Web Exclusive | March 2016 | By Bruce Horovitz

Sonic Boom

How the classic drive-in chain is adapting to the times.
Top QSR chain Sonic serves new and innovative milk shake flavors at restaurants
Sonic recently launched a new line of Creamery Shakes, which includes the Wildberry & Lavender flavor. image used with permission.

It’s tough stuff to stay true to your roots while adapting to the times.

That is precisely the feat that Sonic Drive-In is trying to accomplish in its continued expansion from a regional darling to a national powerhouse. Certainly, such evolution has been successfully done before—just look at once-regional upstarts such as Chick-fil-A and Chipotle. But the formula for national success is not simple.

In fact, there is no formula.

That’s making life particularly interesting for John Budd, executive vice president and chief development and strategy officer at Sonic, who is overseeing the company’s brand evolution. On one hand, Budd wants Sonic to remain the same folksy but slightly off-kilter drive-in fast-food chain that made it a regional standout from its base in Oklahoma City. But on the other hand, as Sonic continues its expansion outside the South and into the Northeast and beyond, some key changes have had to be accommodated at new locations.

For example, winter weather can get nasty in the north. That’s why the chain, famous for its drive-in service and friendly carhops, is installing drive thrus or dining rooms—or both—in many of its new stores.

This is not your grandfather’s Sonic. But, Budd says, it doesn’t exactly have to be. “The drive-in is still at the center of the brand,” he says. “But we do have to make format adaptations to make sure the brand plugs into the real estate in cooler markets.”

“The drive-in is still at the center of the brand. But we do have to make format adaptations to make sure the brand plugs into the real estate in cooler markets.”

Even then, he insists, Sonic needs to “capture the brand essence regardless of the format.” In other words, Sonic needs to first and foremost be the place that offers more than 1.3 million different drink combos, sells burgers at breakfast, and dishes outside-the-box milkshakes like its new Creamery Shakes, which come in such oddball flavors at Bourbon Brown Sugar and Wildberry & Lavender.

At stake for Sonic is nothing smaller than its sea-to-sea future. There are 3,529 Sonic Drive-Ins in 45 states today, with Rhode Island the most recent state to welcome a location. That means there are just five states to go.

Two years ago, the brand announced plans to build 1,000 new stores over the next 10 years. While it’s strayed slightly downward from that track, Sonic still plans to add about 60 new stores over the next year and, in the process, continue entering the digital age of fast food with everything from new point-of-sale systems and menuboards to LED lighting at stores and continued expansion of its social marketing into the worlds of Snapchat, Instagram, and whatever is the next cool click.

One analyst says Sonic has the advantage of keeping ahead of the competitive pack.

“Sonic is the most innovative [quick serve] that we’ve seen,” says Will Slabaugh, managing director of Stephens Research, a financial services firm. “The heart and soul is the drive-in. But Sonic is identifiable in any format.”

As Sonic grows, the innovation seems to grow along with it. Since recently launching boneless chicken wings, chicken has broadened from 5 percent to 10 percent of Sonic sales, Budd says. And by adding the new shake line, it’s extended its shake offerings to 25 flavors. Meanwhile, its limited-time offers (like the most recent Ultimate Chicken Club) remain the envy of the industry.

But the key to Sonic’s successful expansion will be its continued appeal to Millennials, Budd says.

“Millennials are the generation that above and beyond … want to have products customized and personalized for them,” he says.

Slabaugh says Sonic offers more drink flavors and innovative food offers than its peers. “And they’ve put up the industry’s best comps in quick service for the past few years,” he adds. The company’s system-wide same-store sales jumped 7.3 percent in fiscal 2015.

As Sonic expands, it’s looking for ways to improve. It’s upgrading its POS equipment to a cloud-based system. It’s installing new digital menu screens in all drive-in stalls. It’s installing LED lighting in all company stores and in 900 franchise locations. It’s even testing solar panels at a company-owned store in San Antonio that draws in curious customers who want to take a closer look at the panels hoisted on canopies above the parking stalls.

Even the marketing—widely viewed among the strongest in fast food—is getting a tweak. Basketball superstar Kevin Durant joined the familiar “Two Guys” in an offbeat ad campaign. While there are no plans to add more celebs, Budd doesn’t rule it out.

“We’re taking the old service model and trying to modernize it,” he says.

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