Sonic's business seems to grow at speed of sound

Drive-in restaurant chain is largest in country


COLORADO SPRINGS, Colo. -- His red cap is the first thing you see.

The next thing is his red wheels.

Then swoosh, the young man disappears, 12 cars down, carrying a red tray with two bags and two drinks. Seconds later, swoosh, he's up the sidewalk and through the door again, empty tray in hand.

At Sonic, the speed of the carhops isn't the only thing getting attention.

The speed of this company's growth -- in 1998, sales rose 17 percent to $1.3 billion and the company added 170 restaurants -- is turning heads, too.

The company built its brand image by abandoning commercials featuring Frankie Avalon and switching to ads that emphasize the Sonic name and experience. It got consistency in its restaurants' menus and food with a chainwide purchasing program.

Sonic is now the largest and fastest-growing drive-in chain in the country, and it has the highest customer-frequency rate in the quick-service restaurant industry.

The chain has about 2,000 restaurants in 27 states; its systemwide restaurant sales last year exceeded $1.3 billion. Sonic is also the sixth-largest burger chain in the nation, just behind Jack in the Box, which had $1.46 billion in sales in 1998. McDonald's leads with $18.1 billion.

Customers who cruise to Sonic say they like the simple pleasures of parking under a carport, perusing the car-side menu, pushing a button and ordering a Burger Deal with onion rings and a cherry limeade for about $4.

"We come here once a week or so," said John Skiaba of Colorado Springs as he sat in his van with his family and dog at lunchtime recently at the Eighth Street Sonic.

"I like being able to eat in the vehicle, the food's good, and I'm crazy about these blue coconut slushes," Skiaba said, wielding a turquoise drink in one hand and a burger in the other.

`We love the music'

"Oh, and another thing, we love the music," he said, as the outdoor sound system piped oldies: "Scooby-doo, I'm in love with you," and "Build me up, buttercup" a moment later. "That makes it a romantic meal, instead of plain old fast food," Skiaba said.

Though Sonic's demographic studies show its strongest market segment is the 18-to-35 age bracket, the customers packing the parking spaces and drive-up lanes at the Springs drive-ins run the gamut.

Though not all the company's carhops are on wheels, Sonic encourages the employees who deliver food to the cars to roller skate. It's a blast from the past, it's fun and it gets the food out faster.

The roller skates -- the old-fashioned kind, with two pairs of wheels -- are the entertainment at Sonic.

"We're not a play place, we're a restaurant," said Barbara Stammer, president of Merritt Group, the Sonic franchisee that holds the rights for five states.

There are toys -- such as pop-up books and squiggly straws -- in the kids' "Wacky Pack" meals, but there is no movie-themed merchandise. Nor are there video games or ball pits. And there is no inside seating, except at a handful of restaurants that were fit into existing buildings.

"It's just an old-fashioned drive-in concept," Stammer said.

Roller skates, carports and intercom systems aside, the company competes with other quick-service chains such as Wendy's, Burger King and McDonald's on its food.

"I think it's kind of like any other restaurant concept; if your food quality is good, you'll make it," said Michael D. Smith, an analyst for Fahnestock & Co. in Kansas City, Mo. "As a consumer, the real reason you go eat there or anywhere is because you like the food."

Nostalgia is hot

What sets the company apart, however, is its nostalgic, 1950s concept, which is so old it's hot again. Sonic got there simply by outlasting other drive-in chains.

Sonic Corp. got its start 46 years ago when Troy Smith, a struggling Oklahoma restaurateur, discovered a hamburger shop with an intercom system that allowed customers to drive up, push a button and order their food. He installed a similar system at his Top Hat hamburger stand, and sales doubled the first week. During the late '50s, the company's name was changed to Sonic (definition: the speed of sound), and franchising began. Expansion took off in the south-central states.

The oil embargo and inflation in the 1970s took their toll, and in 1978 and 1979 the company's profit fell 21 percent. In the early 1980s, Sonic closed 300 of about 1,300 restaurants. There was no money for advertising, and the menus and food varied because there was no national purchasing program.

Then in 1986, a group of company officers led a $10 million buyout of the company from its franchisee shareholders and took control. A change to a conventional system in which stockholders own the company and franchisees pay a percentage of sales helped ground the company again.

In 1991, Sonic went public, with an initial offering that raised $52 million. In 1995, a second public offering raised $28.2 million. Now, the company's menus, packaging and food purchasing are consistent -- moves that cut costs because of volume buying. Average profits per restaurant climbed 71 percent in the past five years, to $125,000 per year.

Sonic is pushing to keep its 1950s-era drive-in concept fresh. Last year, it retrofit 285 restaurants and built 146 new ones with its "Sonic 2000" look, based on a 1950s idea of "futuristic."

Pub Date: 6/27/99

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