Sonic is one of the most popular drive-in American fast food restaurant chains in the United States. If you are an entrepreneur and want to own a fast-food franchise, then you probably thought of Sonic and whether it is a good idea.
The fast-food market is very saturated, and there are many options out there and Sonic is one of the strongest options to own as a franchise owner.
That’s why this article is here to guide you on Sonic and its franchise system. We will talk about Sonic’s franchise system extensively and give you information about costs and anything related to the Sonic franchise.
About Sonic and Sonic History
Sonic Drive-In, also known as Sonic, is an American drive-in fast food restaurant chain with over 3,500 locations nationwide. The company was founded in 1953 and has been franchising since 1959. They specialize in hamburgers, French fries, chili dogs, corn dogs, milkshakes, and similar fast-food dishes.
With amazing brand recognition and nationwide operations, Sonic has been an important part of entrepreneurs looking to own a franchise.
They provide exceptional help to new franchisees and have a loyal customer base with huge communities. Currently, the Sonic Drive-In brand is owned by Inspire Brands and operated by them.
Franchise Model Table
| Cost or Fee | Amount or Percentage |
|---|---|
| Initial Investment | $699,200-$3.3 million |
| Franchise | YES |
| Franchising Since | 1959 |
| Franchise-Fee | $45,000 |
| Royalty-Fee | 5% |
| Liquidity | $500,000-$1 million |
| Estimated Outlets | 3,545 |
How Much Does it Cost to Open a Sonic Franchise?
The total expected initial investment varies between $699,200 and $3.3 million. The reason why the low and high end varies a lot is mostly because of the type of franchise store you choose. The real estate, land, and construction works could also greatly affect the total cost.
Additionally, fees like the franchise fee, training, cost of employees, and others are included in the initial investment. It covers all of the startup costs.
Franchise Requirements Of Sonic
Sonic looks for both financial and professional requirements in the franchisees. They prefer those with experience in managing a business, especially a multi-unit franchise business. They need to show that they can develop and lead a management team with strong entrepreneurial skills.
For the financial side, you need to possess a net worth of between $1 million and $2 million, depending on the number of units you want to open. Sames goes for liquidity. Depending on the units, it’s between $500,000 to $1 million.
Profit & Revenue Of Sonic Franchise
In the latest report available, Sonic’s annual revenue was $5.4 billion for the fiscal year 2021. The net profit numbers aren’t available for the same year, but when we consider similar profit margins with the numbers per store, we can have an estimation.
This estimation shows Sonic’s annual net profit could be about $850 million.
Overall Sales Of Sonic Franchise
A Sonic franchised store makes about $1.5 million annually in overall sales. Depending on the franchise type you choose, overall sales could vary drastically.
How Much Does A Sonic Franchise Owner Make?
Sonic provides the overall sales numbers per franchised store in their franchise disclosure agreement, but they don’t provide anything about net profit. That’s why the numbers are estimations and could be different.
The estimation is that the profit margin between overall sales and net profit is around 16%. This shows us that a Sonic franchise could make $240,000 in annual profits.
| Financial Overview | Percentage of Revenue | Amount ($) |
|---|---|---|
| Individual Franchise Annual Revenue | 100% | 1500000.00 |
| Rent | 10.50% | (157500.00) |
| Insurance | 5.25% | (78750.00) |
| Salaries | 21.00% | (315000.00) |
| Franchise Royalty Fees | 5.25% | (78750.00) |
| Utilities | 2.10% | (31500.00) |
| Cost of Goods Sold (COGS) | 26.25% | (393750.00) |
| Labor (Variable) | 13.65% | (204750.00) |
| Total (Expenses) | 84.00% | (1260000.00) |
| Net Profit | 16.00% | 240000.00 |
Note: The displayed expenses are estimates based on industry averages and standard costs. Actual expenses may vary due to factors like location, business size, and market conditions. We recommend conducting detailed research or consulting with a financial advisor for a tailored financial analysis.
Payback Period Of Sonic Franchise
With a total investment of $3,300,000 and a yearly profit of $240,000, we can calculate the payback period of the Sonic franchise.
So, to find out how long it will take to earn back the initial investment:
Payback Period = Total Investment / Yearly Profit = $3,300,000 / $240,000 = 13.5 years
Based on these figures, it will take approximately 13 to 15 years to pay back the initial investment for Sonic. This time period of your investment in Sonic varies greatly depending on your income and the type of store you choose.
Failure Rate Of Sonic
Franchised Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 3,329 | 3,251 | -78 |
| 2021 | 3,251 | 3,232 | -19 |
| 2022 | 3,232 | 3,221 | -11 |
For the Franchised outlets:
- In 2020, the failure rate was (78)/3,329×100≈2.34%
- In 2021, the failure rate was (19)/3,251×100≈0.58%
- In 2022, the failure rate was (11)/3,232×100≈0.34%
Company-Owned Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 197 | 271 | 74 |
| 2021 | 271 | 320 | 49 |
| 2022 | 320 | 325 | 5 |
For the Company-Owned outlets:
- In 2020, the growth rate was (74)/197×100≈37.56%
- In 2021, the growth rate was (49)/271×100≈18.08%
- In 2022, the growth rate was (5)/320×100≈1.56%
Total Outlets:
| Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|
| 2020 | 3,526 | 3,522 | -4 |
| 2021 | 3,522 | 3,552 | 30 |
| 2022 | 3,552 | 3,546 | -6 |
For Total outlets:
- In 2020, the failure rate was (4)/3,526×100≈0.11%
- In 2021, the growth rate was (30)/3,522×100≈0.85%
- In 2022, the failure rate was (6)/3,552×100≈0.17%
According to the above-mentioned data, we can see that the franchised outlets for Sonic declined from 2020 to 2022, showing a failure rate between 2.34% and 0.34%.
On the other hand, for company-owned outlets, the growth rate of Sonic was quite high, lying in the range between 37.56% and 1.56% for the same period.
Overall, when we combine the data of franchise and company-owned outlets, we can see that the Sonic franchise has expanded only in the year 2021, showing a growth rate of 0.85%. In the years 2020 and 2022, the company experienced a decline in the number of outlets, showing a failure rate of 0.11% and 0.17%.
Training and Support
Sonic has a two-phase career development training for the franchisee and the manager principal of the store. This training is on-the-job and focuses on teaching operations of the store and how to train the staff. In total, this training is for 336 hours and happens at one of the select Sonic restaurants. They also have a general manager training, which is 24-hour classroom training.
They also provide help with site selection and have ongoing training and support programs post-opening of the store. There will be a general manager on-site to help with operational stuff when the store first opens.
Terms of Agreement and Renewal
The initial Sonic franchise agreement term is for 20 years. There is a renewal possibility if both sides are happy and the franchisor wants to renew the contract. The renewal is an additional 10-year term on the franchise agreement.
Obligations and Restrictions
The franchisee or the principal has to be present in the daily operations of the store and devote enough time to the management of the restaurant. The restaurant must always have an individual, whether the franchisee or a designated person, who successfully completed the initial training program to work full-time on-premises.
Franchisees are obligated to serve any items the franchisor asks them to and they are restricted from selling anything they don’t approve of.
Financial Assistance
Sonic does not offer direct or indirect financial assistance. The franchisee is responsible for finding all of the necessary finances without any help from Sonic.
Sonic Comparison
| Name | Franchise Fee | Royalty Fee | Initial Investment |
|---|---|---|---|
| Dairy Queen | $45,000 | 4% | $1.5 million-$2.5 million |
| A&W Restaurants | $15,000-$30,000 | 5% | $278,285-$1.5 million |
| Sonic | $45,000 | 5% | $699,200-$3.3 million |
Conclusion
On average, you need between $699,200 and $3.3 million to open a Sonic franchise store, depending on which type of store you choose.
With over 3,500 stores and around 60 years of experience, Sonic has one of the best support and training systems available for franchisees. You can get started easily and start earning profits from the first year thanks to their program.
Sonic franchise stores make about $1.5 million in annual overall sales and around $240,000 in net annual profits.
This represents a 16% profit margin, which is quite high compared to the industry standards, proving that they are indeed a lucrative opportunity. That’s why if the Sonic franchise is on your radar, it might be a good decision to own one.
FAQs
Is Sonic a franchise?
Yes, Sonic is a franchise. They have three different franchise store formats that you can choose from.
Does the expected investment change based on the type of the store?
The expected investment varies depending on which Sonic franchise type you choose. Non-traditional ones could be more expensive than traditional stores because of the property costs.
What is the Sonic franchise fee?
The Sonic franchise fee is $45,000, no matter the type of franchise you choose.
Where is Sonic headquartered?
The headquarters of Sonic is in Oklahoma, OK.
Who owns Sonic Drive-In?
Somic is owned by Inspire Brands. It is also the parent company of Arby’s, Dunkin’ Donuts, and Buffalo Wild Wings.
Who founded Sonic?
Sonic Drive-In evolved from Top Hat Drive-In (later Sonic) in Shawnee, Oklahoma. It was a restaurant founded by Troy Smith in 1953.
How Many Locations Does Sonic Has?
There are 3,544 Sonic drive-in restaurant locations in the United States. The city with the most Sonic drive-in restaurants is Texas.
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