Sonic to replace point-of-sale system

Sonic Corp. will add a new point-of-sale system to all company-owned restaurants in the 2014 fiscal year, Sonic chairman, chief executive and president J. Clifford Hudson said Monday in a call discussing first-quarter earnings.

“We expect to see improved margins and revenue from the implementation as we roll this out across our system,” Hudson said, adding that about 70 drive-ins currently have the POS in place.

“The implementation is taking a little longer than we would have hoped at the outset, but we expect to have the systems in all of our company's stores by this summer,” he said. “And then, we would work to continue to roll out with our franchisees in fiscal years 2015 and 2016.”

The system will be integrated with the Oklahoma City, Okla.-based drive-in operator’s two-year development of a “point-of-personalized service” system, which Hudson said works well with the drive-in format, where customers spend time in their cars in the stalls and also use mobile technology and social media. About 60 company units are in test with the POPS system, executives said.

“Because of the physical drive-in format, where consumers spend more time in a stall ordering, waiting for the food and having a dinner than they spend with many of our competitors, it's our view that we have the ability to maintain and connect with the customers with targeted messaging and customized promotions in a way that our competition doesn't really have that opportunity,” Hudson said.

The system will allow the company to drive engagement and promotions “in a more targeted and personalized way,” he added.

The operator of the nation’s largest drive-in chain will also further expand its presence in car-centric Southern California, the company said.

Sonic has signed a franchise agreement with Coast to Coast Commercial LLC to develop 10 new drive-ins in the Los Angeles market over the next seven years, with the first two to open by August 2015. In June, Sonic struck an agreement to open 15 new drive-ins over six years, with five in San Diego County and 10 in West Riverside County.

“Coast to Coast has been a valuable franchisee in the Southern California market since 2007, and their commitment for new locations in an area with such high consumer demand for our brand is further progress toward our goal of 300 California locations by 2020,” said Sonic senior vice president of franchise sales and international development Bob Franke in a statement.

Coast to Coast already owns and operates six other Sonic units in Southern California.

Sonic reported Monday a 33.8-percent increase in profit for the Nov. 30-ended first quarter. Net income rose to $8.2 million, or 14 cents a share, an increase from $6.1 million, or 11 cents per share, the previous year. Revenue rose slightly to $93.5 million.

Same-store sales grew 2.2 percent systemwide in the quarter, with a 2.3-percent increase at franchised units and a 1.9-percent rise at company-owned locations.

Executives attributed the sales boost to its Summer of Shakes promotion, which spilled over into September, its new Spicy Chicken Sandwich, and a Cheesecake Bites dessert.

Analysts greeted the results favorably.

“First-quarter operating earnings came in essentially in line with our projections on slightly lower revenues and same-store sales,” said Lynne Collier, an analyst with Sterne Agee.

However, Collier warned that unfavorable weather in December and early January were leading her group to “tweak” sales and earnings per share for the second quarter.

Forecasts weigh weather heavily, said Alexander Slagle, an analyst with Jefferies, “particularly given Sonic’s drive-in format.”

However, “we believe all key underlying drivers in the business are firing on all cylinders (media strategy, creative, better service, new product news),” Slagle said, adding that he expected same-store sales to continue in the 3-percent range.

Nicole Miller Regan of Piper Jaffray & Co. said: “We believe previously deployed store-level initiatives could help drive [same-store sales] momentum and leverage of labor and fixed costs over the course of the year, but recognize that it appears recent quarter-to-date trends have experienced some unfavorable impact from weather.”

Sonic has more than 3,500 drive-ins across the U.S.

Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless