Sonic

Jan 24, 2022 | Report Announcements

Sonic enjoys strong brand equity (particularly in core South & Central Plains markets) around its unique drive-in format with car stalls, friendly carhops and a plethora of high margin specialty drinks & frozen treats (one of the few QSR brands offering real ice cream & real fruit) that generate strong trial & appeal. Sonic offers fun breaks/special times by leveraging a car culture, the freedom to choose access (drive-in, drive-thru, order-ahead) and nearly unlimited menu combination options. Its drive-in format increases the chance that every customer will be first in line and served by car hops (brand ambassadors) that help to generate high scores for friendliness. This format also allows customers to take their time ordering without concern about slowing a drive-thru line. Access is also complimented by drive-thru available in ~40% of the system (mostly in newer stores). All-American food offerings include: made-to-order cheeseburgers (Sonic & SuperSonic); multiple chicken options; beef hot dogs & footlong quarter-pound coneys (with chili); and sides including tots, hand-made onion rings, soft pretzel twist & mozzarella sticks. The chain’s primary value equation is represented by its 2-4PM Happy Hour featuring ½ priced drinks/slushes and Happy Hour is also offered all day as an LTO to order-ahead customers. Its new digital order platform has extended brand reach into a younger demo and loyalty helps translate drink-only mobile traffic into incremental food sales. Product innovation represents a core brand equity and has returned to levels which approximate 3x the segment average. Very strong comps over the last 3 years were helped most recently by new order-ahead capability and resultant AUV is at an all-time high. Having said all this, Sonic must continue to address how to drive higher average checks from drink/dessert customers. Also, Sonic is challenged to drive development to gain enough share of voice in new markets (particularly in colder climates where frozen drinks/treats have seasonal appeal) sufficient to achieve a national footprint. In conclusion, Sonic’s positioning works well in the current operating environment and, hopefully, will translate into new development, a national footprint and sufficient marketing scale to properly communicate the brand’s strong core equities.

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