[Case Study] Chick-fil-A Creates a Marketing Flap
Updated: Apr 7, 2019
By Marc Rodriguez
Minnesota School of Business MBA Program
On July, 16, 2012, a reporter from The Baptist Press asked Chick-fil-A (CFA) Chief Executive Officer Dan Cathy his thoughts about people who opposed the company’s support of “the traditional family.” (Blume, 2012). Cathy replied by saying he was “guilty as charged.” (Blume, 2012). Cathy answered by describing the CFA corporate culture as one that is very supportive of the family—the biblical definition of the family unit. (Blume, 2012). The CEO told the reporter that CFA is family-owned, family-led business, and all of the owners are married to their first wives. “We give God thanks for that.” (Peters, Thomas, Benjumea, Garner & Turner, 2013, 137). Cathy said the company’s stance might not be popular with everyone but he was thankful to in a country where people can share our value and operate on biblical principles.” (Blume, 2012). Cathy said Americans are inviting God’s judgment when they define marriage outside of biblical context. (The Ken Coleman Show, 2012, 1:05). Cathy’s comments ignited a national controversy surrounding gay marriage, Christian values and free speech. The story intensified when the media reported that CFA’s charitable entity, the WinShape Foundation, donated $3.6 million to anti-gay groups in 2011. (Israel, 2013). Cathy may have worried about judgment from God, but it was clear that he and CFA executives needed to develop a communication crisis strategy to deal with judgment from the public.
Chick-fil-A Profile and History
CFA is a privately owned fast-food chain with restaurants in more than 1,700 locations throughout 39 states. (Marketline, 2014). The chain, headquartered near Atlanta, Georgia, creates additional revenue through licensing to foodservice venues at colleges, hospitals and airports. (Marketline, 2014). Business formats include mall locations, stand-alone buildings, drive-thru-only outlets, satellite “lunch-counters” as well as full-service restaurants Dwarf House and Truett’s Grill. (Marketline, 2014). There are approximately 237 licensed locations across the United States. (Marketline, 2014). In 2012, the company enjoyed an average per-store gross of $3.18 million and a total of $2 billion in overall sales. (PrivCo, 2012). In 2013, total sales were $5 billion. (PrivCo, 2012). The company employees more than 1200 corporate employees, with a corporate retention rate of 95%. (Chick-fil-A, 2015). CFA is owned 100% by the Cathy Family. (Chick-fil-A, 2015). Unlike many fast food chains, CFA owns all of its stores has franchise operators rather than owners. (Petrone, 2014). The average operator makes $190,000 per year. (Petrone, 2014).
S. Truett Cathy founded CFA in 1946 as the Dwarf Grill. In 1963, he brainstormed the idea of making and selling a simple chicken sandwich. In 1967, based on the popularity of his boneless chicken fillet sandwiches, Truett changed the name to Chick-fil-A. (Chick-fil-A, 2015) The company has grown into an iconic brand, advertised through the “CFA Cow” mascots which suggest that customers “Eat Mor Chikin.” (Chick-fil-A, 2015). In the eighties and nineties, the brand’s rise in popularity paralleled the growth of shopping malls throughout the United States. Truett realized the retail possibilities of mall locations, and used the mall format to broaden their market. The company reached the $1 billion sales mark in 2000, and in 2014, surpassed industry titan Kentucky Fried Chicken in market share.
From the beginning, the CFA corporate culture promoted faithful stewardship, the mission to glorify God and the responsibility to create a positive influence on customers. (Alderson, 2012, 114). According to company by-laws, all CFA restaurants must close on Sundays and on Christmas Day, so that employees can attend church services. (Alderson, 2012, 114). The company culture promotes helping the community, helping their employees and being of service to “God and His kingdom.” (Alderson, 2012, 114). Employees are required to say “my pleasure” when speaking to customers. Truett implemented the idea after staying at a Ritz Carlton hotel. When he said “thank you” to the front counter person, he was greeted with “my pleasure.” Truett adopted the idea, treating CFA customers as if they were at a luxury establishment. (Ciotti, 2012). The family has never considered taking the company public. The family maintained that companies go public to raise money and to grow faster but the family is not interested in either. (Coffey, 2012).
The Cathy Family
On their website, The Cathy Family lists faith, family, service, worship and wellness as their core set of values. (Cathy Family, 2015). The family consists of: Truett, CFA founder and chairman; Jeannette, wife and mother; Dan, president and COO; Don or “Bubba,” senior vice president and daughter Trudy Cathy White, director of WinShape Camps for Girls. Truett passed away on September 8, 2014 at age 93. In addition to his kids, he is survived by 19 grandchildren and 18 great-grandchildren. (Stafford, 2014).
Religion as a Mission Statement
Cathy explained in another interview that while CFA does not claim to be a Christian business, it does operate under Christian principles. (Peters, Thomas, Benjumea, Garner & Turner, 2013). Chick-fil-A nets between 10,000 to 25,000 applicants a year from aspiring franchise operators to fill the 60 to 70 slots that open up each year. (Petrone, 2014). To apply, applicants must disclose their marital status, number of dependents and involvement in community and religious organizations. The vetting process includes more than a dozen interviews, including family and children. (Petrone, 2014). The corporate mindset is that married individuals are more industrious and loyal; subsequently, if a man cannot manage his own life, he cannot manage a business. (Petrone, 2014).
The WinShape Foundation
Founded in 1984 to help “shape winners,” the WinShape Foundation is committed to equipping “Christ-centered leaders” who live life “on purpose and with purpose.” (WinShape, 2015). The foundation sponsors over 100 college scholarships every year and operates camps for children. The foundation also promotes “experiential learning” through its WinShape Wilderness leadership program. The WinShape Retreat, located in Northern Georgia, promotes a “caring, safe place for growth and transformation.” (WinShape, 2015). WinShape Marriage is a program that creates opportunities for “marital transformation” through insightful teaching and dynamic worship. (WinShape, 2015). The WinShape Foundation, which sponsors long-term foster children, sends children to summer camp, and has provided 800 university scholarships of up to $32,000 (WinShape Foundation, 2010). Many scholarship beneficiaries have become CFA franchise operators. (WinShape, 2015).
“#hatechicken” versus “Mor Chikin”
Cathy’s comments spread nationally through major news outlets and social media. The story went viral and lasted into the fall, stirring celebrities and politicians on both sides of the gay marriage debate. Former Arkansas Governor Mike Huckabee organized a “Chik-fil-A Appreciation Day.” This event called upon Christian customers to show support for those who honor “godly values” by eating at CFA restaurants. (Peters, Thomas, Benjumea, Garner & Turner, 2013). After this event, the company enjoyed record-setting profits. (Peters, Thomas, Benjumea, Garner & Turner, 2013). As a response, The Gay & Lesbian Alliance Against Defamation created a Facebook event called the “National Same Sex Kiss Day,” in which they encouraged same-sex couples to kiss at CFA restaurants. (Bingham, 2012). CFA officials the company Facebook page to repeat their messaging. They reiterated the company goal of treating people with honor, dignity and respect. (Chick-fil-A, 2012a). They explain that the company intends to step away from the policy debate over same-sex marriage, but their company mission is still the same: to serve great food, provide genuine hospitality and have a positive influence. More than 240,000 people “liked” the post. (Chick-fil-A, 2012a).
In the Twittersphere, the opinions were divided. Evangelist Billy Graham tweeted support for the company, stating he planned to “Eat Mor Chikin.” Fellow conservative supporters included singer Pat Boone, soap star Melissa Reeves, conservative talk show host Rush Limbaugh and former Alaska Governor Sarah Palin, who tweeted a picture of herself and her husband giving the “thumbs up” sign inside a CFA restaurant. (Hsu, 2012a). Celebrity opposition included The Office actor Ed Helms, who tweeted that CFA “lost a loyal fan.” (Davis, 2012). Reality star Lisa Vanderpump called the company “shameful.” (Davis, 2012). Comedian Steve Martin joked that he had dinner at CFA, then went out and married a man. “There’s something about that chicken” Martin tweeted. (Davis, 2012). A tweet from late night talk show host Conan O’Brien seemed to describe the sign of the times: “It’s hard to believe that the greatest division in politics these days is pro- or anti-CFA.” (Hicks, 2012).
The controversy went into overdrive as politicians joined the debate. Chicago City Alderman Joe Moreno told the Chicago Tribune he would deny CFA’s permit to open a restaurant in his ward. (Dardick, 2012). Moreno’s opposition drew Chicago Mayor Rahm Emanuel into the public debate. The next day, Emanuel gave a speech in which he stated that CFA’s values were not “congruent with the City of Chicago’s values.” (Spielman, 2012). Moreno asked CFA management to change its policies toward gays and to stop donating to anti-gay causes through WinShape. Boston Mayor Thomas Menino penned a letter to Cathy (Appendix A) in which he expressed his support for same-sex marriage. Menino declared there was no place for discrimination on Boston’s Freedom Trail and no place for CFA in the city. Since CFA decided to back-off from the same-sex marriage debate, Menino said, they should back of out plans to expand to Boston. (Bhasin, 2012). D.C Mayor Vincent Gray declared publicly he would not support CFA expansion in the district. (Craig, 2012). Gray referred to CFA as “hate chicken” and coined the hashtag “#hatechicken” in his social media comments. Gray said that given his strong support for the LGBT community, he would not support #hatechicken in D.C. (Craig, 2012). Edwin Lee, mayor of San Francisco said the closest CFA to the city was 40 miles away and he strongly recommended that the company did not try to come closer. (Lopez & Hsu, 2012). CFA found somewhat of an ally in Michael Bloomberg, mayor of New York City in 2012. Bloomberg claimed he would not be joining the ban against CFA because although he was in favor of same-sex marriage, he believed businesses have the right to operate regardless of political views. (Grynbaum, 2012). Bloomberg stated it is not the job of the government to ascertain political or religious beliefs before issuing zoning permits. (Grynbaum, 2012).
The First Amendment
The First Amendment protects Americans from government action suppressing right to free speech. (Randazzo, 2012). Moreno pondered the First Amendment approach as he blocked CFA expansion in Chicago, rationalizing one has the right to religious expression, but not the right to zoning permit approval. (Randazzo, 2012). Critics worried the First Amendment was being abused, or at best, being repackaged into a zoning issue. (Randazzo, 2012). Moreno conceded that Cathy’s right to free speech trumped city government’s purview. (Nicas, 2012). The American Civil Liberties Union’s weighed in on the matter, stating they supported Cathy’s right to speak his opinion, but they did not agree with it. (Nicas, 2012). Legal experts stated that it would be unconstitutional for a city to deny business permits because of the company president’s views on marriage. (Peters, Thomas, Benjumea, Garner & Turner, 2013).
Crisis Management Strategy
CFA’s response to the controversy was straightforward and quick. (Rivers, 2012). Cathy and CFA management decided to present their case openly and honestly. On their website, they posted a message reminding loyal customers that CFA is a family-owned and family-led company, which serves the communities in which it operates. (Rivers, 2012). Cathy met with opposing leaders and activists, including Shane Windmeyer, executive director of national gay rights group Campus Pride. (Good, 2013). In an interview with ABC News, Windmeyer said that Cathy sought counsel, offered his point of view and shared his belief that the company was being used as a pawn in the gay marriage debate. (Good, 2013). Windmeyer said even though the two disagreed about gay marriage, they reached an understanding and respected each other. (Good, 2013).
In mid-August, CFA management decided to address the issue formally and definitely. The company issued an internal memo titled “Chick-fil-A: Who We Are” to franchisees and stakeholders. (Appendix B). The company declared it would “treat every person with honor, dignity and respect-regardless of their beliefs, race, creed, sexual orientation and gender.” Executive management passed down the message that their intent was not to engage in political or social debates. (Chick-fil-A, 2012b). After the company issued the “Who We Are” document, CFA spokesman Jerry Johnston said the company was offering no further response on this issue. (Hsu, 2012b).
In September, CFA executives met with the Civil Rights Agenda—a lesbian, gay bisexual and transgender advocacy group. During the meeting, the CFA executive team pledged to stop giving money to anti-gay groups and to back off from political and social debates. The company vowed to scrutinize the organizations it considered for funding. (Hsu, 2012b). CFA promised to treat people with honor, dignity and respect regardless of their believes, race, creed, sexual orientation and gender. (Hsu, 2012b). Cathy used transparency as a crisis management tool. He voluntarily offered the company’s IRS 990 forms to both Windmeyer and Moreno. These forms, which tax-exempt organizations file annually to provide information on the group’s mission, programs and finances, proved the company no longer donated to anti-gay groups through the WinShape Foundation. Once Cathy presented critics with tax documentation, the story lost steam. Moreno reversed his opposition to a new franchise in Chicago. (Corley, 2012).
After a whirlwind summer of controversy and crisis, the company seemed to find a common ground with both supporters and detractors. Cathy’s comments sparked a controversy for the company and thrust its Christian-based business model into the national spotlight. The company did experience a revenue spike; however, it would take years before the company could truly assess if the controversy left a bitter taste for the American public. (Rivers, 2012).
The challenge for a family business is to assess accurately how their values will impact their business performance. (Rivers, 2012). Having clearly defined values is attractive to consumers who share the same view, but unattractive to those who oppose them. (Rivers, 2012). Missing this mark stunts the family business brand, jeopardizes the family’s credibility and calls into question the family’s motivation and purpose. (Alderson, 2012). Clearly defining family business values can prove to be a double-edged sword. (Rivers, 2012). Americus Reed, marketing professor at the University of Pennsylvania, said the CFA debacle should be a wake-up call for companies because social media is ground for quick decision in the public arena. (Hu, 2012). Reed said most companies stay out of the political arena, but those that do persist should be prepared to alter their strategy is controversy leads to loss in revenues. (Hu, 2012). That being said, the company experienced record profits following the “Chick-fil-A Appreciation Day” event. (Peters, Thomas, Benjumea, Garner & Turner, 2013).
1.) Did Cathy’s statement affect brand reputation, revenue and shareholders in a positive or negative way?
2.) In a communication crisis, does customer loyalty make up for bad press?
3.) Should companies regulate what their executives say to the press?
Outcry on Cathy’s statements did not come from celebrities, politicians and customers alone. Companies in support of gay rights activists took a public stance on the issue. (Peters, Thomas, Benjumea, Garner & Turner, 2013). The Jim Henson Company, which partnered with Chick-fil-A to provide Muppets-branded merchandise in CFA’s kid’s meals, decided to withdraw its support to Chick-fil-A. On July 20, the company posted on their Facebook page they would no longer be partnering with CFA. Instead, it would be donating revenue earned from the CFA partnership to LGBT media advocacy organization GLAAD. (Peters, Thomas, Benjumea, Garner & Turner, 2013). By contrast, CFA has higher sales per average store on its six-day schedule than many of its competitors that operate on a traditional, seven-day schedule. Analysts estimate this Sunday policy costs the company $47.5 million in revenue each year
1.) Does the Chick-fil-A corporate philosophy hurt or hinder bottom-line profits?
2 ) Are religious beliefs a valid channel of communication?
3.) Does a Christian-based mission statement alienate potential revenue?
The Business as Mission (BAM) format, popular with Christian businesses, consists of organizations such as CFA which manage for the “triple bottom line” of performing social good, financial motivation and spiritual mission (Alderson, 2012). When adding a spiritual element to profitability and social good, it is important to articulate clearly defined values to management, employees and customers. (Alderson, 2012). But promoting family values can present challenges. Potential customers and employees may find themselves turned off by your values. (Alderson, 2012). If the benefits of religious-backed mission statements include social good, the risks ensue when a company fails to live up to their values. (Alderson, 2012). In 2013, the total buying power of U.S. lesbian, gay, bisexual and transgender population was estimated over $800 billion. (Fuller, 2013).
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