Sonic 2009 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2009 Sonic annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 56

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56

Management's Discussion and Analysis of Financial Condition and Results of Operations
System-wide same-store sales decreased 4.3% during fiscal year 2009 primarily as a result of a decrease in the average check
amount. The decrease in check is consistent with an industry trend of consumers purchasing fewer items per transaction and purchasing
lower-priced items, such as items from our Everyday Value Menu. The company has initiated strategies to offset this trend including
offering a free upgrade to a 44 ounce drink with the purchase of a combo meal during the summer of 2009 and increasing the discount
percentage when consumers purchase a combo meal versus the ala carte menu pricing.
During fiscal year 2009, our system-wide media expenditures were approximately $184 million as compared to $190 million in fiscal
year 2008. Approximately one-half of our media dollars are spent on system-wide marketing fund efforts, which are largely used for
network cable television advertising. Expenditures for national cable advertising increased from approximately $95 million in fiscal year
2008 to approximately $96 million in fiscal year 2009. Increased network cable advertising provides several benefits including the ability
to more effectively target and better reach the cable audience, which surpasses broadcast networks in terms of viewers. In addition,
national cable advertising allows us to bring additional depth to our media and expand our message beyond our traditional emphasis
on a single monthly promotion. The balance of our system-wide media expenditures is focused on local store advertising. Looking
forward, we expect system-wide media expenditures to exceed $178 million in fiscal 2010, with the system-wide marketing fund
representing approximately one-half of total media expenditures.
The following table provides information regarding drive-in development across the system. Retrofits represent investments to
upgrade the exterior look of our drive-ins, typically including an upgraded building exterior, new more energy-efficient lighting, a
significantly enhanced patio area, and improved menu housings.
Year Ended August 31,
2009 2008 2007
New drive-ins:
Partner 11 29 29
Franchise 130 140 146
System-wide 141 169 175
Rebuilds/relocations:
Partner 457
Franchise 46 64 35
System-wide 50 69 42
Retrofits, including rebuilds/relocations:
Partner 24 167 175
Franchise 383 800 316
System-wide 407 967 491
Results of Operations
Revenues.
The following table sets forth the components of revenue for the reported periods and the relative change between the
comparable periods.
Revenues Percent
Year Ended August 31, Increase/ Increase/
($ in thousands)
2009 2008 (Decrease) (Decrease)
Revenues:
Partner Drive-In sales $ 567,436 $ 671,151 $ (103,715) (15. 5)%
Franchise revenues:
Franchise royalties 126,706 121,944 4,762 3.9
Franchise fees 5,006 5,167 (161) (3.1)
Gain on sale of Partner Drive-Ins 13,154 3,044 10,110 332.1
Other 6,487 3,407 3,080 90.4
Total revenues $ 718,789 $ 804,713 $ (85,924) (10.7)
16