Sonic has been America's favorite drive-in destination for decades,
but in recent years, it's struggled to keep up with the competition.
Keep watching to discover why it's in trouble and to see if there's any hope for staging a comeback.
When it comes down to the hard numbers, things just aren't adding up for Sonic.
That wasn't always the case. In the early 2010s, it was bringing in steady revenue as the nation's
fourth largest fast food burger chain. While it was enjoying a so-called "Sonic boom," its major
competitors saw their sales stagnate. But then around 2015, things started to change, as Sonic
began facing quarter after quarter of falling sales, a trend that didn't let up until 2019.
Sonic continues to rank well below its major fast food competitors when it comes to sales
and revenue. In Restaurant Business Magazine's 2019 ranking of the top 500 restaurant chains,
it came in at number 13, behind McDonald's, Burger King, and Wendy's. Other notable popular chains
like Chick-fil-A, Chipotle, Taco Bell, and Subway also outrank Sonic in terms of sales and revenue.
"If you ain't first, you're last."
One reason Sonic lags behind its competition is because it simply doesn't have as many
locations as some of the other big names. According to the company,
the weather is to blame for that, as it can be difficult to operate a drive-in model
at certain locations during the snowy winter months. It makes sense, after all,
that carhops wouldn't fare so well delivering burgers on roller skates on slushy blacktop.
In general, there's plenty of evidence about how bad weather can have negative impacts
on the restaurant industry as a whole. Furthermore, scientists have noted that
climate change is causing bad weather like rain and snowstorms to become more extreme,
which is obviously not ideal for a trip to the drive-in. Just how much all this has
affected Sonic's bottom line is unclear, but we do know that the company has specifically
cited "unfavorable weather conditions" in the past when reporting negative quarters.
"Let's just stay ahead of the wind."
Some of Sonic's woes can be traced to the constant
race to the bottom among fast food giants when it comes to prices. Big name chains are
always evaluating their deals as they aim to squeeze out the competition dollar by dollar.
These price wars really kicked into high gear in 2017 with the launch of McDonald's
reformatted value menu. In response, other major fast food chains began tweaking their
own value menus by offering an array of items at heavily discounted prices.
But Sonic was hesitant to stray from its own business model, which may now be backfiring
on them. The company does offer a range of constantly evolving deals and promotions,
not to mention its daily happy hour half-price drinks and slushes. But unfortunately for Sonic,
it seems that many consumers just can't help but answer the hypnotizing call of the dollar menu.
Another factor in Sonic's struggling sales is the changing attitudes among consumers
when it comes to what they want from a fast food dining experience. In general,
Americans have become more health-conscious, seeking out lower calorie options made with
fresher, more natural ingredients. That hurts Sonic, which has been rated on more than one
occasion as the unhealthiest fast food chain in America. A quick peek at their menu shows
that even the simplest cheeseburger and fries combo can run you more than 1,000 calories,
and it only goes up from there. In a world of health-conscious consumers,
Sonic may only cut it on a cheat day, and that's just not good for business.
Another share of the market that Sonic has been struggling to connect with
is the younger demographic. The chain consistently ranks low in surveys that
ask millennials and Generation Z about their favorite fast food brands. That's a big problem,
especially when you consider that estimates show that within the next decade, millennials are set
to be the biggest spenders on food and beverage products. Sonic knows that it needs to appeal
to young people to stay relevant. They've employed a number of strategies to do so,
including more digital advertising and targeted social media campaigns. Unfortunately, though,
it seems that these efforts haven't quite paid off as well as they possibly could.
Sonic has been working hard for years to revive its brand and overcome its business
struggles. These efforts have included a brand new restaurant design, a new marketing campaign,
and the use of innovative technology. That last initiative has included an order-ahead feature
on the Sonic mobile app as well as a partnership with Amazon that lets customers order simply by
asking Alexa. One other surprising factor has also proven itself to be a major boon for the company,
as the COVID-19 pandemic has led to skyrocketing sales at Sonic in 2020.
According to Paul Brown, the CEO of Sonic's parent company Inspire Brands,
this success is thanks to the chain's, quote, "car centric model." The drive-in concept has always
encouraged people to pull up and enjoy their meal from the comfort
of their own cars. That's certainly an appealing option in a time of quarantine,
with so many safety precautions in place and indoor dining options so limited.
"Company officials say because their business is mainly drive-in,
they're already practicing strict distancing policies."
Sonic says it has become one of the top performers in the industry this year,
as it's seen a 30 percent spike in sales. Furthermore, new users on the chain's mobile
app more than doubled when COVID-19 cases surged in the spring of 2020. Sonic's new strategies for
growth were well underway even before the pandemic began. It remains to be seen if they'll be enough
to keep their nostalgic legacy alive in the long term. In the meantime, the company can
only hope that there are still enough people who will enthusiastically say, "This is how I Sonic!"
"Trying to get out of my comfort zone,
and these guys keep me pulling me back in. PULLING ME! BACK! IN!"
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