How is 'Operating Profit' defined for a Chick Fil A Business?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
- (b) "Operating Profit" as to a particular Business for each calendar month during that portion of the Agreed Term of such Business following the Commencement Date of such Business means the amount by which Gross Receipts for such Business exceeds the ordinary and necessary expenses paid and incurred by the Operator during such calendar month in operating such Business; the term "ordinary and necessary expenses" shall have such meaning as Chick-fil-A reasonably determines from time to time; by way of example and without limitation such term shall not include the following items:
- (i) any amount the Operator paid to himself or, as applicable, paid to the Operator-Owner as compensation for services or as a draw, disbursement or other distribution;
- (ii) any salary, draw, disbursement or other distribution paid to any member of the Operator's or, as applicable, the Operator-Owner's family, to the extent such amount is in excess of the amount of salary which would customarily be paid to an unrelated employee performing similar work or services; and
- (iii) the "Base Operating Service Fee" and "Additional Operating Service Fee" (as defined below);
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
According to Chick Fil A's 2025 Franchise Disclosure Document, Operating Profit for a Chick Fil A business is defined as the amount by which the Gross Receipts for the business exceeds the ordinary and necessary expenses paid and incurred by the Operator during a calendar month. The definition of 'ordinary and necessary expenses' is determined reasonably by Chick-fil-A from time to time.
However, the definition of 'ordinary and necessary expenses' specifically excludes certain items. These exclusions include any amount the Operator pays to themselves or to an Operator-Owner as compensation for services, draws, disbursements, or other distributions. It also excludes any salary, draw, disbursement, or other distribution paid to any member of the Operator's or Operator-Owner's family, to the extent that such amount exceeds what would customarily be paid to an unrelated employee performing similar work or services. Finally, the definition excludes the 'Base Operating Service Fee' and 'Additional Operating Service Fee'.
This definition is important for prospective Chick Fil A franchisees because it clarifies how their profit is calculated and what expenses they can deduct. Understanding this definition is crucial for managing finances and ensuring compliance with Chick Fil A's reporting requirements. The Operator needs to be aware of what constitutes an 'ordinary and necessary expense' as defined by Chick-fil-A, as this impacts the calculation of their Operating Profit and, consequently, their compensation and fees paid to Chick-fil-A.