Around Sonic Drive-In headquarters, it’s referred to as ICE, or Integrated Customer Engagement. And it might just be the most dynamic strategy in the 3,600-unit brand’s history to date. CEO Cliff Hudson said during a June 26 conference call he was “tickled” to unroll some of these initiatives, especially amid a consumer landscape eager for more off-premises options.

Sonic shared progress and future goals of this strategy after its third quarter report Tuesday afternoon, which showed same-store sales declines of 0.2 percent across its system (it was the same at franchise and company units). Five new stores opened in the quarter and Sonic posted revenue of $118.3 million in the quarter, and net income per diluted share of 58 cents, a 32 percent lift from the prior-year mark of 44 cents. Adjusted net income per diluted share upped 21 percent to 52 cents versus 43 cents. These beat Zacks Investment Research predictions of 49 cents per share. Sonic’s stock is up 30 percent from the beginning of the year.

Thanks to ICE, and other strategic targets, which include competitive value, refreshed advertising, new product pipeline, and menu simplification, Hudson believes Sonic has the potential to climb even higher.

In regards to ICE, which Sonic hinted at in previous quarters, the main touch point is Mobile Order Ahead. Sonic started rolling it out in 27 stores in March and, as of this week, had the system live in a collection of restaurants that represent about 29 percent of the company’s total sales. Sonic expects to onboard the platform company-wide by the summer’s end. When fall comes arrives, expect to see a national campaign centered around the technology, Hudson said.

Sonic views this platform as a game-changer since it allows customers to decide when and where to order in a unique way. Guests use the app to customize, pay, and then select which Drive-In to go and pick up the food, as well as the time. Once guests check into the stalls, Sonic employees bring the food out.

Hudson said it lets Sonic communicate in a very personal way with consumers off-lot, via their mobile devices, and on-lot, with its POPS system (the digital screens referred to point-of-personalized service by Sonic, and currently present at 94–95 percent of stalls). The POPS screen has the capability to greet a mobile user by name and suggest add-on items appropriate to the time of day. It tracks order progress and will alert the customer, telling them food is on the way. Additionally, this synchronization with mobile allows Sonic to collect data from individual guests and, in turn, develop additional content, offer new features, and fit the experience as trends evolve. For instance, new forms of cashless payment are likely coming in the future.

“[It] should also help create relationships via social networks and then manage the data that we’re able to yield to leverage our core equities, one of which is the most personalized experience in quick-service restaurant segment,” Hudson said. “And we think this is going to be something we’re going to be able drive quite handsomely over time.”

Hudson said the linking of its own proprietary network through this platform gives Sonic a powerful chance to enhance its relationship with customers, and also be less reliant on third-party networks, whether that’s “20th Century television-style networks or 21st Century food delivery aggregators,” he said

“So we view this as quite a big upside for our business,” Hudson added.

To date, customers have been receiving their food within 2–3 minutes of checking into their stall. But there’s been a deeper effect than speed. The service has actually lifted consumer sentiment toward food quality in those test markets, which is not exactly a typical reaction to pick-up.

“If you think about in the [quick-service restaurant] business, one of the big challenges with speed is hot food—hot, cold food—cold, then having good order accuracy, improved order accuracy, and improved speed of service,” Hudson said. “On food in this circumstance where the customer places the order off-premises [with Sonic], and pulls in, the food’s already being prepared and then brought to them by the Carhop. We’re going to see, I’m confident, with hot food more consistently hot, we’re going to see growing performance in food perception, and I think this is going to be, when we roll this out systemwide … I think it’s going to have a tremendously positive impact on our business and our brand.”

Another part of Sonic’s ICE strategy: Hudson said the chain doubled its weight in digital media this year, and it now constitutes 20 percent of Sonic’s marketing spend. He added that driving customers into its network is “probably our biggest priority over the coming months and years with an internal goal to grow our customer database fivefold over the next five years.”

In the past 12 months, Sonic has increased its text and email databases, and will continue to target those customers for conversion into its app when Mobile Ahead and injectable rewards, as well as other value-added features, hit the marketplace.

Essentially, though, the ICE system allows core guests to interact with Sonic at all occasions, whether through digital interaction, Carhops, the drive-in screens, or via personalized rewards offers.

“Our hope and expectation is that our unmatched potential for offering personalization to [quick-service] segment can increase our guest loyalty, drive incremental visits in the near term and increase average check over the long term,” Hudson said.

Value, simplification, and development

Claudia San Pedro, Sonic’s president, who took over the role in February, said Sonic increased impressions on national cable by 10 percent in Q3, a result of shifting the majority of its spend to 15-second spots and moving ad placements. She also added that Sonic’s recent promotions, including Snow Cone Slushies, Cookie Jar Shakes, and new Crispy Chicken Tenders at $3.99, are differentiating the brand by “achieving the right balance of uniqueness, quality and everyday value.” This includes buzz generated by its Pickle Juice slushie.

Sonic continues to work on simplifying its menu following initiatives that began in spring, which focus on reducing lower velocity items that have historically stuffed throughput and resulted in inconsistent execution. The changes also aim to simplify the drive-thru menu in an effort to drive guests to core items. Another reduction round is coming in the fall, she said.

On the development front, Sonic expects to have 50–55 new openings and another 35–40 relocations and rebuilds this fiscal year. Taking net closures into account, 20–30 openings. Over the past two years, Sonic has refranchised 195 units to both existing and new franchisees as well. Franchisees have invested more than $900 million over the past five years in technology initiatives, relocations and rebuilds, acquiring existing stores, and building new ones. Sonic has 500 commitments in the pipeline for growth.

“We believe combination of regaining same-store sales momentum, looking at the investment cost, improving day-to-day profitability, combined with our studies on where we’ve got whitespace to grow and our media and marketing initiatives, all of those things combined give us confidence that we can open up new units over the next 4 to 5 years,” San Pedro said.

Fast Food, Finance, Story, Sonic