Imagine having a product so good that despite repeated protests and boycotts from millions of individuals, hundreds of groups, and even 2 major US cities, enough people still line up to buy that product everyday that it causes traffic problems, police interventions, and complaints by neighboring businesses in more than 20 different states.
Not only that, imagine that despite being open 14% less than your competitors each week, you still earn more from a single location on average than any of your competitors. In fact, you’d have to combine the yearly per store total for 3 of your competitors to add up to how much you make for one of your locations.
To top off your dominance, imagine being ranked by consumers as their favorite in the product category 8 freaking years in a row.
We’re of course talking about *cough* Flamingo…I mean.. Chick-fil-A – America’s favorite fast food chain known as much for controversy as its delicious chicken sandwich and unsettlingly friendly staff.
If Chick-fil-A got into the apartment industry, they’d most likely have the highest NOI per building while topping the ORA Elite 1% of The Nation’s Apartment Communities with the best online reputation, resident experience, and customer service.
Before talking about how Chick-fil-A would accomplish these things in the apartment industry, let’s learn a bit more about Chick-fil-A as a fast food operator.
A bit about Chick-fil-A
Chick-fil-A was founded over 77 years ago on May 23, 1946 in Atlanta, Georgia, by S. Truett Cathy.
Since its inception, Chick-fil-A has grown steadily and now owns and operates almost 3000 stores across 48 states, DC, Puerto Rico, and Canada and plans to expand to Europe and Asia by 2026 with a presence in five international markets by 2030.
Chick-fil-A specializes in chicken sandwiches and has purposefully kept its menu extremely small compared to those of other fast food chains that have more menu items and variety.
This “Do One Thing and Do it Well” philosophy has created a cult following for Chick-Fil-A’s sandwiches with drive-thru lines often disrupting local traffic.
Besides offering a superior product, Chick-Fil-A has also focused on offering superior customer service. When you thank them, Chick-Fil-A team members don’t say “You are welcome”, they say “It’s my pleasure.” This and dozens of quirks makes a trip to any Chick-Fil-A location extremely memorable, if not unsettling.
Offering this level of service quality is driven by the chain’s extreme selectiveness when it comes to employees and franchisees. Over 20,000 people apply each year to become franchisees but Chick-Fil-A only accepts 75 to 80 per year, an acceptance rate of .4% that is right up there with the Ivy Leagues of the world.
The results of this focus on simplicity, quality, and customer service has resulted in 2 major wins for Chick-Fil-A.
- Chick-Fil-A has ranked 1st for fast food restaurants for 8 years in a row on the American Customer Satisfaction Index
- Chick-Fil-A earns more per store than any other fast food chain. A lot more in fact. The average Chick-fil-A store made $4,090,900 in 2017. By contrast, the average McDonald’s made $2,670,320), the average Starbucks made $945,270, and the average Subway made $416,860 – for a combined total of $4,032,450, which is still less than one Chick-Fil-A store.
If Chick-fil-A got into the apartment industry, they’d use these same principles to have the highest NOI per building while topping the ORA Elite 1% of The Nation’s Apartment Communities with the best online reputation, resident experience, and customer service.
Here are the 6 ways Chick-fil-A would win in the apartment industry:
1. Chick-fil-A would use an integrated model where they fully own and manage to ensure the highest level of customer service and long term value
Apartment operators typically pursue one of three business models:
- 100% 3rd-Party Fee Management: Companies pursuing this business model manage apartments on behalf of the individuals or institutions that own these buildings. The 3rd-party management company is responsible for the day-to-day operations of the apartment, including staffing, rent collection, maintenance, customer service, etc. For rendering these services, the owners pay the 3rd-party manager two to 3% of rents collected.
- 100% Owner-Managed: Companies pursuing this strategy own all their building assets and also do the day-to-day management of those assets.
- Blend of Fee Management and Owner-Managed: Companies pursuing this strategy pursue a mix where they own and manage their own assets while also doing the day-to-day management of assets owned by a different company.
Chick-fil-A’s approach to its restaurant management has been to grow slowly, without taking on debt, and maintaining as much control as possible.
Even though Chick-fil-A has a franchising model, its approach to franchising is different from other companies like McDonalds. Whereelse McDonald’s and other fast food chains require franchisees to pay high franchise fees of up $45,000 and shoulder the majority of the restaurant startup cost that can go as high as $2,000,000, Chick-fil-A franchise fees are only $10,000 and Chick-fil-A covers the majority of the build out cost.
This allows Chick-fil-A greater control over operations and profits.
Applying the same concept to its apartment portfolio, Chick-fil-A would prefer to maintain complete control over operations rather than handing them over to a 3rd party property management company.
2. Chick-fil-A Would Adopt New Technology and Innovation Faster to Improve It’s Resident Experience
Apartment owners and operators are notoriously slow at adopting technology. There are many theories as to why – from not understanding the power of technology to not facing the same competitive pressures as other industries since housing is a need rather than a want.
For example, despite over 85% of American adults using a smartphone daily, very few apartment owners and operators have implemented a modern resident app – with most still relying on legacy resident portals with little functionality outside of rent payment and maintenance.
Chick-fil-A built innovation into its DNA from day one.
In fact, Chick-fil-A’s entire business model rests on the fact that the founder, S. Truett Cathy, discovered a pressure-fryer that could cook a chicken sandwich in the same amount of time it took to cook a fast-food hamburger.
This was a game changer for Cathy because he knew chicken sandwiches sold well but the limiting factor was that chicken sandwiches took significantly longer to make than hamburgers. And in the fast food industry, speed is everything.
Cathy immediately used this technology to grow Chick-fil-A into the first and largest national chain of fast food focused on chicken sandwiches.
Over the years, Chick-fil-A has moved quickly in adopting new technologies and innovations. Chick-fil-A even hired a former Facebook and Google leader to head its Mobile Experience Division. The 4.5/5 rated Chick-fil-A app has been downloaded by over 13M customers to facilitate online ordering and personalization. And Chick-fil-A has combined this with a rewards and loyalty program that keeps customers coming back.
Additionally, Chick-fil-A in 2014 made a commitment to serve only chicken raised with no antibiotics and achieved this goal in 2019, the first fast food chain to make a 100% commitment.
Chick-fil-A would approach its apartment operations the same way by implementing best-in-class technology including implementing a branded Chick-fil-A resident engagement app and resident rewards program to build loyalty.
Most apartment companies express frustration with their property management system but very few actually make changes or are willing to try out the newer and more modern group of property management systems.
Chick-fil-A recently showed it’s not afraid to make changes at any time when, after 20 years, it broke away from The Richards Group, the ad company that made Chick-fil-A famous with the “Eat Mor Chikin” ad campaigns.
When a Chick-fil-A store comes up with something new that delights customers, leadership scales it across their entire chain within days. When was the last time you heard an apartment operator implement an innovation in days or even months?
Implementing modern technology faster than other apartment operators would help Chick-fil-A offer a modern resident experience and enjoy the competitive advantage that comes with being an early adopter.
3. Chick-fil-A would distinguish itself with superior apartment finishes, amenities, staff, and a long term focus
There are 2 basic business models in real estate – 1) develop-buy-fix-sell or 2) develop-buy-fix-hold.
In the first case, real estate investors make their money by developing, buying, or fixing apartments and then selling.
In the second case, real estate investors hold onto the apartment and make their money from monthly rent.
Both are valid ways to run a real estate business, but the former tends to drive short sighted thinking, which leads to common issues like cheap construction materials including paper thin walls. And according to Flamingo’s monthly survey of over 40,000 residents, noise complaints are one of the most common reasons residents cite for moving out.
Chick-fil-A would take a long term approach by developing, buying, or fixing apartments and holding on to them for the long term.
People love Chick-fil-A because their chicken sandwiches are delicious and high quality. And it’s this focus on quality that has allowed them to make more per store than any other fast food restaurant while also ranking 1st for fast food restaurants 8 years in a row on the American Customer Satisfaction Index.
For its apartment operations, taking a long term for Chick-fil-A would mean avoiding shortcuts with construction by building high quality apartments with modern finishes, solid walls, and plenty of amenities.
This long term focus would manifest further in how Chick-fil-A would focus on brand, service, and employee development. These deserve their own sections so let’s dig into these separately.
4. Chick-fil-A Would Focus on Building An Apartment Brand Consumers Recognize
From its very inception, Chick-fil-A recognized the power of branding and being top of mind for customers.
Almost everyone in the USA has seen one of Chick-fil-A’s famous “Eat Mor Chikin” ad campaigns featuring cows trying to get you to…well eat more chicken instead of beef.
This iconic advertising campaign covered water towers, billboards, radio, TV, sporting events, and social media.
Additionally, Chick-fil-A sponsors various sporting events from high school to college including the Chick-fil-A Classic, the Chick-fil-A Peach Bowl, and the Chick-fil-A Kickoff Game.
Chick-fil-A has even taken the smart strategy of partnering with retailers to sell branded clothing, accessories, and its sauces.
While expensive to run, these brand campaigns have made Chick-fil-A a household name and driven sales through the roof.
In its apartment operations, Chick-fil-A would focus as much on building an apartment brand that consumers recognize through various marketing campaigns from billboards to radio to TV to sporting events to social media.
And they can do this profitably because of their focus on the long term, rather than quick flips.
5. Chick-fil-A Would Offer Employees Healthy Work Life Balance, Higher Pay, and Development Opportunities
Chick-fil-A is famous for being closed on Sundays. A fact that many falsely attribute to the deeply held Christian religious beliefs of its founder, S. Truett Cathy.
While there is some truth to that, the real reason the restaurant is closed on Sundays is because when the founder and his brother opened the first restaurant, at the time called “The Dwarf Grill”, they were the only 2 employees and each worked 12 hours per day on a rotating schedule since the restaurant was opened 24 hours per day.
With such a brutal schedule, they realized they needed at least one day off to recharge. And as they opened additional restaurants, they stuck to this belief of closing on Sundays so employees could set aside one day to rest or worship.
This tradition continues to this day despite it potentially costing the chain almost $1 Billion dollars per year by being open 14% less than their competitors.
Additionally, Chick-fil-A team members are paid higher than almost every other fast food restaurant.
Chick-fil-A recognizes the value of employees and invests heavily in employee recruitment, training, and development. This has paid off with high employee loyalty and low turnover.
Less than 5% of franchise operators leave the Chick-fil-A chain annually. A stack contrast to the 13% percent annually for rival McDonald’s. Chick-fil-A’s 60% hourly worker turnover rate is half the fast food industry average of 107%.
Visit any multifamily Facebook group and the common theme among all member posts are complaints about overwork, stress and burnout by onsite teams. A fact reflected in the 33% annual turnover rate in the multifamily industry.
In its apartment operations, Chick-fil-A would bring a similar intensity to hiring, developing and managing employees. Cutting turnover rates by half would drastically reduce operational costs. Hiring employees who are fully bought into Chick-fil-A’s mission and way of doing business would lead to the next and most important point – superior customer service.
6. Chick-fil-A’s Superior Customer Service Would Create Residents for Life
Most apartments suffer from retention leak, losing 50% of their residents each year and then spending $1000s to replace those residents.
In its restaurant operations, Chick-fil-A has perfected the act of customer service. So much so that it has developed a cult following, not just from customers but also employees.
Chick-fil-A has achieved such insane levels of customer service by implementing a very strict hiring process where they only hire employees and operators who are fully bought into the Chick-fil-A mission and values.
Chick-fil-A also trains its employees extensively on its customer service methodology, which are developed by its service and hospitality team.
This training includes the “Every Life has a story” video series that teaches employees to imagine what must be going through the lives of each customer that comes through their door and the impact the employee can make by showing that person kindness no matter what how that person presents – happy, angry, impatient etc. It’s easy to be unsettled by how patient, respectful, and calming Chick Fil A employees are or to even take it as fake… until you see the training that they are put through.
Employees are also trained to use very specific language that makes guests feel special – for example saying “My Pleasure” instead of “You’re Welcome.” How many times in your life have you said thank you to someone and that person responds with “You’re welcome” – after hearing it 1000s of times, it loses meaning. When a Chick-fil-A employee says “It’s my pleasure,” you pay attention and feel something.
Additionally, despite being a fast food restaurant, Chick-fil-A employees do things that you typically only see at site down restaurants – from flowers at tables to refilling your glass to even clearing your trash.
Finally, Chick-fil-A is so dedicated to customer service and improvement that each food receipt comes with a survey that if completed by a customer, they earn a free sandwich. Chick-fil-A is not just proactively asking customers for feedback, but is rewarding them with a free meal just to provide feedback.
Consider the difference with the apartment industry where most apartments survey their residents maybe once or at most twice a year.
The average Chick-fil-A store has an online review of 4.2/5. The average apartment building has an online review of 3.7/5.
In its apartment operations, Chick-fil-A would fix many of the customer service issues that plague the apartment industry – from more than 50% of phone calls going unanswered to slow response times to resident emails to high employee turnover.
This memorable level of customer service would help Chick-fil-A create residents for life. Residents who stick with the Chick-fil-A apartment brand as the resident grows from a studio to a 1 bedroom apartment to a 2 bedroom with a partner to even moving across the country.
Conclusion
If Chick-fil-A got into the apartment industry, they’d implement the above strategies to have the highest NOI per building while topping the ORA Elite 1% of The Nation’s Apartment Communities with the best online reputation, resident experience, and customer service.
