What is the definition of 'Operating Profit' for a Chick Fil A restaurant?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
(a) "Gross Receipts" for a particular restaurant for each calendar month is your entire gross receipts from sales (excluding sales tax) with respect to the restaurant, including any associated food truck; any captive venue or delivery kitchen unit that is an additional Chick-fil-A Restaurant business and is accounted for as a separate restaurant;
(b) "Operating Profit" for a particular restaurant for each calendar month is the amount by which Gross Receipts exceeds the ordinary and necessary expenses (as this term is reasonably determined by Chick-fil-A) incurred by you for the restaurant during the month; by way of example, for purposes of this calculation the following items shall not be ordinary and necessary expenses:
(1) any amount you pay to yourself or, if you are approved to form and use an entity, the entity pays to you as compensation for services;
(2) any salary paid to any member of your family, to the extent the salary exceeds normal wages for similar work; and
(3) the "Base Operating Service Fee" (as defined below) and the "Additional Operating Service Fee" (as defined below);
"Aggregate Operating Profit" for a calendar month is the sum of the Operating Profit for the month of all restaurants operated by you;
Source: Item 6 — OTHER FEES (FDD pages 27–40)
What This Means (2025 FDD)
According to Chick Fil A's 2025 Franchise Disclosure Document, 'Operating Profit' for a restaurant for each calendar month is defined as the amount by which Gross Receipts exceeds the ordinary and necessary expenses incurred by the franchisee for the restaurant during that month. Gross Receipts include all sales (excluding sales tax) from the restaurant, including any associated food truck, captive venue, or delivery kitchen unit that is an additional Chick-fil-A Restaurant business and is accounted for as a separate restaurant.
However, the definition also specifies certain exclusions from 'ordinary and necessary expenses'. These exclusions include any compensation paid to the franchisee (or to the franchisee's entity if one is approved), any family member's salary to the extent it exceeds normal wages for similar work, and the Base Operating Service Fee and the Additional Operating Service Fee. These exclusions are important because they directly impact the calculation of Operating Profit, and therefore, the franchisee's compensation and fees paid to Chick Fil A.
'Aggregate Operating Profit' for a calendar month is the sum of the Operating Profit for the month of all restaurants operated by the franchisee. Understanding how Chick Fil A defines operating profit is crucial for franchisees as it directly affects the calculation of fees owed to Chick Fil A and the franchisee's potential earnings. Franchisees should carefully review Section 14 of the Franchise Agreement, as referenced in Item 6, to fully understand the calculation and payment concepts related to Operating Profit.