Sonis Drive-In

December 7, 2005

Sonic has emerged as the largest drive in chain in the United States. It is smaller than its leading competitors such as McDonald's, Burger King and Wendy's. Though it is smaller it leads in the category of customer satisfaction and loyalty. Sonic has improved its relationships with franchises and employees, offered unique menu innovations, invested in information technology and initiated.

History

Sonic Drive-In Carhops have been serving up beloved American food and signature Sonic favorites at "the speed of sound" since 1953. Founded by Troy Smith the first SONIC was established in Shawnee, Oklahoma. SONIC is parked in a very prominent place in the annals of drive-in history. SONIC developed innovations in the drive-in concept and is one of the few remaining drive-in chains left in America. In an industry stressed with automation, SONIC keeps the personal touch. Carhops still deliver food prepared-to-order right to you're the car.

Restaurant Industry

For the past three decades, the restaurant industry has consistently posted yearly sales gains. Today's consumers regard food prepared away from home as a necessity. Convenience, a need for socialization and gains in real disposable income has led consumers to spend more of their food dollars in restaurants. Last year, large chains for the first time captured more of the dining out market than independent restaurants. Their growth has resulted from highly sophisticated companies specializing in sit-down restaurants. Restaurant chains have expanded throughout the country and many are publicly traded (fueling their expansions). The growths of these chains coupled with slow-moving economic times have forced many independents out of business.

The rapid growth in number of the "fast-casual" restaurants will have a significant impact on the overall quick service sector. Fast-casual restaurants offer foods and dйcor more in line with the casual dining experience. This new category, which falls between the Quick Service and Full Service segments, is less likely to offer fried foods and more likely to have hand-held items such as sandwiches sales volume during lunch and generate a higher average check than traditional quick service restaurants. Eighteen

to 34-year-olds are especially attracted to the "fast casual" segment. The quick service restaurant industry has power of rivalry, buyers with high bargaining power, and threats of substitution of products.

What are the key opportunities and threats facing Sonic?

There are many opportunities for Sonic to capture and grow. These opportunities take place at both an industry level and an internal level as well. With proper management, Sonic will continue to prosper in the quick-service industry.

Sonic has successfully differentiated itself from its competition through a series of innovations. Sonic prides itself on being a "drive-in" restaurant. This concept creates a personal environment to the customers that come to enjoy their food. This technique has allowed Sonic to be the largest drive-in chain in the United States. Sonic also offers unique items on their menu. Sonic offers the basic" burger and fries", while also serving different items such as Coney Dogs and Cherry Limeades. They also gear to the health awareness consumers by serving healthy substitutes such as wraps and salads. Sonic's attempt of providing quick-service fare with full-service quality differentiates Sonic from its competitors. Maintenance of these innovative concepts will serve to preserve Sonic as a major competitor in the quick-service market.

To receive the best service possible, Sonic believes it starts in the heart of its employees. Performances of employees reflect how consumers will justify Sonic's image. Consumers look for great tasting food and quick and friendly service. Sonic offers their employees benefits. By offering so many benefits its employees, Sonic has enjoyed a turnover rate that is lower than the industry average. As Sonic grows, its focus on its employees will be a key determinate in its success.

Sonic possess the capability of being flexible and able to respond quickly to market and internal changes. Sonic's ability to compete with the other quick service restaurants is related to its management's ability to think ahead of their competition's next move. The management of Sonic is also great at responding to internal needs as well. The company recognized its need to be more centralized, and organized a successful restructuring of the company. With the managers' of Sonic's thorough understanding of their internal and external environments, Sonic will continue to be a leader as it continues to grow.

Global Expansion is yet another opportunity Sonic has opened in hopes to develop growth. Currently Sonic has 2 locations outside of the United States. Sonic could soon grow to be the "World's Drive-in," not just America's. Although careful analysis of the new global locations would be needed, this is definitely a region in which Sonic could enter and take over.

Although Sonic many opportunities exist that will enable Sonic to constantly grow, there are also threat that Sonic should be aware of that may hinder grow as well.

The quick service industry is a very large, yet it is a slow growing industry. Sonic uses aggressive growth strategies but need to be careful not to grow beyond the means of the industry.

Another threat to Sonic is its size compared to its competitors. Sonic is one of the smallest in the quick service market. This brings about many problems, as Sonic cannot compete on larger scales. With larger competitors that are able to compete not only domestically, but also internationally, Sonic may not be able to keep up. The size of the company also means that they have a smaller amount of capital to use bringing in smaller revenues.

Sonic, like other quick-service restaurants also deal with employee turnover. The industry itself has a turnover rate of 85%. one of the highest rates Sonic's turnover is less than the industry's yet it still poses a threat to its survival. Sonic must continue to find innovative ways to show its employees that it is a great company to work with.

Sonic also struggles with brand building. For so long, consumers identified Sonic with a specific spokesperson and not as "America's Drive-in."