Analysis of Sonic Corporation
In 1953 Sonic Corporation was founded by Tony Smith in Shawnee, Oklahoma
under a different name of the Top Hat. Tony Smith started the company as a
drive-in restaurant featuring hot dogs, hamburgers, and french-fried onion rings.
In the mid-50s Smith was asked by Charles Pappe for assistance in establishing
a similar restaurant in a rural town also located in Oklahoma. This was the
beginning of a partnership between the two men .
In 1991 Sonic Corporation was the fifth largest chain in the fast-food
industry, servicing in the hamburger segment, behind McDonald's, Burger King,
Hardee's, and Wendy's. Sonic has and is still carrying the tradition of being a
high-quality franchise-based organization in the Sunbelt states. The following
case will be broke down into five different stages beginning with early
strategies, problems, new strategies, a ratio analysis, and a recommendation.
UNDER TONY SMITH
Tony Smith introduced the Top Hat as a drive-in restaurant that reduced
start up cost by not having eat-in space. This new restaurant featured drive-in
stalls for automobiles, that were equipped with a two-way intercom enabling
customers to order as soon as they drove in, opposed to conventional practices
of waiting for a carhop to take an order. Delivery of the fresh fast-quality
products was do to the unique design of the kitchen, and the use of carhops.
Sonic Corporation preferred to do things as easy as possible and avoid
sophistication. Another strategy Smith implemented was a collection of
franchise royalties. This was done in a way such that Sonic franchise holders
were required to purchase printed bags at an additional fee that Smith arranged
through a paper-goods supplier.
Pyramid-type selling arrangements were formed by franchisees in money
making efforts by starting other franchises through friends. This lead to
original store managers having a percentage of their own store earnings and a
portion of the new operation of the recruited friend manager. This idea further
developed to multi-ownership of almost all Sonic operations as store managers
were also part owners. This concept of pyramid-type selling carried Sonic
forward with rapid growth.
In the later-70's almost one new Sonic store opened per day. The rapid
expansion of Sonic was growing at an uncontrollable rate. With such rapid growth
some stores failed. In these cases Sonic assumed control over failed franchise
units, driving the number of company owned restaurants from 3 in 1974 to 149 in
1979. This rapid expansion of Sonic was a short lived frenzy which resulted in
numerous failures do to lack of planning, market analysis, and requirements for
unit managers. The company was forced to operate the failed franchise as
company units in most cases, to protect the franchise name and reputation. A
loss was posted...