Sonic Case Study

2178 WordsMar 24, 20059 Pages
Executive Summary Beginning with one restaurant, Sonic has become the largest drive-in chain in the United States. While they are smaller than their competitors, they are still leading in sales growth, customer loyalty and customer satisfaction. Sonic restaurants saturate the southern U.S. This gives them the opportunity to expand to other area. However, Sonic is reluctant due to the colder climates and their basis as a drive-in restaurant. Sonic should look at adding or combining capabilities to it 's restaurants to increase competitiveness and make it easier for them to expand into other areas without limiting themselves. Situational Analysis In 1953, Troy Smith, the founder of SONIC and World War II veteran, was…show more content…
Data collection and analysis section Net income for Sonic increased 21% in 2004 while total revenues rose 20%. The key factor for growth last years was because of expansion. Franchisees opened 167 new drive-ins with partner drive-ins numbering 21. Sonic now has 2,885 restaurants. Looking at the ratios, there is a signal that Sonic is using financing for expansion. They are currently using $14.1 million of a $125 million line of credit that expires July 2006. Sonic also has long-term debt of $38.1 million and $22.2 million that matures in 2005 and 2006 respectively. They plan to refinance $30 Million of that debt using the line of credit. To confirm the ratios, Sonic plans to use the line of credit to finance new drive-ins, acquisitions, purchase of common stock and other purposes, as needed.1 Consolidated Statements of Income 2 Year ended August 31, 2004 (In thousands, except per share data) Revenues: Partner Drive-In sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 449,585 Franchise DriveIns: Franchise royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,518 Franchise fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,958 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,385 536,446 Costs and expenses: Partner DriveIns: Food and

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