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Sonic Looks to Conquer Tougher Markets on Encouraging Q1 Results

January 7, 2014
URL: http://www.entrepreneur.com/article/230672

Fresh off a solid first quarter, drive-thru chain Sonic is doubling down on expansion in the highly competitive markets of the Northeast and California.

The nation's largest chain of drive-in restaurants saw system-wide same-stores sales rise 2.2 percent during the first quarter, powered by a 2.3 percent increase at franchise drive-ins, the corporation reported Monday. Sonic's first quarter net income grew to $8.2 million, a 33 percent increase from $6.1 million a year ago.

"For the remainder of 2014 we will focus on our multi-layered growth strategy, which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow, increasing royalty revenues and new drive-in development to build shareholder value," Sonic CEO Cliff Hudson said in a statement

Sonic's drive-in development aims to push the chain to establish a wider coastal presence, with expansion opportunities including California and New York. The Oklahoma City-based company has turned to local franchise partners to grow the chain from the existing 3,500 drive-ins that already dominate the fast food landscape in the central U.S.

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Sonic hopes to have as many as 300 drive-ins in California by 2020, and this morning announced plans to bring 10 new drive-ins to the Los Angeles market over the next seven years. In 2013, Sonic announced plans to open drive-ins in relatively unexplored markets in California, Washington and North Dakota.

Sonic also announced its expansion into upstate New York, as seasoned franchisee Kevin DiPirro signed an agreement to bring eight new drive-ins to Buffalo, N.Y., and the surrounding area in the next six years. The agreement, along with the six new locations in Rochester, N.Y. announced last June, will more than triple Sonic's presence in the state. 

As Sonic expands to areas more accustomed to chilly winters, franchisees are testing revised drive-in prototypes. With cold-weather customers in mind, Buffalo drive-ins will feature an enclosed dining area, where guests can eat in their car or seated at a table.

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