Winners & Losers: Chick-Fil-A Vs. Boston Market

Hey there,

Why do some businesses win and some lose? How can we tell which one is going to be successful and which one is going to fail? Better yet, how can we “stack the odds” in our favor when applying these lessons to multifamily real estate?

Ask these questions to many, even college professors or financial advisors, and they’ll tell you it’s “impossible” to know.

This view, however, I highly disagree with. Rather, I suggest a different approach. Study winners and losers to see what they did right or what they did wrong.

This newsletter, albeit long, is a high-level case study of two such companies.

Chick-Fil-A

A Unique Approach to Fast Food

Chick-fil-A was founded in 1967 by Truett Cathy in Atlanta, Georgia, but its origins trace back to 1946 when Cathy opened the Dwarf Grill (later Dwarf House). In the early 1960s, Cathy developed the now-famous pressure-cooked chicken sandwich, which retained the crispiness of fried chicken while cooking faster than traditional methods. This innovation led to the creation of Chick-fil-A, a restaurant focused on high-quality, hand-breaded chicken sandwiches served with fresh ingredients.

Chick-fil-A differentiated itself with superior customer service, a family-friendly atmosphere, and its well-known policy of closing on Sundays, reflecting Cathy’s Christian values. The brand’s commitment to quality and consistency quickly attracted a loyal customer base.

Expansion and Brand Growth

Throughout the 1970s and 1980s, Chick-fil-A expanded primarily in mall food courts, becoming a staple in shopping centers across the U.S. However, recognizing the limitations of this model, the company pivoted in the 1980s toward freestanding restaurants, which allowed for drive-thru service and greater visibility.

By the 1990s, Chick-fil-A’s reputation soared, thanks in part to iconic marketing campaigns, including the “Eat Mor Chikin” cow advertisements. The company also introduced new menu items, such as waffle fries, breakfast offerings, and healthier options, further broadening its appeal.

Continued Success and Industry Leadership

Unlike many competitors, Chick-fil-A remains privately owned, allowing it to prioritize long-term quality over short-term profits. It has expanded carefully, maintaining a selective franchising model, which ensures consistency and customer satisfaction.

By the 2000s, Chick-fil-A had become one of the fastest-growing and most profitable fast-food chains in the U.S., surpassing rivals in per-location revenue. Today, it is a dominant force in the industry, recognized for its exceptional service, strong brand identity, and commitment to quality.

Key Points:

I have highlighted parts of this story that are important to Chick-fil-A’s success.

1. Identified ONE product to focus on that they could be superior with.

2. Focused relentlessly on quality of experience and consistency.

3. Expand to where the customers are and be able to pivot (Malls, then free-standing).

4. Private ownership, careful expansion.

Boston Market

A New Approach to Fast-Casual Dining

Boston Market, originally known as Boston Chicken, was founded in 1985 in Newton, Massachusetts, by Steven Kolow and Arthur Cores. The two entrepreneurs recognized a gap in the food industry—families were becoming increasingly busy and needed convenient, home-cooked-style meals that didn’t compromise on quality. Their solution was a fast-casual restaurant offering rotisserie chicken, fresh side dishes, and a warm, inviting atmosphere that made customers feel like they were eating a home-cooked meal without having to prepare it themselves.

From the start, Boston Chicken’s business model was simple but effective: serve high-quality rotisserie chicken with a variety of sides such as mashed potatoes, mac and cheese, cornbread, and steamed vegetables. The concept quickly gained popularity, as it appealed to both working professionals and families looking for a healthier, fresher alternative to traditional fast food.

The company focused on fresh ingredients and a limited but high-demand menu. Their rotisserie chicken became the star attraction, differentiated from the typical fried fast-food chicken by its perceived health benefits and premium quality. The emphasis on home-style cooking resonated with customers, fueling its initial success.

Rapid Expansion and Rebranding as Boston Market

By the early 1990s, Boston Chicken was thriving, and in 1992, the company caught the attention of restaurant investor George Naddaff, who helped drive its expansion. With a growing number of locations in New England, the brand soon attracted significant financial backing. One of its biggest moves came when venture capital firm Bain Capital saw an opportunity to scale the business nationwide.

With Bain Capital’s backing, Boston Chicken aggressively expanded, opening hundreds of new locations. The chain’s business model was not just about opening more restaurants—it also relied on a franchise strategy that allowed for rapid growth without significant upfront costs to the company itself. The brand evolved beyond just chicken, incorporating a broader menu with turkey, meatloaf, and ham, making it a more versatile dining option.

In 1995, Boston Chicken rebranded as Boston Market, reflecting its expanded menu and positioning itself as a one-stop shop for a variety of homestyle meals. The rebranding was meant to convey that Boston Market was not just a chicken-focused restaurant but rather a destination for all types of high-quality, home-cooked meals.

During this period, Boston Market used an aggressive expansion strategy, opening more than 1,000 locations across the U.S. between 1995 and 1997. The company went public in 1993, and its stock surged as investors saw it as the next big thing in fast-casual dining. However, despite the rapid growth and strong brand identity, the company began facing significant challenges.

The Fall: Overexpansion and Financial Struggles

By the late 1990s, the cracks in Boston Market’s business began to show. The cost of expansion far outpaced its profitability, and the company was unable to generate enough cash flow to sustain itself. To make matters worse, competitors such as KFC, Popeyes, and even grocery store chains began offering rotisserie chicken at lower prices, making it harder for Boston Market to justify its premium pricing.

As the financial strain mounted, Boston Market attempted to revamp its strategy by expanding into new product lines. The company introduced frozen meals sold in grocery stores and experimented with different menu offerings, but these changes failed to reverse its downward spiral.

By 1998, Boston Market was drowning in debt, with liabilities exceeding $900 million. The company’s stock, once a Wall Street darling, plummeted, and locations that were once packed with customers saw dwindling foot traffic. In 1998, Boston Market filed for Chapter 11 bankruptcy, marking the end of its rapid rise.

Key Points:

I have highlighted parts of this story that are important to Boston Market’s success then failure.

1. Success: Identified ONE product to focus on that they could be superior with.

2. Failure: Chasing every dollar and abandoning core business (expanded menu).

3. Failure: Lost ground-level connection to customers.

4. Failure: Because they had the capital backing they pushed for expansion even in low-quality areas.

Rust Belt Capital - Applying to Multifamily:

1. Identify ONE product: The properties we pursue

   • Focus on one type of asset class (multifamily)

   • Focus on one specific type of multifamily (mid-market workforce)

   • Emphasize the location of properties heavily

   • Reinvest in/increase the quality of apartments even if this means slightly lower cash distributions. (reputation/brand of the asset in the community).

2. We prioritize careful expansion/acquisitions over growth at all costs.

   • We have stayed local with acquisitions for several years as the business grows.

   • Pass on way more deals than we go after.

3. Allowed investor type

   • Alignment with Investors

   • We don’t allow short-term investors

   • We’re careful to open up to private equity shops

Questions always welcome!

Nate & Steven
Rust Belt Capital, LLC

www.rustbeltcapital.com

_Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.