SONIC franchise CEO explains that and more in a Q&A
Cliff Hudson has served as CEO of SONIC for 23 years. In that time, SONIC has evolved from a hyper-regional brand to one of the most dominant brands in the QSR industry. Under Hudson’s leadership, SONIC pioneered a winning five-daypart menu strategy and won millions of loyal fans by offering wildly innovative products and appealing to them with humor in the enormously popular “Two Guys”, and the new “Two Girls” marketing campaigns. SONIC has grown to more than 3,500 locations across the country, and the brand is only getting started.
In this wide-ranging Q&A, Hudson maps out why SONIC’s future is brighter than ever before and how SONIC collaborates with franchisees. He unpacks future growth plans, new products and the revolutionary new mobile app that is poised to change the way customers interact with SONIC forever.
How is SONIC enhancing the customer experience today?
Hudson: One of the big things that will enhance our customer experience is our growing integration of technology. We’ve had our first market test of what we call Integrated Customer Engagement. It includes a customer’s ability to order ahead using an app, pay ahead and pull into a stall. Because the food will have been prepared before the customer gets there, it is delivered to the customer’s car in less two minutes — now the customer can be first in line every time. The customer has the ability to completely personalize and customize their order on the app, so we’re enhancing the customer experience with 21st-century tools. We’re taking the strength of what we’ve had historically, and we’re stepping it up.
Why does SONIC stand out as a franchise opportunity?
Hudson: We are a national brand with a super-regional footprint. There’s still territory for which a new franchisee can purchase development rights. That territory will have had years of national marketing, so when a franchisee opens his first store, he already will have a high degree of brand awareness. There are many markets where that is true, and that is a real advantage for a new franchisee. In addition, we have something that is rare in the franchise industry, which is an ascending royalty rate. This means that we share some of the risk with the franchisees — if their sales are lower when they open, their royalty rate will be lower as well. As their sales climb, their royalty rate will climb. They get the benefit of a national brand, even going into new markets, and the benefit of us running the risk with them in new markets.
What does SONIC look like in the next five years?
Hudson: We are approaching 4,000 units and will be on a new plateau of national brands in the next 5 to 7 years. It makes us a better risk for a new franchisee opening in a new market. There are about five states where we do not have a presence, although in the near term, we will open our first store in Hawaii. Then we will focus on other states where we have no presence. In the next five years, we will continue to focus on domestic expansion and increase our brand awareness and customer loyalty.
One of the unique things about SONIC is the culture of collaboration between the franchisor and the franchisee network. How do you continue to deliver on this goal?
Hudson: One of the things that we’ve worked on really hard is to promote a culture of collaboration. We’ve worked hard to engage our franchisees in planning regarding technology, new products and marketing programs. The franchisees are involved in the development and testing of those long in advance. As a franchisor, we go a great distance in achieving alignment with our operators because they’re so involved in the process. We’ve all achieved a great deal of success together — and success begets further success. Even in times when things are more challenging, we’ve done a good job of keeping our operators on board by keeping them involved in the process.
There is the opportunity to have fun! Our brand lends itself — with products and customer experience — to having fun. We spend a lot more time at work than we do in any other aspect of our lives, so it’s important to enjoy the people you work with and the time you share together.
How does SONIC’s five-day part strategy help franchisees generate sales throughout the day?
Hudson: About 20 years ago, we started developing beyond the traditional lunch and dinner business — which all of our competition still relies on — when we introduced our Frozen Fountain Favorites in 1996. This really blew out the afternoon and evening business. Four or five years later, we implemented breakfast, and that rounded out the five dayparts — Breakfast, Lunch, Afternoon, Dinner and Evening, or B.L.A.D.E., as we say. This has helped our franchisees leverage labor throughout the day. Rather than having a small lunch staff and a big dinner staff, our operators get to leverage their staffs all day.
If you look at most of the sandwich concepts, 75% to 80% of their business comes from lunch and dinner, whereas about half of our business comes at lunch and dinner, and half comes from breakfast, afternoon and evening. SONIC offers a very differentiated business strategy that allows you to leverage fixed assets and labor in a way the competition does not.