Sonic 2013 Annual Report Download - page 4

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Last year, I wrote to you about the improved performance and increased
strength of our brand, driven by multiple initiatives to improve service,
product quality, value perception and media effectiveness. My letter
indicated our confidence in the future of our business and our product,
media and technology initiatives. If fiscal 2012 was a year for gaining
traction in key areas, then 2013 was a year for shifting into overdrive. Our
efforts to fully leverage our multi-layered growth strategy delivered
significant and meaningful results, including:
• A system-wide same-store sales increase of 2.3%;
• A 60-basis-point improvement in drive-in level margins;
• A 20% increase in earnings per share for the year, on an adjusted basis; and
• Further progress on building our drive-in development pipeline.
This growing momentum in our business is especially noteworthy given the challenging consumer
and competitive environment. How do we do it? We do it by providing a customer experience like no
other in the industry. In fiscal 2013 our innovative products, friendly service and ability to engage our
customers, through effective advertising and improved media effectiveness, drove sales across all
day-parts. New product introductions and limited-time offers, including a premium chicken sandwich,
all beef hot dogs in a pretzel bun and spicy Jumbo Popcorn Chicken®, drove sales throughout the day.
We pushed the boundaries of innovation even further with 25 flavors of real ice cream shakes,
including a Peanut Butter and Jelly Shake!
We also stepped up our focus on healthier options with the introduction of the premium chicken
sandwich (the delicious new product I mentioned above) and egg white burritos. What's more, with
our new freshly brewed diet green tea, we now offer more than 20,000 lower-calorie drink
combinations. Add to this our customers' ability to customize virtually anything they order at Sonic
and you can understand why we believe Sonic offers the most differentiated menu of any major
quick-service concept!
Innovative and distinctive products will continue to play a central role in same-store sales growth in
2014. Whether an entrée like our chicken sandwich or our hot dogs, or great desserts made with real
ice cream, our robust new product pipeline promises to offer new and delightful flavors to make
consumers smile over the coming years.
We also improved how we communicate what we offer to our customers. The ongoing success of
our “Two Guys” advertising campaign, recognized by multiple third-party sources as among the most
effective in the industry, combined with improved efficiency in our media buying and a greater
emphasis on national media, has improved our advertising reach and awareness and continues to
provide a solid platform for promoting both our brand and day-part strategy. This advertising shift also
benefits us by promoting our offerings in all of our markets, including those newly developed or still
on the drawing board.
To supplement our traditional media spending, we increased our investment in digital media to
ensure we are going where the consumer is. Already capitalizing on social media platforms, Sonic is
quickly moving to add mobile solutions as part of our integrated customer engagement program that
will heighten our customers' experience and further differentiate our brand. The next year will offer an
expected test of these initiatives.
Technology also is at work behind the scenes. To improve the customer experience and drive
profitability, we tested and began deployment of a new point-of-sale (POS) system. In addition to
easier crew member training, the new POS system will provide better capabilities for managing food
and labor costs.
We also have focused on enhanced management of our supply chain in order to improve demand
forecasting, inventory management and promotion planning. Our new supply chain management
system should allow us to better manage the costs of key commodities for our drive-ins. These
investments in state-of-the-art technologies will provide significant advantages to Sonic and
our franchisees.
To Our Shareholders: