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Sonic Will Add “Loaded Burgers,” Quarter-Pound Dogs

sonic1No longer just a regional chain with retro carhops, Sonic Drive-In establishes itself as an innovative, national QSR power with a new game plan outlined to Wall Street this week at “Analysts Day” meetings at its Oklahoma City headquarters. That strategic plan includes the menu introductions this year of a line of Loaded Burgers, a Footlong Quarter-Pound Coney dog and “Real Ice Cream” as well as a steady stream of limited-time specials.sonic_menu

And as if the 168,000 beverage variations it now offers weren’t enough, Sonic is rolling out the Ultimate Drink Machine, new equipment that will allow it to add more carbonated and noncarbonated beverage choices. Promoting all these changes will be a revised marketing strategy that shifts money from national to local buys without reducing total impressions.

Sonic’s sales have been hit hard by the recession and, lately, by weather. For the second quarter, ended Feb. 28, its same-store sales were down 13.2% for company stores, down 14.9% for franchised stores. But Sonic Chairman-CEO Cliff Hudson told analysts the chain has built a foundation in the past year that its new strategies will help “take our brand to another level.”

What Sonic did in 2009, he said, was to shift consumers’ perception of value beyond price. “Value isn’t just price, it is experience divided by price,” Hudson told analysts. Last year, the chain concentrated on improving service. Now it will promote menu-quality improvement, new product news and the skating carhops that differentiate Sonic from every other QSR, and differentiation is the chain’s focus for 2010. “There are a lot of things our competitors can do that we do. Anyone can sell a drink cheap. Everyone has a burger. But nowhere else is food delivered by a skating carhop,” said Sonic President Scott McLain.

sonic3Sonic’s TV advertising (handled by Barkley in Kansas City, Mo.) now has dual formats. One is the long-running “two guys” style with Pete and T.J. doing improvised riffs on food from a consumer perspective. The second format—the “From Where I Skate” commercials (below) added this year—highlights the Sonic experience from the point of view of real skating carhops who talk about the chain, its food and its value. In 2008, 18% of Sonic units had skating carhops. Today that’s 42% (and 56% at company locations) and research shows consumer perceptions of food, service, value and even cleanliness rise when carhops are employed, Hudson said.

sonic2Along with improved service quality, Sonic intends to improve food quality. The first step comes May 17 when the chain adds “Real Ice Cream” to the menu. The new product can be called “real” because it has 10% butterfat rather than the current product’s 5%, and to cover higher food costs, Real Ice Cream prices (shakes and desserts) will be hiked 10¢. A buy-one-get-one promotion with milkshakes will accompany the introduction of the new ice cream.

In July, Sonic adds a Footlong Quarter-Pound Coney dog, replacing the smaller (10½ inches) hot dog on its menu now. The larger product will be priced at $2.99 because, Hudson said, the chain saw Coney sales decline once it broke the $3 ceiling. “Trial-driving hooks are key in this economic environment to getting customers to come in,” Sonic VP-Marketing Dominic Losacco said of the slimmer-margin $2.99 price.

httpvh:// line of Loaded Burgers comes on the menu in September. The Ched ‘R’ Peppers burger (above) added to Sonic’s menu as an LTO last month is the prototype, although it doesn’t use the “Loaded” name. But its use of stuffed-fried jalapeño peppers as a topping is what the Loaded line will be about, said Losacco. Using “distinctive sides” such as onion rings as burger toppings lets Sonic create distinctive products at premium prices that drive trial, raise average check and “are a unique way to compete without deep discounting,” Losacco said.

Rather than discount its burgers, Sonic has been offering free sides with purchase, such as the current deal of free tater tots with any cheeseburger. Losacco said that 80% of 90% of customers who get the free-side deal also buy a full-price (high-margin) beverage. “With our offer [last year] of free medium onion rings with a Steak Melt Toaster sandwich, 91% bought a drink,” said Hudson. “I wonder about that other 9%.” The free-sides offers will continue.

Finally, the Ultimate Drink Machine equipment broadens Sonic’s positioning as “Your ultimate drink stop” by increasing variety and deepening customization with drinks, Losacco said.

In 2009, Sonic spent a total of $184 million on advertising, with $96 million channeled to national media (primarily national cable TV). This year, total spending will decrease to $170 million and national spending will drop to $70 million so that a chunk of its ad funds can be returned to local markets for use with local TV or radio, outdoor, social media or whatever else is most effective. The chain actively monitors its Twitter conversations, Losacco said.

Losacco outlined Sonic’s new “Footprint Strategy,” which evaluates individual markets based on the number of people living within 3 to 10 miles of a Sonic unit divided by the total number of people in the entire market. That math divides Sonic’s system into 49 trading markets with a “footprint” of 60% or more; 40 markets at 40% to 60%, and 47 markets calculated at 40% or less. With the new tactic of shifting media funds, those 47 “low-footprint” markets will see an average increase in media impressions of 85%. Sonic will continue to run 52 weeks of national cable TV ads.