July 9 (Bloomberg) -- Chick-fil-A Inc., the Atlanta-based chicken sandwich chain, plans to open three restaurants in Chicago next year, its first locations in the city as the company expands in the northern U.S.

The closely held company will open the locations “next fall” and add as many as four restaurants in the region in 2011 and 2012, said Dan Cathy, president and chief operating officer. Chick-fil-A has more than 1,400 restaurants in 38 states, mostly in the Southeast and California.

“Once we start in that market, we generally stay in that market and continue to develop it,” he said in an interview yesterday. “That’s been our pattern in a lot of other markets like Phoenix and Orange County, California.”

The chain competes with McDonald’s Corp., Wendy’s/Arby’s Group Inc. and Burger King Holdings Inc., which have all introduced more chicken offerings. Chick-fil-A plans to open 70 stores this year, five more than it initially projected, Cathy said, citing lower construction costs.

“It’s clearly another sign that the quick-service restaurant space is becoming more competitive,” said R.J. Hottovy, an analyst at Chicago-based Morningstar Inc. who covers fast-food restaurants.

Price, Products

While Chick-fil-A has a loyal following, McDonald’s, Burger King and Wendy’s have more bargaining power over suppliers because they operate nationally, Hottovy said.

Chick-fil-A, which has a $150 million revolver loan due in 2012, plans to pay off its debt by the end of 2011, said Janet Bridges, director of financial services. The company had borrowed money as it transitioned from mall locations to free- standing units, which are four times as expensive to build, Cathy said.

The chain’s sales have risen this year as consumers trim spending by buying fast food over casual-dining meals, Cathy said. Sales at stores open at least 12 months have climbed 5 percent at free-standing locations in the first half, and are unchanged to down 1 percent at restaurants based in malls, he said.

“The price points for our menus are such that our customers can still afford to eat at Chick-fil-A,” Cathy said. “They may not be going down to some of the fancier $25 to $30 restaurants as often.”

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net; Duane D. Stanford in Atlanta at Dstanford2@bloomberg.net.

Last Updated: July 9, 2009 15:33 EDT