I would like to give a special thanks to Perry Ragsdale, former Executive Vice President of Chick-fil-A, for the invaluable insights he shared with me about the history, culture and values of Chick-fil-A. Perry was the fourth management employee at Chick-fil-A and served alongside Truett Cathy for over 44 years.
Samuel Truett Cathy, founder and former chairman of Chick-fil-A, arrived in Atlanta at the age of three when his father accepted a position as an insurance salesman. Life was hard and the Cathy’s struggled. From an early age Truett demonstrated incredible entrepreneurial potential. At eight, he purchased six-packs of Coca-Cola for $0.25 and sold them door-to-door for a nickel apiece. At twelve, Cathy was awarded a paper route, purchasing papers at wholesale and reselling them at retail prices. For eight years, Truett Cathy operated his paper route and built the business acumen that would serve as a foundation for building a restaurant empire.
“My success with the paper route convinced me that I would one day open a business of my own, most likely a service station, grocery store, or restaurant.” – Truett Cathy
After high school, Truett Cathy joined the United States Civil Service and was later deployed to the South Pacific during World War II. Upon an honorable discharge in 1945, a 25-year-old Truett and his younger brother Ben decided to start a business together. Truett envisioned a short-order restaurant that would operate 24-hours a day, each brother taking a 12-hour shift. The brothers pooled their personal resources and took out a bank loan to come up with the $10,600 of startup capital for the business ($140,000 in 2014 dollars). Post war material shortages caused significant delays in the construction of the small restaurant, but in May 1946, the pair opened the Dwarf Grill in a suburb of Atlanta. A hamburger cost $0.15, but as of yet, there was no chicken sandwich on the menu.
The genesis of the chicken sandwich came by happenstance when Goode Brothers Poultry approached Cathy to see if he would be interested in buying boneless, skinless chicken scraps that wouldn’t fit on Delta Airlines food trays. Truett thought back to his mother’s homemade chicken recipe and decided to experiment with the chicken. After lots of experimentation, Truett finally introduced the chicken sandwich in his restaurant to much success. Following a brief foray in licensing the process for creating the chicken sandwich, Truett decided to take his chicken sandwich and launch a new restaurant around it. In 1967, Chick-fil-A was born in a tiny 384 square foot store in the Greenbriar Mall.
A $10MM Tomb Stone
By 1979, Chick-fil-A had a total of 137 restaurants. Growth had been largely organic as Cathy was not a believer of excessive debt, but that was all about to change. Truett joined his right hand man, Jimmy Collins, at the International Council of Shopping Centers trade show in Las Vegas and realized that a short window of opportunity lay before them. Regional shopping malls were all the rage and Chick-fil-A received invitations to join 100 new malls that would open in the next two years. They decided to take the plunge and in 1980, Chick-fil-A opened 47 new stores followed by 53 in 1981. At the same time, the company had purchased 75 acres to build a new $10MM headquarters. In 1982, the economy took a nosedive with interest rates shooting up to 21 percent. Retail sales reduced and many of the new stores struggled as the company had rushed too quickly in selecting franchisees. During a survey of the new headquarters, Truett mentioned to his long-time friend and fourth management employee, Perry Ragsdale, “Perry, I think we are building a $10MM tomb stone.”
Clarity of Purpose
The struggles came to a head in an executive retreat at Lake Lanier. Dan Cathy, Truett’s eldest son and now president and CEO of Chick-fil-A, asked the group, “Guys why are we here?” One executive responded, listing all the challenges the company was going through. Dan responded, “No, why do we exist as a business?” The executives then came together to craft the purpose statement that would guide them out of the crisis.
“To glorify God by being a faithful steward of all that is entrusted to us. To have a positive influence on all who come in contact with Chick-fil-A.”
Christian faith is an important aspect of the Cathy family and the primary driver of Truett’s business interests. Work was an opportunity to honor God and to serve every person that walks into a Chick-fil-A restaurant. As Chick-fil-A grew, Truett strove to build a business model that would ensure that each new restaurant was taken care of with the same level of quality, care, and service as his original Dwarf Grill. Not surprisingly, the key to replicating this exceptional service was found in the selection of great people.
In 2013, Chick-fil-A received over 20,000 applications from prospective franchise operators and awarded just 100 licenses (0.5 percent). The defining characteristic that Chick-fil-A looks for in its people is character. Interestingly, the company has been hesitant to write a formal list of values, instead relying on the modeling of proper behavior from more senior team members. Truett Cathy taught by his actions and built this into the fabric of his company.
Truett Cathy’s Legacy
Truett Cathy built Chick-fil-A into a restaurant empire, which now has over 1,800 locations and $5B in revenues. He died on September 8, 2014 at the age of 93, having served in the restaurant industry for over 65 years. His story proves that it is possible to hold true to strong values all the while achieving an incredible level of success in business.
This article was originally posted at Joel Montgomery’s blog.
Article take from Values & Capitalism: http://valuesandcapitalism.com/truett-cathy-model-values-based-entrepreneurship/