- WHITE PAPERS
Sonic released its second fiscal quarter results earlier this week, which included a company-owned same-store sales increase of 3.3 percent (without the comparative Leap Year day).
During Monday's earnings call, CEO J. Clifford Hudson attributed the positive numbers to improved customer service initiatives, among other efforts.
"For this fiscal year, there really are four initiatives that resulted in our same-store sales growth rate during the first six months of the year, and we expect those to continue as the year progresses. That would include a more effective media strategy, innovative product pipeline, a layered daypart promotional strategy and our iconic television creative," Hudson said.
The company's investments in media have been drivers for both same-store sales and new store development, he added. Sonic allocated its media spend from local to national television earlier in the decade and experienced the same positive results. Beginning in January 2013, approximately 70 percent of Sonic's media budget went toward national cable, up from a 50/50 split previously.
This shift, Hudson said, should increase the number of times the average customer or potential customer in every market will see the brand's commercials.
"We expect this increase to drive increased sales in all of the markets. And we also expect this to have a positive impact on new store development over time," he said.
New product news
Sonic is also focused on layering its daypart promotional strategies. In contrast to many other QSR players, more than 50 percent of Sonic's sales occur outside of lunch and dinner hours.
"Growing each daypart is a critical element for us in driving same-store sales growth," Hudson said. "The promotional strategy features a variety of our products in a relatively short 60- to 90-day timeframe to drive sales across all dayparts."
The promotions will focus on Sonic's "distinctive" products. Hudson said the company will have new product news across all dayparts this year. During Q2, those products included the Philly steak grilled cheese sandwich, the BLT ultimate grilled cheese sandwich and two new premium breakfast toasters.
Thus far in Q3, Sonic has rolled out new spicy jumbo popcorn chicken for lunch and dinner, sweet potato tots and a new molten lava cake sundae.
"In addition, we're excited to be introducing new freshly brewed iced green tea. We're one of the leaders in offering a product of this kind in the QSR, and it's available in regular and diet. This addition increases the number of drink combinations at our drive-ins and it also demonstrates our continued commitment to innovation in the drink category," Hudson said.
Sonic is also in the process of implementing a new point-of-sale system, which will provide integrated back-office tools such as labor management and inventory control to achieve better margins.
"We believe this point-of-sale system initiative, combined with complementary supply chain rationalization, will benefit the entire Sonic system in the mid-term and for years to come," Hudson said.
Sonic has also improved store-level profitability through its new, smaller building prototype that the company expects to accelerate in fiscal 2014. The new building design reduces non-land costs by up to 20 percent. It will be Sonic's primary layout for new stores in the future.
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