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Younger Cathy faces new issues at Chick-fil-A

Dan Cathy is taking the reins as the restaurant chains CEO

Dan Cathy has challenges awaiting him as the new chief executive officer of Chick-fil-A. (Special photo)

Dan Cathy has challenges awaiting him as the new chief executive officer of Chick-fil-A. (Special photo)

By Arielle Kass and Leon Stafford

The Atlanta Journal-Constitution

ATLANTA (MCT) — The new CEO of Chick-fil-A shares his father’s ability to connect with customers, often delighting at being the first face they see at the opening of a new store.

But when Dan Cathy takes the reins of the Atlanta-based chicken chain 92-year-old Truett Cathy started a half century ago, he’ll face challenges that go beyond simply filling his famous dad’s shoes.

Experts say Dan Cathy will have to control tendencies to speak out about personal views that have thrust the private company into the culture wars and made eating at Chick-fil-A a wedge issue for some.

He also will face strategic decisions on international expansion as the chain seeks to sustain its lofty growth.

Chick-fil-A announced last week that Truett Cathy, who has led the company since its inception, will step down as CEO, handing the title and job to Dan Cathy, 60.

Industry experts expect Dan Cathy to navigate his new role as CEO and chairman well. While he is perhaps most widely known for public comments disapproving of of gay marriage — creating backlash for the company — Dan Cathy’s business acumen reflects lessons learned at his father’s feet.

That means anyone who expects the company to go public, or to open stores on Sunday, will be disappointed, experts say.

“What changes do I anticipate? Not much, not many,” said Don Sniegowski, editor of the site Blue MauMau, which provides news for franchise owners. “My impression is it will be same-old, same-old.”

It would be foolish for the growing company to mess with success, said Robert Wagner, president of NetFinancials, which provides tax and accounting services to restaurants. Being private has allowed Chick-fil-A to grow at its own pace, pay higher employee wages to attract strong workers and avoid cutting corners to meet Wall Street expectations.

Dan Cathy, though, is a less cautious businessman than his father. When it comes to expansion — especially internationally — he has long wanted to move faster and may use his new stature to grow the company beyond the United States.

The chain, now in 39 states, has been adding about one new state a year. Before too long, the company will have to look to other countries to sustain growth, said Ken Bernhardt, a Georgia State University marketing professor who consults for the company.

“Dan’s been thinking about this a long time,” Bernhardt said. “The long-term future growth is going to have to eventually come from outside the U.S. Looking down the road, international will make sense.”

Truett Cathy got burned on international expansion after opening and closing stores in South Africa that never became profitable. But the company has licensed some international stores on college campuses, Bernhardt said, and Dan Cathy may be ready to revisit the issue of standalone stores in other nations.

In the U.S., there is heated competition in the quick-service restaurant industry, particularly where chicken is involved.

Chick-fil-A and others need to continue innovating to maintain sales against fast-casual sit-down competition, said Harry Balzer, chief food analyst with NPD group.

Still, Chick-fil-A’s sales volume is “unreal,” said Sam Oches, editor of QSR Magazine, which follows quick-service, or fast food, restaurants. He said the opportunities in international markets are “enormous.”

Chick-fil-A makes about $2.7 million in annual revenue per store, said John Gordon, a restaurant consultant and principal of Pacific Management Consulting Group. That’s about equal to McDonald’s per-store haul — and McDonald’s is open seven days a week.

Other quick-service chicken competitors make between $700,000 and $1.2 million per store, Gordon said, making Chick-fil-A the clear revenue leader in the industry.

“It’s a phenomenally run business,” Oches said. “They have this down so well. It’s impressive to watch.”

Oches noted that Dan Cathy has already held leadership roles as president and chief operating officer for some time. In recent years, Truett Cathy has taken less of a day-to-day role, instead signing off on decisions made by the management team.

Much of Chick-fil-A’s success has stemmed from both Cathys’ gregarious personalities. Both enjoy shaking hands with consumers, asking about their families and getting one-on-one feedback on menu suggestions.

Dan Cathy tries to appear at many new store openings, sometimes sleeping in a tent in the parking lot so he can greet the first customers. He often gives out his personal cell phone number to customers and asks them to text message or email him. He will be among a handful of businesses and people honored for their economic empowerment of urban communities and families by the Atlanta Urban League later this week.

On the other hand, Dan Cathy caused an uncharacteristic stir in the summer of 2012 by saying he was “guilty as charged” when asked about his opposition to gay marriage. This summer, as that dust-up subsided, he tweeted “Sad day for our nation” in response to Supreme Court rulings that made gay marriage legal in California and declared a provision of the Defense of Marriage Act unconstitutional.

“I wasn’t surprised the first time, but I was shocked when it happened a second time,” Gordon said. “It does have an impact on the brand. The U.S. is so diverse right now that companies have to be absolutely agnostic on this stuff… . To the extent that Chick-fil-A wants to grow its base, it has to keep that stuff extremely under the cover.”

Truett Cathy, who keeps the restaurant closed on Sundays so employees do not have to work on the Sabbath, has never been shy about his Christian beliefs. But has been less vocal about cultural issues, keeping the focus on business.

Bernhardt said he believes the new CEO will no longer take stands on divisive issues.

“I think Dan has learned his personal views on things and corporate views on things are two separate things, and need to be kept separate,” he said.

While Bernhardt said Dan Cathy has been training for the role “since he was a teenager,” he expects him to continue to consult with his father about the business.

“It’s a very close family, and his father’s not going away,” Bernhardt said.

There is room for Dan Cathy to put his own stamp on Chick-fil-A, though. In addition to possible international expansion, there are opportunities to update the menu with healthier options and to bring other more modern ideas to the chain, Oches said.

Any changes Dan Cathy makes aren’t expected to change the face of the well-respected chain.

“They thrive on tradition and have a family way about doing business,” Oches said. “I don’t think Dan is going to change too much of that.”