Johnnie Davis
Anna Sterling
Zane Barnes
Nolan Bosworth
Shaina Weaver
Kimberly Smith
Clay Jones
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Sonic’s Main Competitors:
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McDonalds
Burger King
Wendy’s
Jack-in-the-Box
Main points:
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Leadership
Marketing
Financial Outlook
Globalization

Original location in Stillwater Oklahoma in
1953
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First franchise location in Woodward
Oklahoma in 1956
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1958 new openings in Enid and Shawnee
Oklahoma
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Growth in the 1960’s

Vast expansion in the 1970’s
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Reorganization of the 1980’s
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Opened 1000th location in 1987
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J. Clifford Hudson CEO
 Been at Sonic for last 34 years
 Has been president since 1995
 Became CEO in 2000

Average drive in profit increase

Average drive-in sales increase
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And increased sales at the store level
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Renee G. Shaffer CIO
 Became CIO in 2005
 Prior to appointment of CIO she served as
Treasurer of Sonic Corp.

Stephen C. Vaughan CFO
 Member of Sonic Corp. since 1992
 Prior to appointment of CFO he served as a Vice
President and Treasurer
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McDonald’s
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Burger King
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Wendy’s
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Jack-in-the-Box
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McDonald’s: $924,709
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Burger King: $760,259
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Sonic: $1,031,085
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Holds true to American Values
– Drive-In with a retro feel
Stick to what made us so popular
– Convenience with fun, friendly customer service
Menu consists of made to order American classics
– Hand battered onion rings, tator tots, burgers, chicken
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finger and even fried pickles
Full menu all day
Dollar menu
Best and only option for drinks
– More than 168,000 drink combinations
– First to offer a happy hour
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Both older and newer generations
– Classic American feel of carhops intrigues all
generations
•
First in the industry to air commercials
hundreds of miles away
– Raises awareness and helps with expansion
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“Two Guys” advertising campaign
– Aimed at grabbing people’s attention with humor
•
http://www.youtube.com/watch?v=6qx6pmX
G1Ug&feature=related

We are the best in the world at giving a classic
dining experience in a hurry!
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Humility + Will
J. Clifford Hudson: CEO and Chairman of the
Board
Started as legal council in the 1980’s, then CFO
and COO
Since 1995:
– Drive in sales have grown from $602,000 to $1.1
•
million
– Brand awareness has doubled
– Revenue is 7 times greater
No superstar status or private jet
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No link to making a great leader
Mr. Hudson has the lowest numbers by far
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Sonic
– Sales: $792.97 million, up 4.4%
– Income: $53.27 million, down 6.5%
Jack in the Box
– Sales: $2.54 billion, up 1%
– Income: $118.21 million, down 23%
Burger King
– Sales: $2.55 billion, up 9.9%
– Income: $186 million, down 10.2%
McDonalds
– Sales: $23.52 billion, up 3.2%
– Income: $4.31 billion, down 22.6%
Past Year
Past 10 Years

-SWOT analysis must be customer focused to gain
its maximum benefit; strength is really meaningful
only when it is useful in satisfying the needs of a
customer. At this point, the strength becomes a
capability (Marketing Strategy, 1998)

Internal Factors
 Strength- Atmosphere/ Happy Hour
 Weakness- Bad weather
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External Factors
 Opportunity- New Markets/International
Expansion
 Threat- Food borne illness
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A marketing strategy is the process of
anticipating future events and determining
strategies to achieve organizational
objectives in the future
The marketing mix or four P’s is made up of
product, place, promotion, and price
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Products offered by sonic are:
 Food
 Beverages
 Customer service
 Brand image
 Convenience
 Atmosphere
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Place or distribution strategies are concerned
with making products available when and
where customers want them
 Sonic does not use large centralized distribution
center, only uses local suppliers.
 Sonic locations are easily accessible and visible
 Sonics are open from 6 a.m. to 12 p.m. Monday
through Saturday and 11 a.m. to 11 p.m. on
Sundays
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Promotion’s help inform, educate, persuade,
and remind the public of the benefits offered
 Advertising
 Public relations
 Sales promotions
 Philanthropy
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Price is what a buyer must give up to obtain a
product
Price can be the most flexible element of the
four P’s
 Due to the current rescission disposable personal
income has been dramatically decreased
 Dollar menu also know as a value menu is a
competitive weapon
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A firm without a good marketing strategy is
destined to be over taken by its competition
McDonalds is the leader but has no barriers to
keep its competitors from imitating their
marketing mix
Television advertisements are the most
effective way of reach mass amount of
customers
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The weakest link in the marketing mix is
price; although easily adjusted and very
effective the prices of the burger segment
can not be reduced much more
New and creative products can create
temporary increased sales
Sonic will have to continually manipulate
their four P’s to increase the value to the
customers and increase its revenues
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The quick-service restaurant industry is a highly competitive
market that focuses on placing an emphasis on marketing
similar products with a different brand image.
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In the quick-service industry they compete on speed and
quality of service, food variety and quality, the number and
location of other restaurants, attractiveness of facilities,
effectiveness of advertising and marketing promotions, and
new product development.
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Future growth in the fast-food restaurant industry depends
on how well retailers are able to innovate, provide value for
money, and keep up and surpass competitors through their
own competitive strategies.
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“America’s Drive-In” sums up Sonics’ strategy.
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Sonic is primarily within the United States, and offers more than 3,500
drive-ins from coast to coast.
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Sonic recently added a dollar-menu to compete with their major
competitors.
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Sonic strives for potential customers to feel like they are the best option
for drinks. Customers can order more than 168,000 drink combinations
making Sonic “Your Ultimate Drink Stop!”
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Sonic was also the first of our competitors to offer a happy hour every
day to encourage customers to come in for half-price drinks.
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Sonic is unique from other fast-food restaurants in that food is brought
to you by carhops.
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Companies try to compete at the lowest cost
possible and differentiate themselves through
their advertising.
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Each of the quick-service restaurants
incorporate their own themes and characters to
help bring out their core values, ideas, and
products.
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Effective advertising is necessary to compete
with and stand out from each of the large quickservice chains.
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Sonic took the comedy route for their
advertisements.
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Sonics’ new advertising and commercials are
meant to appeal to the younger generation
as well as the original customers.
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They use the slogan "It's not just good... it's
Sonic good," implying a higher standard of
quality than normal fast-food restaurants.
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Growth is another important aspect of Sonics’ continued
success. Because this industry is highly competitive,
growth is very important to keep market share.
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Sonics’ buildings stand out from competitors because they
have a new, unique look. This is the second redesign that
they have had in 10 years.
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Sonic Corporation says that their primary “objective is to
maintain their position as, or to become, a leading
operator in terms of the number of quick-service
restaurants within each of their core and developing
markets (Sonic 10-k).”
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The Current Market
 The restaurant industry, like most other industries, has felt
the wrath of the current, global economic downturn.
 Sonic has seen a decrease in earnings per share since 2007
and Value Line revenue estimates for 2009 are down
almost $5 million.
Year
2004
2005
2006
2007
2008
2009
Average earnings growth per year:
SONC
MCD
BKC
0.68
1.93
0.05
JACK
1.14
0.81
1.97
0.44
1.24
0.88
2.30
0.24
1.52
1.01
2.91
1.09
1.89
0.97
3.67
1.38
2.00
0.85
3.85
1.45
2.05
4.37%
12.73%
186.73%
10.67%
(EPS figures from Value Line and respective 10K’s)
Sonic’s slow earnings growth is attributed to reduced consumer traffic due to the
economy and a corresponding rise in input prices. Sonic is not seen as a “value” fast
food establishment and this has kept its growth slower than its competitors.
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Debt Structure
 Sonic has $780 million in total debt; $733 million of this is
long term.
 The last two fiscal years the company has posted current
liabilities in excess of current assets. In times of economic
prosperity this can be viewed as positive by investors as
long as the company is growing.
 In Sonic’s case tapping our ample retained earnings makes
the most sense.
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Z-Scores
 The Z-Score measures the probability of bankruptcy as a function of
current assets, current liabilities, total assets, net sales, retained
earnings, equity, and operating income.
 On a more positive note, Sonic’s more than adequate retained
earnings and solvency left it with a Z-Score second only to McDonalds
when compared with its closest competitors.
Z-Score Scale
>2.99=Safe Zone
1.8-2.99=Grey Zone
<1.8=Distress Zone
Firm
McDonalds
Sonic
Burger King
Jack in the Box
Z-Score
4.37
3
2.51
2.38
The restaurant industry and the quick service
segment in particular have a much better three
to five year outlook than the current conditions
allude to.
 The market is not getting smaller, people just
aren’t eating out as much.
 Value oriented fast food chains could actually
see gains, as consumers forego the sit down
restaurants in favor of the cheaper fast food.
 Sonic will have to focus on its strengths, new
value menu, and increasing market share.
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Sonic’s Strengths
 50’s classic drive-thru theme commands slight price
premium and creates a market niche.
 New value menu starting to increase sales.
 Summer ad campaign and later hours
 Widest drink selection of any quick service chain
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Sonic must-do’s
 Defend niche and continue expansion in the south
 Find ways to expand into northern states
 Increase popularity of new value menu
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The average revenue growth rates for the last six
years and positive sales change in the last twelve
months are good signs that the new value menu and
long term growth initiatives are having and impact.
Year
2004
2005
2006
2007
2008
2009
Average revenue growth per year:
Revenue Growth Rates
SONC
MCD
(Revenue figures from Value Line)
BKC
JACK
536.4
19065
1754
2322.4
623.1
20460
1940
2507.2
693.3
21586
2048
2765.6
770.5
22787
2234
2876
804.7
23522
2455
2890.6
800
23500
2620
2570
7.07%
3.59%
6.98%
1.95%
(Percentages in pie chart from QSR
Magazine, 2008)
(Sales change percentages from QSR
Magazine)
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Summary and Growth Rates
 Sonic is leading the competition in both annual revenue growth and
annual positive sales change.
 EAR Valuation method has the current stock price undervalued by
almost $10.00 using 10.6% required rate of return.
 Value Line growth rates: Sales (16%), Cash Flow (13.5%), Earnings
(15%)
 All of these measures point to a futures rise in share price and increase
in market share. Sonic is positioned very well in the event of an
economic turnaround.
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Sonic Corporation has grown to be a
competitor in the quick-serve food industry
Through Sonic’s unique atmosphere and
marketing campaigns, along with their
financial strategy, they have established
themselves amongst some of the largestnamed restaurants
Sonic has also made themselves known
across borders in Mexico, and we will see if
this continues