Top 250 Franchise by Entrepreneur – Rank no.52 – Sonic Drive-In Restaurants – US
Products & Services: Quick-service restaurant
Number of Locations: 3,534
Total Investment: $1.11M – 3M
Began Franchising: 1959
About Sonic Drive-In Restaurants
Sonic Drive In Restaurants began when Troy Smith purchased the Top Hat Drive-In, a root beer stand in Shawnee, Oklahoma. He expanded from there and teamed up with Charlie Pappe. They introduced the Sonic name and began franchising in 1959. At Sonic Drive In locations, patrons order hamburgers, fries, chicken, breakfast items, specialty drinks, desserts and more curbside in their cars from a speaker box.
Startup Costs, Ongoing Fees and Financing
Franchise Fee: $45,000
Ongoing Royalty Fee: 2-5%
Term of Franchise Agreement: 20 years, renewable
Net Worth: $1,000,000
Liquid Cash Available: $1,000,000
60% of all franchisees own more than one unit. Number of employees needed to run franchised unit: 25. Absentee ownership of franchise is NOT allowed..
|FINANCING TYPE||IN-HOUSE||THIRD PARTY|
How This Franchise Supports Franchisees
Franchise Ranking History
It’s not just good. It’s Sonic good.
Sonic’s got it, others don’t.
|Traded as||NASDAQ: SONC|
|Founded||Shawnee, Oklahoma (1953)|
|Headquarters||Oklahoma City, Oklahoma,United States|
|Number of locations||3,561|
|Key people||J. Clifford Hudson, Chairman and CEO
W. Scott McLain, president Sonic Industries (Resigned from his current post, effective 3/31/13)(franchising subsidiary)
Omar Janjua, president Sonic Restaurants, Inc.
Stephen C. Vaughan, CFO
|Revenue||$545.9 million US$(2011)|
|Operating income||US$84.2 million (2011)|
|Net income||US$19.2 million (2011)|
|Employees||321 corporate employees|
Sonic Drive-In is an American drive-in fast-food restaurant chain based in Oklahoma City, Oklahoma. As of August 31, 2011, there were 3,561 restaurants in 43 U.S. states, serving approximately 3 million customers per day. In 2011, it was ranked 10th in QSR Magazine’s rankings of the top 50 quick-service and fast-casual restaurant brands in the nation. Known for its use of carhops on roller skates, the company annually hosts a competition to determine the top skating carhop in its system. It also hosts, with Dr Pepper, an internal competition between drive-in employees. The company’s slogan is “America’s Drive-In.”
Although Sonic has operated since the early 1950s, Sonic Corp. was incorporated in the State of Delaware in 1990. It has its corporate headquarters in Oklahoma City, Oklahoma; the headquarters building features a dine-in Sonic restaurant on the premises. Its stock trades on NASDAQ with the symbol SONC. Company restaurants are owned and operated by Sonic Restaurants, Inc., a wholly owned subsidiary. Total 2011 revenues were approximately $546 million with net income of $19 million.
Menu items and venue
Sonic is a member of the hamburger segment of fast food restaurants, so the menu consists of some classic fast food items, such as hamburgers, and french fries as well as other “carnival-like" fare such as onion rings, corndogs, and hotdogs. Other items that are special to Sonic’s menu include Breakfast Toaster sandwiches (made with Texas toast instead of the typical bun) and Cheddar Peppers. Drink options include soft drinks, slushes and milkshake. Customers can combine various drinks and flavors to create thousands of possible drink combinations. Ice cream desserts include sundaes and banana splits. Sometimes they have corndogs for 50 cents. The company publishes nutritional information on its products on its corporate website.
At a standard Sonic Drive-In, a customer drives into a covered drive-in stall, orders through an intercom speaker system, and has the food delivered by a carhop. Most drive-ins also have patio seating, and many have drive-thru lanes.
Following World War II, Troy N. Smith Sr., Sonic’s founder, returned to his hometown of Seminole, Oklahoma, where he became employed as a milkman. He decided to work delivering bread because bread was not as heavy as milk. Soon afterwards, Smith purchased the Cottage Cafe, a little diner in Shawnee, Oklahoma. Before long he sold it and opened a fast food restaurant, Troy’s Pan Full of Chicken, on the edge of town. In 1953, Smith went in with a business partner to purchase a five-acre parcel of land that had a log house and a walk-up root beer stand, already named the Top Hat. The two men continued with the operation of the root beer stand and converted the log house into a steak restaurant. After realizing that the stand was averaging $700 a week in the sale of root beer,hamburgers and hot dogs, Smith decided to focus on the more-profitable root beer stand. He also bought out his business partner.
Originally, Top Hat customers would park their automobiles anywhere on the gravel parking lot and walk up to place their orders. However, on a trip to Louisiana, Smith saw a drive-in that used speakers for ordering. He suspected that he could increase his sales by controlling the parking and having the customers order from speakers at their cars, with carhops delivering the food to the cars. Smith borrowed several automobiles from a friend who owned a used-car lot to establish a layout for controlled parking. He also had some so-called “jukebox boys" come in and wire an intercom system in the parking lot. Sales immediately tripled. Charles Woodrow Pappe, anentrepreneur, chanced upon the Shawnee drive-in and was very impressed. He and Smith negotiated the first franchise location inWoodward, Oklahoma, in 1956, based on nothing more than a handshake. By 1958, two more drive-ins were built, in Enid andStillwater.
Upon learning that the Top Hat name was already trademarked, Smith and Pappe changed the name to Sonic in 1959. The new name worked with their existing slogan, “Service with the Speed of Sound". After the name change, the first Sonic sign was installed at the Stillwater Top-Hat Drive-In; the original sign still can be seen there. Although Smith and Pappe were being asked to help open new franchise locations, there was no real royalty plan in place. The pair decided to have their paper company charge an extra penny for each Sonic-label hamburger bag it sold. The proceeds would then be split between Smith and Pappe. The first franchise contracts under this plan were drawn up, but there was still no joint marketing plan, standardized menu, or detailed operating requirements.
1960s and 1970s
Sonic’s founders formed Sonic Supply as a supply and distribution division in the 1960s. Under Smith, longtime franchise holders Marvin Jirous and Matt Kinslow were hired to run the division. In 1973, Sonic Supply was restructured as a franchise company that was briefly named Sonic Systems of America, which provided franchisees with equipment, building plans, and basic operational instructions. As the company grew into a regionally known operation during the 1960s and 1970s, the drive-ins were located mainly in small towns in Oklahoma, Texas, Kansas, New Mexico, Missouri and Arkansas. In 1967, the year Pappe died, there were 41 drive-in locations. By 1972, this number had risen to 165, and by 1978, 1,000.
In 1977, the Sonic School for manager training was established under Winterringer’s guidance. Most of the drive-ins were operated by franchisees who often made the store manager a business partner, which is still often the case today.
1980s and 1990s
In 1983, Smith and Sonic’s board of directors saw the need for change.[clarification needed] C. Stephen Lynn was hired as president, and, in 1984, Lynn hired J. Clifford Hudson, an attorney, to head the legal department. Under Lynn, Sonic and its major franchisees began to encourage the development of local-advertising cooperatives, and developed a field structure to work with the franchisees. New franchises began to expand the company into new areas and redevelop markets that had been unsuccessful in the past. These developments, combined with a major advertising campaign featuring singer and actor Frankie Avalon, led to significant growth and a new image that would make Sonic a nationally recognized name. In 1986, Lynn, with a group of investors, completed a $10-million leveraged buyout and took the company private. The next year, Sonic moved its offices to leased space at 120 Robert S. Kerr Avenue in downtown Oklahoma City and began to assume a higher profile in the community.
In 1991, Sonic became a publicly traded company again. By 1994, the corporation had renegotiated the franchise agreements with all of its franchisees. In 1995, Hudson became president and chief executive officer, and Sonic Industries became Sonic Corp.
During the mid-1990s, Sonic opened 100–150 new restaurants a year. Beginning in 1998, Sonic began a retrofit program, called “Sonic 2000″, to redesign and update all 1,750 stores in its chain to what was called a “retro-future" look.
Hudson was named chairman of Sonic Corp. in January 2000.
Celebrating its 50th birthday in 2003, Sonic briefly added the Birthday Cake Shake to the menu. Development milestones celebrated in the 2000s include the opening of the 3,000th Sonic Drive-In in Shawnee, Oklahoma, and the 3,500th Sonic Drive-In in the Chicago market (Algonquin, Illinois). In October, 2004, President Pattye Moore stepped down to spend more time with her family. On June 28, 2005, Helped by new menu items and increased advertising exposure, Sonic Corp. reported double-digit increases in net income and revenue in the third quarter that year. On January 5, 2005, the company started to roll out card readers in the drive in stalls at its 544 company owned restaurants by the end of January that year.In 2007, the company opened its first restaurants in theNortheastern U.S., in New Jersey.
In 2009, Sonic partnered with DonorsChoose.org on a collaborative effort, Limeades for Learning, the chain’s first systemwide cause marketing initiative. Public school teachers request needed supplies and materials and Sonic customers vote on how to allocate more than half a million dollars each fall. In the first three years of the program, Sonic and its franchisees have donated more than $2 million and impacted learning for more than 111,000 students nationwide.
In September 2009, Omar Janjua joined the company as president of its restaurant operating subsidiary, Sonic Restaurants, Inc. (“SRI") and more recently was appointed as executive vice president of operations for Sonic Industries.
Despite growth into new markets outside the brand’s traditional footprint, the company was hit hard by the recession of 2008–2009. In 2009, the brand saw multiple quarters of declines in same-store sales for the first time in recent memory.[clarification needed] Alaska has yet to have a Sonic location, but attempts to acquire one have been made in the past.
Sonic reformulated its popular soft-serve ice cream to meet the FDA guidelines that define what constitutes real ice cream and introduced Real Ice Cream on May 17, 2010.Several new hot dog items were also introduced in June 2010 and February 2011.
In late 2010, Sonic announced it was ending its 17-year relationship with advertising agency Barkley. A group of specialized agencies were selected to represent the company and in early 2011, the San Francisco-based Goodby Silverstein & Partners was named as the new creative agency for the company.
In June 2011, the first location under the name Sonic Beach was opened in Homestead, Florida. A second location, opened in Ft. Lauderdale, Florida, in November 2011, lacks the usual drive-in stalls due to its beach-side location. Both locations also include outdoor seating and flatscreen televisions.
Sonic ran its first television advertisement in 1977. During the early 1980s, actor Tom Bosley was featured in the company’s commercials. One of the company’s most memorable advertising campaigns, which ran from 1987 to 1993, featured Frankie Avalon. In May 1999, the company began a new campaign featuring the character Katie the Carhop.
Sonic was also involved with NASCAR. The company contracted with Richard Childress Racing in late 2000 to be an associate sponsor for Dale Earnhardt, Sr. during the 2001 NASCAR race season. After Earnhardt was killed on the last lap of the Daytona 500, the company continued its sponsorship with his replacement driver Kevin Harvick, through the end of the 2003 season.
In 2004, the company became more widely known nationally by advertising in television markets hundreds of miles from its nearest franchise. Improvisational actors T. J. Jagodowski and Peter Grosz have become known to American television viewers from their “Two Guys" series of commercials. Similar series of ads for the company have featured other duos of improvisational performers, including Molly Erdman and Brian Huskey, Katie Rich and Sayjal Joshi, and Emily Wilson and Tim Baltz. In 2010, national auditions were held and a new series of commercials began airing, some of which featured carhops from Wisconsin and Austin, Texas.
Slogans used by Sonic over the years include:
- “Service With the Speed of Sound" (1958)
- “Happy Eating" (1980s: on signs at many of the company’s drive-ins)
- “America’s Drive-In” (1987)
- “Summer’s Funner" (1993)
- “It’s Sonic Good” (2003)
- “Sonic’s Got It, Others Don’t" (2007)
- “Even Sweeter After Dark" (2009)
- “This is How You Sonic" (2011)
- “It’s not just good. It’s Sonic good.”