Sonic: America’s Drive-In - Case Analysis
Table of Contents
i. General Background / Key Issues
a. Internal Analysis
b. External Analysis
c. Business-level Strategy
d. Corporate-level Strategy
e. Structure and Controls
f. Strategic leadership/ Entrepreneurship
iii. Case Recommendations
General Background / Key Issues
Sonic was created over 50 years ago, the enterprise started as a small drive in Shawnee, Oklahoma. The company started out as “Top Hat Drive-In” but was changed to “Sonic” because the old name was copyrighted and the slogan their “Service With the Speed of Sound.” Business flourished from 1973 to 1978 with the opening of 800 new stores. However, with the opening of all these stores caused taste variation between each of the stores, even in the same city. This was because each franchise bought ingredients from different vendors. All this caused management to buyout all the franchisees in 1986 for 10 million dollars. The debt from this acquisition was repaid by 1995 after 2 stock offerings. So after all this drama in the company, things got a lot better for Sonic thereafter. They started “Sonic 2000” which made their stores more visually appealing. Sonic also added a new menu items and standardized the menu for all stores in the chain, thus improving the variation in the taste across stores. From 1996 to 1997 the brand recognition increased 23 percentage points from 44 to 66, meaning the brand was becoming increasingly aware to the American people.
In Competition with Sonic are McDonalds, Burger King, and Wendy’s. These three companies operate on a much larger scale and are more expanded across the nation than Sonic. They all compete to offer a quick and delicious meal. However, Sonic offers a more diverse menu and the “Drive-In” experience. Personal carhop service and unique made to order menu items are also a staple for Sonic. The differentiation of menu items helps avoid price wars between them and their big three competitors. They also serve their items in more expensive form because the “increased quality and customer satisfaction are worth the cost.”
Expansion is the future of Sonic Corporation. Most stores are located on the Sun Belt because the warmer weather year round is better for business in the drive-in system. They are expanding more in the north because of the increased financial opportunities. If we could suggest anything to the company it would be that they should increase the number of stores overall and create that same experience so that their customers will keep coming back. As long as they make stores in areas of the country that are low risk with a chance of high reward, that will be the best strategy. High risk stores will never be a good idea for Sonic because their company structure cannot take on as much failure as McDonalds could. Sonic cannot compete with price as much so they must keep their product diversified. Offering other kinds of burgers, shakes, etc. would be an excellent idea.
The effective management of the franchise is a core competency to Sonic. Sonic has introduced “Sonic 2000”, a multi-level strategy that unifies the operation activities among all the franchise stores, increases brand awareness and fosters brand identity. Also, Sonic has achieved a high corporation level between the company and its franchisees through advisory councils and a national franchisee association, making sure they are actively involved in the company’s operations. As a result, Sonic has the lowest franchisee turnover rates in the quick-service restaurant industry, giving Sonic a sustainable competitive advantage over its competitors.
In the human resources area, the strategic leadership of CEO Hudson and President Moore, along with well trained and experienced franchisees, Sonic has continuously enjoys high sales growth over time....
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