The Chick-fil-A Portfolio

Ladies and gentlemen, welcome to Mr. Stillman's Opus.

I'm Ron Stutz, along with Mr. Stillman. On Mr. Stillman's Opus today, Jon's going to go off on one topic or another, and we're all going to learn a lot, right? That's the premise of this.

Well, I hope so. What are we doing here? Let's talk about Chick-fil-A. What do you say?

And I'm always down for that. Now, I've thought about Chick-fil-A a lot lately because the Tar Heels are in the Chick-fil-A kickoff classic coming up soon against Georgia Bulldogs. But Chick-fil-A itself, what can we learn about retirement from Chick-fil-A? Well, you certainly want to have enough built into your retirement income plan to be sure you can eat at Chick-fil-A on a regular basis.

Yeah, absolutely. How often would you say you frequent a Chick-fil-A? How often? One day for another.

Well, probably once every couple of months, to be honest with you, but it's about to get more often than that. Oh, that's right, because you're about to have an office right next to it. W. St. Charles moving to the university place. There you go.

I'm sure I'll be eating lunch there a lot. Yeah. Sammy runs that one. Yeah, good guy, too.

Sammy Culberson. Yeah, he is. Interestingly, Truett Cathy's grandson, most people don't know this, Truett Cathy's grandson lives here in the area, lives in Chapel Hill, and he owns, or runs, however they phrase it, the Chick-fil-A on 54, near 55, basically at the corner of 54 and 55, and then at Renaissance Parkway over next to Target near South Point.

He runs both of those. I had no idea. Yeah, I was at a little, we're on the A-list, the Chick-fil-A A-list, no big deal. You eat there a whole lot.

Eat more chicken and dress up like a cow. I don't know exactly. Molly, of course, takes care of all that. So, we were at this A-list dinner and John White, who's Truett Cathy's grandson, didn't know that at the time. He was talking about Chick-fil-A and the history of the company and he kept referencing granddad. Granddad did this and granddad did that. Molly and I looked at each other and we're like, granddad? Oh, no, okay. He is Truett Cathy's grandson, so that's pretty cool. Also really cool, sorry for the tangent, we'll get to the point in a minute. That's okay, we're used to that. So, the thing I really like about the way Chick-fil-A handles the family business aspect of things is, you don't get to just say, alright, well, I'm a cousin or a grandson or whatever, give me a restaurant.

Doesn't work that way. And John, actually, and his cousins were kind of thinking as they were growing up that, well, we'll go to college, we finish college, and we'll have our own Chick-fil-A to manage. Well, they instituted a new rule in the Cathy family while those guys were still in college, or maybe while they were in high school, I don't remember. But in any event, the new rule was, you can't just come straight out of college and get your own store, you have to go work somewhere else for two years, get some real life experience, and then you can apply to manage a Chick-fil-A just like anybody else would. So of course, John grew up in Atlanta, went to school at Auburn, and then he always thought he'd end up running a Chick-fil-A in Georgia or Alabama or somewhere like that. Turns out, they said, well, we've got a store opening in Chapel Hill.

Like, he went through the application process like everybody else. They said, we're about to open one in the Durham Chapel Hill area. Would you like it? And so here he is.

So I just think that's cool that you don't get just granted a store just because you're in the family. Kind of an interesting story, but it still doesn't get to the heart of the matter, which is, what can we learn about retirement from Chick-fil-A, Mr. Stillman? Well, in order to tell you that, I'll need to tell you another story.

We haven't gotten to the Opus yet. So rewind with me back to the 80s. Rewind with you, okay. Yes, you remember the 80s.

Very well. A little fuzzy for you? Yeah, it is.

It's getting that way. So there was another company called Boston Chicken. We know it today as Boston Market. They were sort of new on the scene. They were the first real competitor for Chick-fil-A in the chicken world, I guess. And so Boston Chicken, as they were known at the time, had some pretty lofty goals. They wanted to do a billion dollars in sales by the year 2000. So this was, I don't know what year, sometime in the 80s.

Late 80s, I guess. And so everybody at Chick-fil-A was really nervous about all this, because here's this big competitor with these big ambitious goals. So we have to compete with them. We have to figure out how we're going to increase our sales. How are we going to grow? How are we going to be on this billion dollar pace like they're trying to get to? And so for months at Chick-fil-A, all the marketing folks and all the vice presidents were all trying to figure out, what do we do to get bigger faster?

How do we grow faster? And so it all sort of came to a head in this board meeting where all the vice presidents and all the marketing people had all their presentations to talk about how do we get bigger faster. And Truett Cathy sat there and he listened to as much as he could take. And then finally he started just banging on the table, which was out of character for him. He was a pretty mild-mannered fellow.

Very grandfatherly, takes in all these orphaned kids and just like a very generous individual, starts banging on the table. And everybody kind of looked like, okay, what's this all about? And he said, gentlemen, I guess in the 80s it was only gentlemen in the boardroom. He said, gentlemen, I'm sick and tired of you talking about how we can get bigger. What we need to be talking about is how we get better and our customers will demand that we get bigger. Good philosophy. Brilliant way to just reshape the conversation. But also sort of gives us a look into how good leaders process things. So from that point forward, they shifted from how do we get bigger to how do we get better?

And once they started focusing on how to get better, they got better by leaps and bounds. They're the company who was doing a billion dollars in sales by the year 2000. Boston Chicken, they went bankrupt. Of course, Boston Market is still around, but they went bankrupt in the process. And Boston Market used to be at Eastgate.

It's not there anymore. So how does this all relate to retirement planning? I was wondering. At some point in your investing life, and it's a different point for everybody, you need to cross the threshold of what do I do to get better instead of what do I do to get bigger? The way that a lot of clients might phrase that to me is, at this point in our life, we don't care that much about making more, we just don't want to lose what we have. That's the proper train of thought to be having as you're in retirement or getting close to it. Now, I said it's different for everybody because for some people that might be in their mid-50s. Maybe they're looking to retire around their early 60s.

They really can't afford another 2008 type of stock market crash. And so, at that stage in your life, that's where you need to focus on getting better instead of bigger. What might better look like? Well, better could be safer, less volatile. It could be better optimized to give you income instead of growth. It could be more tax-efficient.

Better could mean a lot of different things. But it's a different mission from how do we grow this portfolio as big as possible? Now, for some people, they might be in their 60s, and getting bigger might be the thing that still makes sense for them. Maybe they're 62, they're going to work until they're 70, and when they retire, they're going to have a massive pension and maybe some rental income, and all their income needs are going to be taken care of.

All that money we have invested in the stock market for them, they don't need it for 20 years, maybe. So, in their case, maybe we can still focus on getting bigger. That's why I say the threshold is different for everybody. The point where you cross from, all right, let's focus on getting better, it's not like a magic age, and it's not even a certain number of years from retirement. It's just that at some point, you need to cross that threshold.

How do we get better instead of how do we get bigger? All right. Well, I feel as if I've learned a lot from this conversation, and thank you very much. And you're hungry. Mr. Stillman, yeah, you've made me really hungry. That's the number one thing you've accomplished here. I've learned about retirement and what you can learn from Chick-fil-A, but you've also made me very hungry, so let's go get some chicken. What do you say? I'll see you there.