The Exchange

Chick-fil-A Flap Likely Won’t Hit Sales

The Exchange

Dan Cathy, the president of Chick-fil-A, sparked a heap of controversy on July 16 when he told the Baptist Press that the Atlanta-based privately owned chain of fast-food restaurants is "very much supportive of the family -- the biblical definition of the family unit."

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The Cathy family, whose 1,600 stores are closed on Sunday as a testament to the founder's "faith in God," is known for being deeply involved in Christian philanthropic work. Now, the family and the chain are known as being at the center of a rancorous debate about gay rights and equality in America.

Should Cathy and his family worry that liberal-minded customers will change their buying habits significantly based on the company's gay marriage stand -- enough to put a noticeable dent in Chick-fil-A's revenue numbers?

The short answer: probably not. The chain, which is 100%-owned by the Cathy family, is doing just fine financially. PrivCo, a provider of financial data on non-public companies, values the firm at $4.5 billion, and in a report published this week, it noted that Chick-fil-A's "impressive financials" come from "high margin licensing fees (as a result of it franchising 97% of its units)." That gives the company the ability to limit its capital spending and generate substantial cash flow.

Do What We Say?

More importantly, most consumers are, in economic-speak, "utility maximizers," which means we act according to our professed values when it's easy, says CB Bhattacharya, the Dean of International Relations at the European School of Management and Technology in Berlin.

Say you're strongly opposed to Cathy's views on gay marriage. You're driving along, you're hungry and you see a Chick-fil-A on the side of the road, and there's no other food source for miles. Chances are, you'll forego your pro-gay marriage beliefs to satisfy your hunger. Doing a "utilitarian analysis, it doesn't pay to boycott [the store], unless it's very easy," Bhattacharya says. "If there's a McDonald's next door, then fine, I don't need Chick-fil-A."

Or consider the other side. After the Chik-fil-A news broke, Amazon.com (AMZN) founder Jeff Bezos and his wife announced a $2.5 million pledge to help pass Referendum 74, which would legalize same-sex marriage in Washington. (Washington, Maine, Maryland and Minnesota have measures on the November ballot dealing with same-sex marriage.) Using Bhattacharya's argument, your disapproval of Bezos's financial support of Washington's gay-marriage law likely won't dissuade you from buying the new Kindle Fire.

Bhattacharya says Amazon is less likely to see an impact from its CEO's move because it doesn't have many competitors But the average consumer puts a higher value on that e-reader than he or she does on acting in accordance with one's beliefs about gay rights, especially when there are no alternatives, he says. In other words, we want what we want, when we want it -- our convictions be damned.

"Consumers are very good at rationalizing and behaving in a way that's to their advantage," he says.

Public Stands

Naturally, public outcry and media backlash have ensued since Cathy's comments started spreading, with strong reactions both in favor of and against the chain.

Chicago Mayor Rahm Emanuel was quoted as saying: "Chick-fil-A's values are not Chicago values." Former Arkansas Gov. Mike Huckabee called for Aug. 1 to be "Chick-fil-A Appreciation Day," and people responded in droves. Chick-fil-A's in several states reported customers waiting hours in line to buy sandwiches. The company said in a press release: "While we don't release exact sales numbers, it was an unprecedented day."

Meanwhile, some folks have organized boycotts of the chain. Celebrities have weighed in. Gay rights advocates are planning "Kiss-Ins" and protests against the opening of new Chick-fil-A restaurants. The manager of a Nashua, N.H., Chick-fil-A said the shop was going to help sponsor the New Hampshire Pride Fest on Aug. 11.

Along with Bezos and Amazon, several other publicly traded companies or their founders have addressed gay rights recently, even before the Chick-fil-A controversy. Earlier this year, Microsoft (MSFT) co-founder Bill Gates and Steve Ballmer, the company's CEO, each wrote $100,000 checks to Washington United for Marriage, a same-sex marriage advocacy group based in Seattle. Starbucks (SBUX), Google (GOOG) and Nike (NKE) also endorsed the state's bill, while General Mills (GIS) took a stand in June against a proposed state constitutional amendment to ban same-sex marriage in Minnesota, where the consumer-foods company is based.

You'd think a business which, in theory, puts profits as its top priority, would stay out of the cultural wars. For big-name brands to appeal to the broadest range of customers possible, marketing pros would advise them to be agnostic when it comes to anything with a politically provocative tinge. You don't want to risk alienating consumers on either side of the divide.

But do most consumers actually care how the guy who runs the company that makes their chicken sandwiches, or their shoes or their software, feels about gay marriage?

Says Bhattacharya, "You'll find a lot more people who will talk about it, but far fewer will act, by not buying Chick-fil-A or endorsing a brand."

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