Roberto A. Ferdman (c) 2015, The Washington Post. Fast food is an indulgence, not a lifestyle.
And Sonic, the fourth largest burger chain in the country, has taken that credence to heart, doubling down on the notion that there’s little reason to clutter its menu with healthy options, like salads and wraps. Instead, Sonic focuses on ensuring that its hamburgers and french fries remain as affordable as possible. And it seems to be paying off.
On Wednesday, Sonic celebrated yet another quarter of outstanding results. Sales at stores that have been open for at least 13 months rose by 8.5 percent in the first quarter of 2015. Profits jumped 23 percent. And the company’s stocked surged by roughly 10 percent on the day.
The encouraging performance, which comes as the chain aims to expand its presence in the United States, is hardly an isolated event. Rather, it marks the latest in a string of signs the Oklahoma-based fast food chain has figured something out that other chains — namely, McDonald’s — have not.
Sonic’s stock has risen by more than 30 percent since October, and roughly tripled since early 2013. The southern burger chain hasn’t reported a decrease in same-store sales in more than three years.
Meanwhile, the quirky drive-thru’s competition has struggled, and mightily. McDonald’s, the country’s largest burger chain, is Exhibit A. It’s been more than a year since the maker of the Big Mac reported a monthly increase in same-store sales.
Part of the divergence could be tied to the fact that Sonic, unlike other fast food burger behemoths, has yet to saturate its audience in the country. Most of the chain’s outlets are still located in the south, and much of its expansion has happened in states like California and New York, which aren’t as familiar with its brand. There are also simply fewer Sonics in the United States than there are other fast food chains. Sonic has roughly 3,500 branches nationally. Wendy’s has nearly 6,000; Burger King has closer to 7,000; and McDonald’s has more than 14,000.
Sonic has also benefited from its strong marketing campaign, which has long advertised to audiences nationally, despite the chain’s small presence outside of the south. The most memorable bit of its national campaign features two men, talking about eating Sonic, while eating Sonic in a car. But the company has also signed celebrities, including NBA basketball superstar Kevin Durant.
But Sonic’s reluctance to invest in salads and other healthy options, a strategy other chains have long employed, has likely propelled a good part of its success too.
“I think Sonic understands their core customer more than the big guys do,” Will Slabaugh, an industry analyst with Stephens Inc, told CNN on Thursday. “You’re typically going out to indulge. You’re watching that waistline a little less and your wallet a little bit more.”
Sonic’s menu reflects that understanding. The menu is simple, straightforward and mostly cheap. The chain sells nine different burgers, 10 different hot dogs, an array of chicken-based foods, almost all of which are fried, and sides, which range from french fries to chili-cheese tater tots. Beyond that, there’s a “Smart” menu, which offers no salads or carrots, but rather calorie-controlled portions of its burgers, sandwiches and hot dogs. And there are milkshakes.
McDonald’s, on the other hand, has opted to expand its menu, which currently sports almost 200 items, and largely with salads, wraps and other healthier but also more expensive fare. There have been many problems with that strategy. For one, those items, along with the chain’s other, pricier options, are pitting McDonald’s against the likes of Panera and Chipotle, fast casual brands with which McDonald’s has been hard-pressed to compete. The price point, as Fortune recently noted, has put McDonald’s at a serious risk of losing customers.
Most importantly, McDonald’s strategy seems to point to a misunderstanding of its audience: namely, that Americans who walk through its restaurants’ doors do so to indulge in cheap, but also, for lack of a better word, indulgent food.