.

Chick-fil-A vs. McDonald's vs. Starbucks

Source: Technomic Top 500 Chain Restaurant Report

When market share shifts in the restaurant business, two things typically need to happen: One chain grows, while the other one shrinks or stagnates.

That happened in the pizza business over the past few years, where Domino’s growth coupled with Pizza Hut’s pullback shifted that sector’s dynamic.

Chick-fil-A was easily able to overtake KFC because it was growing sales well into the double digits for years while its larger rival closed locations and shrunk.

Starbucks isn’t actually shrinking. Over the past five years, in fact, it has added more in total sales than did Chick-fil-A—$6.9 billion to Chick-fil-A's $5.1 billion.

McDonald’s is growing at a much slower rate—7.4% over the past five years.

Based on existing growth rates, Chick-fil-A would overtake both chains at about the same time—2032. At that point, McDonald’s would probably be the third-largest restaurant chain in the country behind Chick-fil-A and Starbucks.

Of course, that’s if current growth rates stay the same. And current growth rates never stay the same.

And it doesn’t necessarily matter whether Chick-fil-A is bigger than Starbucks, at least at this point. While the two compete to an extent in the mornings and perhaps the afternoon, they are not necessarily primary rivals—though, if Chick-fil-A were to grow that large, it would probably require a larger morning focus on the chicken chain’s part that would take it directly into Starbucks’ path.

McDonald’s is another matter.

As I’ve said before, Chick-fil-A is McDonald’s top competitor. Both concepts consider families as a core customer and focus on freestanding locations. They have all three dayparts and specialize in sandwiches and sides. And McDonald’s serves a lot of chicken.

But McDonald’s courts an on-the-go consumer looking for low-cost food, while Chick-fil-A consumers spend more money, thanks to the chain’s focus on service and quality, as well as its values.

Chick-fil-A would be hard-pressed to maintain its level of growth for the next 13 years, though the chain has plenty of white space to expand beyond its Southeastern roots.

The bigger a concept is, the slower the growth. McDonald’s maintained growth by adding menu items and expanding hours, things Chick-fil-A is traditionally reluctant to do. And though it has had no impact at all thus far, a boycott over Chick-fil-A’s stance on gay marriage could also put a cap on the chain’s growth.

What’s more, McDonald’s isn’t exactly sitting still. It has focused a lot of attention on chicken in recent years in part to protect itself from Chick-fil-A's incursion. A potential economic downturn could also shift more overall business to the burger chain, which has a much lower average check.

That’s not to say something couldn’t come along to change the equation. In the decade since Kalinowski’s prediction, consumers shifted rapidly from the meal replacement bone-in chicken of KFC to the on-the-go boneless sandwiches and fingers of Chick-fil-A.

While it may seem inconceivable that Chick-fil-A could one day sit atop the Top 500 heap, it was just as far-fetched that it would overtake KFC 10 years ago.

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