Sonic Case Study

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Instagram Case Study: Sonic Drive-In's #SquareShakes Campaign

When it comes to increasing user engagement on social media platforms like Instagram, posting photos of food, whether at a fast food restaurant like McDonalds or a fancy eatery in Paris, is almost guaranteed to boost social shares and garner likes. Recently, Sonic Drive-In capitalized on this trend and leveraged Instagram's high levels of engagement by developing a campaign designed specifically for Instagram. In this case study, we examine how creating a unique, "Instagrammable" product—in this case, a series of "square shakes" made by culinary Instagrammer Chef Jacques LaMerde—and allowing patrons to pay for the frozen treat simply by posting an Instagram photo (with the hashtag #SquareShakes) helped Sonic grow their Instagram channel and increased social engagement among Coachella's social media-obsessed audiences. 

Instagram Marketing Case Study Overview

Sonic Drive-In's #SquareShakes Instagram campaign featured square-shaped creations that were sold on April 16 at the Base Camp of the Coachella Music and Arts Festival. In addition to the unique shakes themselves, which were created specifically to capitalize on Instagram's popularity, the campaign was noteworthy for its "shop on demand" integration that allowed consumers to choose a milkshake through Sonic's ad on Instagram, select a flavor, have the special shake hand-delivered (an innovation made possible by a geo-fence overlaid on the festival), and pay for the drink simply by posting a picture with the hashtag #SquareShakes.

For more examples of how brands were marketing with Instagram at Coachella, see our post here.

Goals

  • Primary Objective — Leverage the Coachella Music & Arts Festival's massive audiences and boost brand awareness on Sonic Drive-In's Instagram channel and across other social media channels by encouraging users to purchase, like, and share photos of the restaurant's specially-designed desserts using the hashtag #SquareShakes.
  • Secondary Objective — Introduce Sonic's new premium shake flavors using a creative Instagram tie-in. (The shakes were designed by Instagrammer Christine Flynn, also known by her Instagram handle, Chef Jacques LaMerde.)

Approach

  • Sonic partnered with famous Instagram chef Jacques LaMerde (who has 128K followers on Instagram) to create a unique product that would engage users while simultaneously paying homage to Instagram's previously-confined-to-a-square format.
  • The restaurant chain integrated "Shop On Demand" features into their Instagram account to allow social media users to select shakes through the app, then utilized geo-targeting innovations to hand-deliver the desserts to customers.
  • Consumers "paid" for their frozen treats simply by taking a photo of the shake and tagging the post with the hashtag #SquareShakes.

Instagram Case Study Results

Sonic's Instagram campaign was a creative way to bring awareness to a new, unique product, build a relationship with young audiences (who are highly engaged with Instagram, especially during Coachella), and increase the number of followers on Sonic's brand Instagram account. In addition to generating over 26K likes and garnering close to 1K comments, Sonic's Instagram campaign accomplished the goal of increasing the brand's Instagram followers—on April 4th (before the campaign launched), Sonic reported 118K followers; after the campaign, the number of followers on the company's account jumped to 129K, an increase of 11K (Nation's Restaurant News).

Instagram Case Study Takeaway: What Brands Can Learn From Sonic

Designing a product specifically for a social media format was a bold move for Sonic. Though the campaign did enjoy a moderate degree of success and featured noteworthy "Shop On Demand" integrations and geo-targeting technology (which we predict will only become more popular in the coming months and years), it's likely that the Instagram users purchasing the shakes (and publishing user-generated content (UGC) with the branded hashtag) simply didn't have enough followers or engagement to give the campaign traction on social media.

For Sonic, collaborating with a high-reach Instagrammer to create just one #SquareShake post would have likely generated greater engagement (in the form of likes, comments, and social shares) and more word-of-mouth publicity than the sum total of the campaign's UGC.

Also See Our Posts On:

How Brands Marketed On Instagram At Coachella

Why Brands Need An Instagram Marketing Strategy

What Is Instagram Influencer Marketing?

10-Step Guide To Developing An Effective Influencer Marketing Strategy

April 28, 2016By Mediakix Team

Sonic Case Study

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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 living in Shawnee, Oklahoma. Troy dreamed of owning his own restaurant business. In fact, he had already tried twice.
Troy first owned a small diner called the Cottage Café. The income he received was barely enough to make a living for himself and his family. Troy sold the Cottage Café and bought a bigger restaurant. His next business, the Panful of Chicken, was so successful that he tried opening more. Unfortunately, fried chicken didn't do well in early 1950s Oklahoma and Troy closed his Panful of Chicken restaurant.
Troy then owned a steak house that had a root beer stand attached. This root beer stand, called The Top Hat proved more profitable and eventually outlasted the steak house.
While traveling to Louisiana, Troy saw some homemade intercom speakers in use at a local hamburger stand. He contacted the innovator in Louisiana and asked him to make an intercom for the Top Hat. He then hired some local electronics wizards to install the system. He then added a canopy for cars to park under and servers to deliver the food right to customers’ cars. During the first week after the intercom was installed, the Top Hat took in $1750.
With his new partner, Charlie Pappe, four more Top Hats were opened. However, their lawyers informed them that the Top Hat name was copyrighted. They changed the name to Sonic to go along with the restaurant slogan of "Service With the Speed of SoundSM."1
In 1973, a group of ten principal franchise owners became the officers of the company. Shares were offered to each store owner. Because of the amount of stock offered, Sonic became a publicly traded company with 165 stores in the chain.
Between 1973 and 1978, Sonic grew tremendously. 800 new stores were opened and a Sonic School that formally trained new managers was established.

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Sonic         Case Study         Situational Analysis         Restaurant Business         Customer Satisfaction         Cottage         Troy         Servers         Innovator         1950s        




Sonic’s first television advertising campaign was launched also.
When Cliff Hudson joined the legal department in 1984, Sonic had a loose collection of around 1000 independent restaurants in 19 states. There was no national advertising program, accounting was done manually, and packaging was inconsistent, and even the menu varied from store to store. He realized that changes had to be made to turn Sonic’s poor financial performance around. After he led a successful buyout in 1986, Hudson was instrumental in the resurrection of Sonic.
Hudson headed two different stock offering in 1991 and 1995. These offerings raised enough capital to pay off the company debt and add to working capital. He also had the franchises purchasing together, which resulted in cost savings, consistency and quality.5
In 1991, Sonic was the 5th largest in the fast-food industry. Today they call themselves the largest chain of drive-ins in the country. They have to compete with McDonalds, Burger King, Wendy’s and Hardee’s. Sonic relies heavily on the opening of new restaurants to maintain their expansion. However, Sonic has shown a reluctance to enter new geographic regions.


Problem Statement

One of the main things that sets Sonic apart from the rest is it’s drive-in service. However, this service is not ideal in northern climates. Sonic would have to depart from it’s traditional format to a non-traditional format. Hence, Sonic would not be unique in the competing area.

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 packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          118,073
Payroll and other employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . .          135,880
Minority interest in earnings of Partner Drive-Ins . . . . . . . . . . . . . . . . . . . .
     19,947
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          84,959
          358,859
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          38,270
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           32,528
Provision for impairment of long-lived assets and other . . . . . . . . . . . . . . . . . . .          675
          430,332
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           106,114
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          7,684
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (1,306)
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           6,378
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          99,736
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          36,721
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $     63,015
Basic income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $      1.06
Diluted income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $     1.02


Consolidated Balance Sheets
August 31, 2004
(In thousands)
Assets
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $      7,993
Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           18,087
Net investment in direct financing leases. . . . . . . . . . . . . . . . . . . . . . . . . .           1,054
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,551
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          798
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,100
Total current assets           34,583
          
Notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5,459
Net investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . .          6,107
Property, equipment and capital leases, net . . . . . . . . . . . . . . . . . . . . . . . . . .           376,315
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          87,420
Trademarks, trade names and other intangibles, net. . . . . . . . . . . . . . . . . . . . . . .           6,450
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,299
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $      518,633
Liabilities and stockholders’ equity           
Current liabilities:           
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $      7,695
Deposits from franchisees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           2,867
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           32,552
Long term debt and obligations under capital leases due within one year . . . . . . . . . . .
     6,006
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          49,120
          
Obligations under capital leases due after one year. . . . . . . . . . . . . . . . . . . . . . .          38,020
Long-term debt due after one year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
     78,674
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           8,231
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          9,826
Commitments and contingencies (Notes 6, 7, 14, and 15)           
Stockholders’ equity:           
Preferred stock, par value $.01; 1,000,000 shares authorized; none outstanding          –
Common stock, par value $.01; 100,000,000 shares authorized;
shares issued 74,617,554 in 2004 and 73,770,840 in 2003 . . . . . . . . . . . . . . . . .          746
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
     105,012
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          351,402
          457,160
Treasury stock, at cost;
15,098,687 shares in 2004 and 14,945,898 shares in 2003 . . . . . . . . . . . . . . . . .           (122,398)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           334,762
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . .      $      518,633




Growth Rates4
Growth Rates(%)     Company     Industry     Sector     S&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago     19.81     12.99     12.65     17.60
Sales (TTM) vs TTM 1 Yr. Ago     19.97     14.85     15.08     15.81
Sales - 5 Yr. Growth Rate     15.80     12.71     15.26     9.76

EPS (MRQ) vs Qtr. 1 Yr. Ago     22.97     15.39     11.78     16.59
EPS (TTM) vs TTM 1 Yr. Ago     19.69     30.49     21.65     24.79
EPS - 5 Yr. Growth Rate     19.64     14.78     12.39     13.64

Capital Spending - 5 Yr. Growth Rate     4.78     3.66     2.23     3.15
                    

                    

Financial Strength
Financial Strength     Company     Industry     Sector     S&P 500
Quick Ratio (MRQ)     0.56     0.65     0.89     1.20
Current Ratio (MRQ)     0.68     1.00     1.42     1.69
LT Debt to Equity (MRQ)     0.24     0.47     0.76     0.63
Total Debt to Equity (MRQ)     0.30     0.51     0.87     0.79
Interest Coverage (TTM)     14.68     9.60     7.87     11.87
                    

                    

Profitability Ratios
Profitability Ratios (%)     Company     Industry     Sector     S&P 500
Gross Margin (TTM)     35.91     28.69     42.86     46.09
Gross Margin - 5 Yr. Avg.     38.67     29.13     42.04     45.61

EBITD Margin (TTM)     25.69     18.28     21.68     21.60
EBITD - 5 Yr. Avg.     26.97     18.34     21.06     20.37

Operating Margin (TTM)     19.78     13.06     12.26     21.20
Operating Margin - 5 Yr. Avg.     20.25     12.80     11.04     18.26

Pre-Tax Margin (TTM)     18.63     11.94     10.88     18.11
Pre-Tax Margin - 5 Yr. Avg.     18.72     11.30     10.46     17.09

Net Profit Margin (TTM)     11.83     8.25     6.81     13.35
Net Profit Margin - 5 Yr. Avg.     11.76     7.41     6.88     11.43

Effective Tax Rate (TTM)     36.50     31.91     30.89     30.26
Effective Tax Rate - 5 Yr. Avg.     37.16     34.55     34.05     33.42
                    

                    

Management Effectiveness
Management Effectiveness (%)     Company     Industry     Sector     S&P 500
Return On Assets (TTM)     13.06     9.46     5.62     7.40
Return On Assets - 5 Yr. Avg.     12.24     8.57     4.92     6.67

Return On Investment (TTM)     14.30     11.68     7.95     11.16
Return On Investment - 5 Yr. Avg.     13.42     10.66     7.24     10.54

Return On Equity (TTM)     20.91     20.34     12.75     19.46
Return On Equity - 5 Yr. Avg.     21.49     14.82     12.07     18.79
                    
                    
                    
DIRECT COMPETITOR COMPARISON3     


     SONC
WEN
MCD
Pvt1     Industry

Market Cap:     2.00B     4.44B     40.11B     N/A     155.29M
Employees:
305     10,800     438,000     32,6001     4.50K
Rev. Growth (ttm):     20.10%     15.30%     11.20%     N/A     9.80%
Revenue (ttm):     559.97M     3.52B     19.06B     1.30B 1     232.10M
Gross Margin (ttm):     35.91%     25.91%     31.27%     N/A     22.37%
EBITDA (ttm):     143.86M     629.51M     4.74B     N/A     19.98M
Oper. Margins (ttm):     19.78%     12.77%     18.57%     N/A     5.36%
Net Income (ttm):     66.26M     258.18M     2.28B     N/A     3.31M
EPS (ttm):     1.07     2.228     1.796     N/A     0.29
PE (ttm):     30.99     17.49     17.56     N/A     21.62
PEG (ttm):     1.55     1.55     1.82     N/A     1.35
PS (ttm):     3.60     1.28     2.11     N/A     0.69
WEN = Wendy's International Inc

MCD = McDonald's Corp

Pvt1 = Burger King Corporation (privately held)

Industry = Restaurants

1 = As of 2004













List of alternative solutions

1. Design a building that will be able to accommodate automobiles in all climates. This will require some sort of door system that can be retracted during the warmer weather. This solution would allow Sonic to maintain it’s current format year-round and maintain uniqueness.

2. Use the hybrid format they currently have. This includes drive-up windows, inside seating and outdoor drive-in service.

3. Expand into other countries.

Recommendation with Implementation plan.

Sonic has a non-traditional franchise plan. However, they do not include the drive-in portion. This was mainly designed for malls, travel plazas, airports, arenas, and military facilities. They have already moved into Idaho, Colorado and Wyoming. This shows a willingness to expand into the colder climates. Most of these restaurants do not have dine-in facilities. Sonic’s description is vague so there is uncertainty that there is a drive-in. They do say that the non-traditional buildings generally do not have drive-in or car hop service.
A building could be designed that will have ample indoor seating, a drive-thru window, and a drive-in portion. Sonic shows that a majority of their business comes during the daylight hours with lunch time being the busiest. A drive-thru window will accommodate the lunchtime crowd that does not want to or can’t take the time to go to a drive-in spot to get food. The indoor seating will accommodate the crowd that does not wish to eat out of their automobiles.
Marketing will stress the use of the indoor seating and drive-thru during the colder months. They will also stress the drive-in portion during the summer months. While the car hop’s employment will be more of a temporary nature, this will be ideal for the student looking for summer work.


References

1. Sonic – America’s Drive-In (2005). http://www.sonicdrivein.com/history

2. Sonic – America’s Drive-In (2005). http://www.sonicdrivein.com/pdfs/annualReports/04_12annualReport.pdf

3. Yahoo Finance (2005). http://finance.yahoo.com/q/co?s=SONC

4. Reuters Know. Now. (2005). http://www.investor.reuters.com/MG.aspx?ticker=SONC.O&target=%2fstocks%2ffinancialinfo%2fratios%2fvaluation

5. Hitt, Ireland, Hoskisson (2005). Strategic Management – Competitiveness and Globalization 6th Edition pp. 365-378. Thompson Publishing



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