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Hidden Chick-fil-A Billionaires Hatched as Value Soars

Chick-fil-A Inc., the Atlanta-based fast-food chain feuding with gay-rights advocates over some executives' stance on marriage, has served up two hidden billionaires.

The two sons of Samuel Truett Cathy, the chicken sandwich empire’s founder -- Dan Cathy, 59, and Donald Cathy, who is known as Bubba -- have joined the ranks of the world’s richest, according to a report published today by PrivCo, a New York- based research firm that specializes in private companies’ financial data.

The report values Chick-fil-A at $4.5 billion. Dan Cathy, the company’s president, and Don Cathy, its executive vice president, each own a third of the restaurant chain, according to a person familiar with the company who asked not to be named because it is closely held. Neither has appeared on an international wealth list.

“The sons have been involved in running the company for many years,” said Kenneth L. Bernhardt, a professor at Georgia State University’s business school and a longtime consultant for Chick-fil-A, in a phone interview today. “Dan has had just about every job there is in the company, with a strong focus on operations. Bubba focuses a very large percentage of his time on the company’s philanthropic efforts.”

Gay-rights groups have urged a boycott of the chain and mayors of cities including Boston and San Francisco have spoken out against the company after Dan Cathy took a position against same-sex marriage, the Associated Press reported July 19. He said the company is “guilty as charged” for backing what he called the biblical definition of the family unit, AP reported.

In a statement released today, Steve Robinson, Chick-fil- A’s executive vice president of marketing, said the company will “leave the policy debate over same-sex marriage to the government and political arena.”

Closed Sundays

Chick-fil-A generated $492 million in earnings before interest, tax, depreciation and amortization on revenue of $1.12 billion in 2011, PrivCo said. It added that the company’s 44 percent Ebitda margin was “virtually unheard of in the restaurant industry.”

The chain has the biggest sales per unit in fast-food, according to QSR Magazine. In 2011, the company generated gross sales of $2.9 million per location, outpacing the average unit sales of runner-up McDonald’s Corp. (MCD) by $400,000, the magazine said in its August 2012 issue.

PrivCo said it valued Chick-fil-A at $4.5 billion using peer multiples of Oak Brook, Illinois-based McDonald’s, Dublin, Ohio-based Wendy’s Co. (WEN) and closely held Wichita, Kansas-based Wil-Ken Enterprises Inc., which operates Popeye’s Chicken and Biscuits restaurants. The calculation factored in the company’s 3-year annual growth rate and Ebitda margins, the report said.

The chicken chain has a value of at least $4.3 billion, according to data compiled by Bloomberg, based on the average enterprise value-to-Ebitda and price-to-earnings multiples of four publicly traded peers: McDonald’s, Wendy’s, San Diego-based Jack In the Box Inc. (JACK) and Louisville, Kentucky-based Yum! Brands Inc. (YUM), the owner of the KFC and Taco Bell brands.

“It is a very impressive business story,” said Sam Hamadeh, CEO of PrivCo, in a telephone interview. “Whatever people think of the politics, when you look at how we quantify the amount of money they are forgoing every year by being closed on Sundays, you have to respect that.”

Truett Cathy keeps Chick-fil-A stores closed on Sundays as “a testament to his faith in God,” according to the company’s website. Jerry Johnston, a spokesman for the company, didn’t return a phone call seeking comment.

Northern Expansion

As of Jan. 1, Chick-fil-A said it had a total of 1,615 Chick-fil-A outlets, the majority of which are franchised, according to PrivCo. The company also operates full-service restaurants under two other brand names, Truett’s Grill and Dwarf House.

The company paid a $191 million dividend to the Cathy family in 2011, PrivCo said.

Dan and Bubba Cathy's sister, Trudy Cathy White, is director of WinShape Girls Camps, an operation of the family’s non-profit WinShape Foundation Inc. that provides camp services for children. She doesn’t appear to be involved in the restaurant operations, according to the company’s website. Her ownership stake of the chain hasn’t been disclosed.

From its southern U.S. base, Chick-fil-A has been expanding north. In 2010, it opened its first Chicago-area locations and has been planning to grow beyond its two franchised locations in the Boston suburbs.

The Cathys haven’t given any indication of wanting to loosen their grasp on the family business. In a 2001 interview with Bloomberg News, S. Truett Cathy, now 91, said, “I would never even think about going public. I think Dan supports me in this. Most companies go public to raise money and grow faster. We’re not interested in either.”

To contact the reporter on this story: Brendan Coffey in Boston at bcoffey10@bloomberg.net

To contact the editor responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net

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