Diverse menu pays off for Sonic

by Monica Watrous
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The drive-in chain claims to have the most diverse menu in the fast-food industry.

 

NEW YORK — A key to consistent same-store sales growth at Sonic Drive-In is what the Oklahoma City-based company considers the “most diverse menu in Q.S.R.”

“A lot of people tend to think of Sonic as a burger chain, but you can see that burgers only make up about 17% of sales,” said Steve Vaughan, executive vice-president and chief financial officer of Sonic Corp., during a presentation for analysts at the Morgan Stanley Global Consumer and Retail Conference on Nov. 18 in New York.

As the top seller of hot dogs eaten outside of the home, Sonic generates a significant portion of revenue from such items as chili cheese coney dogs and cheesy bacon pretzel dogs. Forty per cent of the drive-in’s sales comes from beverages and ice cream products, including slushes, sundaes and shakes. And now chicken represents a larger portion of the company’s business, after the chain launched a premium sandwich platform in 2012. Recently, the chain introduced a line of boneless wings in buffalo, barbecue and Asian varieties.

“If you look at the Q.S.R. industry overall, chicken and burger servings are fairly comparable,” Mr. Vaughan said. “But we still see a lot of upside in the chicken area of our business.”

Innovation has helped Sonic sustain business momentum with four consecutive years of positive same-store sales. The company stepped up its menu efforts at the beginning of 2012 by hiring a new chef to help build a stronger pipeline, enabling the chain to test market and tweak products ahead of a national roll-out.

“That’s something that I think is really helping us build this momentum over the last three or four years,” Mr. Vaughan said. “And then also the focus on the different day parts and making sure that those product promotions and also the media support the five different day parts that Sonic tends to have our business spread across.”

Promoting products across breakfast, lunch, afternoon, dinner and evening day parts helps Sonic’s franchisees manage business more efficiently.

“So you tend to see, in the afternoon when a lot of our competitors may not have a lot of business on their lot, you can see that our afternoon business makes up 23% of sales,” Mr. Vaughan said. “We also have promotions that really are targeted toward the evening, trying to make sure that late-night business is successful.”

Sonic’s breakfast menu, which is served all day, includes croissant sandwiches, french toast sticks, breakfast burritos and coffee drinks.

As a result of the varied menu, Sonic has a mixed set of competitors that includes traditional fast-food chains such as McDonald’s and Burger King, convenience stores with slush drinks and similar beverages, and ice cream brands like Dairy Queen.

“Clearly, right now, it does feel like Sonic has been taking some market share from some of that competition,” Mr. Vaughan said.
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