Industry News | November 6, 2001

Sonic to Double Number of Stores Offering Breakfast

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Sonic Corp. announced that it expects to double the number of its stores offering breakfast from four hundred to at least eight hundred beginning in the spring of next year. The company plans to introduce its unique breakfast offering in at least ten new markets, which will expand the breakfast menu to about one-third of the stores in the Sonic system.

However, said the chain, these eight hundred stores represent a greater proportion of the chain's sales than their percentage of drive-ins in the system represent.

Sonic is pleased with the results from the ongoing test of its breakfast menu, said Sonic's chairman and CEO, Clifford Hudson. "Not only have our unique breakfast products been a hit with customers," said Hudson, "[but] the availability of our full made-to-order menu from opening to close further differentiates the Sonic concept in the quick-service segment. As a result, we are now prepared to move out of the test phase into a period of progressive rollout. It continues to be our view that expansion into the morning daypart is a tremendous opportunity for our operators not only to increase sales and leverage fixed costs, but also to enhance store-level management, which will help us continue to deliver the one-of-a-kind service that is the hallmark of our brand."

Separately, the company reported that sales during the company's first quarter, which began in September, continue to be affected by worsening consumer confidence and economic conditions. Estimated same-store sales for the months of September and October were well below the company's targeted range of 2 to 4 percent. As a result, the company says it believes there is an increased likelihood that earnings per diluted share for the first quarter ending in November will be toward the lower end of current analyst estimates of $0.33 to $0.36.

"Despite the impact that shaken consumer confidence may have on our near-term results, we remain confident about the fundamental health of our business and our core sales driving strategies, which include increased media spending, strong promotions and new product news, newly redesigned menus, and strategies to further penetrate underserved dayparts, including the expanded breakfast program," Hudson said. "We also anticipate supplementing these efforts with some targeted traffic generating efforts beginning in December, which we believe will help us restore the strong sales momentum we enjoyed before September."

Hudson added, "We still believe we are well positioned to deliver strong earnings growth during the fiscal year that began in September. We continue to target ongoing same-store sales growth in the 2 to 4 percent range for the balance of year as well as another record year for drive-in development in 2002, with the planned opening of between 190 and 200 new restaurants. These factors, together with the ongoing benefit of our ascending franchise royalty rate, support our optimism that we can once again deliver 18 to 20 percent earnings growth in fiscal 2002 with a return on equity of approximately 22 percent."