Sonic Drive-In - The Rise and Fall...And Rise Again

[Music] sonic drive-in is unlike any other restaurant that i've ever been to i mean where else are you going to find a car hop and where else are you going to find over 1 million drink combinations including their famously refreshing cherry limeade you know what i don't think that i have to explain what makes them different they're one of the biggest restaurant chains in the united states so you've probably been there or i guess they're not everywhere so if by chance you haven't i'm sure you've at least seen the commercials or i guess if you haven't seen the commercials either just look at the name you drive in order your food and they roll it out to you despite successfully holding on to a concept that's become so uncommon in the rest of their industry sonic has had some troubles so today i want to highlight some of them while talking about the rise fall and rise again of sonic drive-in all of it started with troy smith who i think is a great example of perseverance and capitalizing on opportunities here he was in his early 20s when he fought for the us in world war ii and upon returning home to a small town in oklahoma he had aspirations of starting his own business it took him some time to get things started for the next three or four years he worked at various jobs while he was saving money and planning things out before finally making his move in 1948 he and his family relocated to the larger nearby city of shawnee oklahoma a population of about 22 000 at the time where he opened a diner called cottage cafe i'll go ahead and tell you right away that things did not work out very well over at cottage cafe i believe mainly because it was so small it had a dozen stools lined up at the counter and four boots around the perimeter and the small location simply wasn't generating enough money troy smith had a family to support so he made the decision to sell the cottage cafe and use the money to open a new larger restaurant called troy's pan full of chicken which again did not work out very well well actually at one point it must have been doing all right because he tried to open more of them around the area and that's when he ran into trouble after a few years he had given up on that restaurant as well so after two failed businesses he somehow had the perseverance to try it a third time this one was a steakhouse that was located inside of a log cabin appropriately named log house and if you can believe it this one was not much of a success either but there is a bit of a twist here when he bought that steakhouse it also happened to come with a much smaller root beer stand nearby on the property called top hats and it wasn't just root beer they also sold hamburgers and some other basic foods the setup was that you would park your car nearby walk up to the stand to order and receive your food and then eat it at a table that was set up outside or more commonly just take it back to your car and eat it there it was a pretty decent small business generating 700 in sales each week but the steakhouse was the real money maker so much so that troy wanted to get rid of that root beer stand simply to make more room for parking at the steakhouse but that plan was changed the following year see while he was on vacation he happened to come across a restaurant that was taking people's orders while they were still in their car by using an intercom system it was the first time that he had ever seen it and it made him see new potential for that root beer stand he contacted the person who made that intercom system had him install one over at tophat and made some other changes that he took from other popular drive-in restaurants at the time i'm talking about designating spots for the cars and hiring car hops on roller skates to deliver the food and installing a canopy overhead those renovations were so successful that within the first week sales were two and a half times higher now up to one thousand seven hundred and fifty dollars and all of a sudden it was looking more promising than the steak house so technically troy's big break didn't happen until his fourth attempt and i think it's safe to say that it was in an unexpected form top had existed as one location for the next two years until charles papp partnered with troy to open a second location hours away in woodward oklahoma they then opened two more of them still in oklahoma over the next couple of years and then in 1959 they were disappointed to learn that there was an existing copyright on the name top tophats in the late 1950s jets were at the front of the public's mind the boeing 707 was first being used for passenger travel and the introduction of jet airplanes to the public was starting to change the world that popularity motivated top hat to adopt the slogan service at the speed of sound so now when they were forced to choose a new name sonic was very fitting so by the 1960s the sonic that we know today with the name and the concept pretty much already existed but only as a handful of company-owned locations in different parts of oklahoma from there some local businessmen liked the concept and expressed interest in opening their own sonic franchises they then made all of these franchising agreements where these people would own and operate their own sonic restaurants while paying royalty fees to the central company a pretty standard model in fast food and they used it to grow to about 200 locations over the next 13 years mostly in oklahoma but now expanding into some of the bordering states as well it was at that point in 1973 when a group of those franchise owners joined together to essentially purchase the company from troy these new owners then set out to expand the company in a way that you wouldn't even believe over the next five years they grew five times larger from 200 locations to just under 1 000 and that is where things got dangerous both their sales and their profits started to fall in the late 1970s and by the 1980s they started losing money sonic reported a net loss of almost 300 000 that year the next year they closed 300 of their locations and started hiring new leadership each year in what seemed to be a panic to try to save things so let me try to explain what happened first off there were some external factors beyond their control that were making things worse inflation was a big problem in the 1970s not to mention the oil crisis that kept happening gasoline was scarce the prices were high which was not helpful for a drive-in restaurant but internally we can obviously say that this was not the safest decision to open so many stores so fast under these conditions it got to a point where they couldn't keep up with training enough managers to run this many locations they even opened a school dedicated to it but still many of those new sonic restaurants were operated by people that didn't quite know what they were doing but probably the biggest reason for their struggles was a lack of teamwork that was allowed by these terrible franchise agreements when troy smith started making these agreements 20 years earlier it doesn't seem like he envisioned things getting quite as big as they did they were very short and informal everyone's agreement was different and honestly they didn't give the sonic company enough control over their franchisees which is probably a big reason they were able to attract so many people and open so many so fast typically agreements like this are pretty strict for almost anywhere those agreements will force every one of their restaurants to have a specific menu at specific prices to get their food from certain suppliers they'll have to contribute to advertising campaigns on one end it helps sales because it controls quality and makes all the restaurants similar and predictable on the other end it lowers cost because of economies of scale if you order a bunch of stuff from one supplier it's way cheaper than ordering a little bit from many suppliers well the issue with sonic was that they were hardly doing any of this these agreements were all over the place and gave the sonic company very little control over what was happening at the 1000 restaurants many of these franchisees were able to make their own menus and set their own prices i mean if you went to a sonic drive-in at the time you would have no idea what to expect i guess to put it simple they weren't working together and they actually spent the next 20 years trying to unite everyone throughout the next decade or so sonic adopted new franchising agreements and programs that would help them come together in most of these aspects they would start with a small group of restaurants and then grow to include more and more of them then in the late 1990s they sort of completed the unification with this multi-year program called sonic 2000 i know that sounds like a video game but by the end of it the restaurants all looked similar their menus were consistent everyone had agreed to work together in purchasing ingredients and they were all contributing a portion of their sales to fund a national ad campaign which meant increased overall marketing expenditures and this is when they introduced their familiar logo that was quickly adopted by all of the sonic restaurants it helped build their brand and put them in a great position to become one of the largest fast food restaurants in the country so that right there was the main rise fall and rise again but it's not the end of it taking a look at their number of locations we can see that the rise continued until about 2008 when the recession started which can be expected but they've been around 3 500 locations for more than a decade now a good explanation for this could be the weather obviously as a drive-in restaurant like this they get less business in cold weather they even say that their worst quarter financially tends to be the coldest one so it does make sense to stick to the more southern warmer states here's a map showing their locations from 2008 not much different today so the fact that they may have already saturated their most ideal areas would make it hard to open new ones they essentially have a restriction on them that other restaurants don't have and they may have finally reached a point where that could make it hard for them to grow and compete when looking at same store sales they are generally positive except for that rough patch there but those last two or three years could be concerning the reason that all of these graphs end at 2018 is because that was their final year as a public company that year they were acquired by inspire brands the owners of arby's and buffalo wild wings and as of today a few others in a 2.3 billion dollar deal and those new owners have made some major changes likely to help reposition and revitalize the brand i would describe the changes as making their marketing more simple and real the commercials with those two guys cracking jokes in the car they've been replaced with more true to life commercials that are supposed to depict everyday moments their new logo is kind of simpler and more retro looking and that is the logo featured in their new restaurant design that they unveiled in july of 2020. unfortunately it seems like the rebranding has received a mostly negative response and i can't say that i'm a big fan of it myself but i do recognize that they need to do something different and i can see what they're going for here let me know in the comments what do you think about sonic specifically the trouble that they've had in the past and the potential troubles that they're dealing with now do you think this acquisition and the rebranding will prove to be effective or does more need to be done i'll be honest i didn't care for that new logo at first but after seeing it for a while it's starting to grow on me and finally what do you think of the food the burgers and the ice cream and the tots how could you not like the tots and any other thoughts you have about sonic driving leave them in the comments i'd like to hear what you have to say thank you for watching [Music] you

Channel: Company Man

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Length: 11min 17sec (677 seconds)

Published: Wed Feb 03 2021