Sonic Franchise Review
What's as fast as the speed of sound and comes with your choice of condiments? Sonic, America's Drive-In. It all started in 1953 with a small hamburger and root beer stand named "Top Hat Drive-In" located in Shawnee, Oklahoma. Top Hat changed its name to Sonic in 1959, offering "Service with the Speed of Sound," and today the franchise chain has more than 3,500 drive-ins coast to coast serving over a million customers every day.
History of the Brand
What started as a small, local, trend-reliant burger joint has grown mightily into a large, national, archetypal pillar of the quick service industry. Beginning as not much more than a root beer stand in small town Oklahoma, Sonic Drive-In has proven that the drive-in restaurant model, unlike its movie theater counterpart, has stood the test of time. While the brand still embraces its nostalgic character, it doesn't rely on it as a crutch and has instead continued to establish itself as more than a gimmick. Today, the Sonic brand is the nation's largest chain of drive-in restaurants.
Sonic has built on its unique operating system and found ways to leverage that system to its benefit. A standard store layout provides for 24 to 36 stalls and requires approximately ¾ of an acre for build out. This physical layout alone allows Sonic to service almost four to five times the number of drive-through customers than a typical quick service restaurant.
With many of its competitors in the quick-service restaurant industry becoming more and more reliant on drive-through business, Sonic’s operating system serves as an advantage that should continue to grow.
Naturally, by its name, speed is an element that Sonic has long embraced as a competitive advantage.
Their slogan was traditionally “Service with the Speed of Sound,” and that has become more than just a clever advertising line. Sonic offers one of the quickest and most efficient speed-of-service times in the quick service restaurant industry. Customers file into individual parking spaces where they can almost instantly submit their order via the speaker system or by speaking with a roller-skating carhop. There is no waiting in a drive-through lane as car after car slowly breathes their orders one at a time into a single squawk box.
Sonic patrons also have the option to simply eat their meal right there in the car, as opposed to being rushed off to make way for the car honking rudely behind them. The concept cuts down on busy drive-through lines and presents a unique eating experience to customers.
Admittedly there are limitations and restrictions that come with operating this type of system in northern markets, where the weather can be more of a factor. This may be why Sonic was slow to grow outwards of its southeastern roots. However, northern franchisees have adapted, allowing Carhops to go without roller skates in wet and icy weather and limiting most ordering in colder months to the speaker system only.
In terms of their actual food offering, Sonic has been one of the more adventurous quick service restaurants over the years. Growing from only offering burgers, hot dogs, and root beer, they now include breakfast as well as ice cream and other desserts. In keeping with its root beer stand roots, Sonic has always put special emphasis on providing unique soda and other drink options, with their famous slushies becoming a calling card. These are products that their customers generally can’t get anywhere else, and that has lead to high customer frequency rates and strong brand loyalty.
Sonic Drive-In has over 3,500 locations nationwide, almost 90% of which are franchised. The franchise offering comes in two different formats: traditional and non-traditional. Traditional franchises come with a 20-year term and a 10-year renewal opportunity with a $45,000 franchise fee requirement.
The total initial investment ranges from $710,000 to $3 million with cash liquidity of $1 million and total net worth of $1 million to meet the 2-store minimum. Royalty fees are 5 percent; advertising fees are 3.25 to 5 percent.
Non-traditional franchises start with a 10-year term, a 5-year renewal, and a $22,500 franchise fee. The total initial investment ranges from $434,000 to $545,000, excluding land costs. Other non-traditional locations start with a manageable investment of $107,000 to $221,000. Also, you must have prior or current successful restaurant experience and/or strong entrepreneurial skills to be offered a non-traditional franchise.
- Initial Investment: $107,000 to $3 million depending on store type
- Liquid Cash Requirement: $1,000,000 for traditional franchise offering
- Net Worth Requirement: $1,000,000 for traditional franchise offering
- Franchise Fee: $22,500 to 45,000 depending on store type
- Royalty Fee: 5%
- Ad Fund: 3.25% to 5%