Sonic 2005 Annual Report Download - page 23

System-Wide Performance
Year Ended August 31,
2005 2004 2003
($ in thousands)
Percentage increase in sales 12.4% 13.1% 7.0%
System-wide drive-ins in operation:
Total at beginning of period 2,885 2,706 2,533
Opened 175 188 194
Closed (net of re-openings) (21) (9) (21)
Total at end of period 3,039 2,885 2,706
Core markets 2,165 2,059 1,977
Developing markets 874 826 729
All markets 3,039 2,885 2,706
Average sales per drive-in:
Core markets $ 1,059 $ 1,004 $ 947
Developing markets 934 861 802
All markets 1,023 964 907
Change in same-store sales (1):
Core markets 5.6%6.4%0.5%
Developing markets 7.4 6.8 (1.2)
All markets 6.0 6.5 0.3
(1) Represents percentage change for drive-ins open for a minimum of 15 months.
System-wide same-store sales increased 6.0% during fiscal year 2005, largely as a result of traffic growth (an
increase in the number of transactions) across all day parts (e.g. morning, lunch, afternoon, dinner, and evening).
Additionally, a lesser portion of the growth came from an increase in the average check (the average amount spent
per transaction). This marked our 19th consecutive year of positive same-store sales. We believe our strong sales
performance is a direct consequence of our specific sales-driving initiatives including, but not limited to:
• Growth in brand awareness through increased media spending and greater use of network cable advertising;
• Strong promotions and new product news focused on quality and expanded choices for our customers;
• Continued growth of our business in non-traditional day parts including the morning, afternoon, and evening
day parts, which saw solid increases in sales; and
• Use of technology to reach customers and improve the customer experience.
During fiscal year 2005, our total system-wide media expenditures were approximately $125 million as compared
to $110 million in fiscal year 2004, which we believe continues to increase overall brand awareness and strengthen our
share of voice relative to our competitors. We have also shifted more of our marketing dollars to our system-wide
marketing fund efforts, which are largely used for network cable television advertising, growing this area of our
advertising from approximately $32 million in fiscal year 2004 to approximately $60 million in fiscal year 2005. We
believe increased network cable advertising provides several benefits including the ability to more effectively target
and better reach the cable audience, which has now surpassed broadcast networks in terms of viewership. In
addition, national cable advertising also allows us to bring additional depth to our media and expand our message
beyond our traditional emphasis on a single monthly promotion. Looking forward, we expect system-wide media
expenditures to be approximately $140 million in fiscal 2006. The system-wide marketing fund portion will again
represent approximately one-half of total media expenditures for fiscal 2006.
We continue to use our monthly promotions to highlight our distinctive food offerings and to feature new
products. We also use our promotions and product news to create a strong emotional link with consumers and to
align closely with consumer trends for fresh ingredients, customization, menu variety and choice. During the past
year,our new product offerings showcased the breadth of our menu and emphasized the opportunity for choice at
Sonic. We will continue to have new product news in the coming months, all designed to meet customers’ evolving
taste preferences including the growing desire for fresh, quality product offerings and healthier alternatives.
We continue to promote the expansion of our business in non-traditional day parts (morning, afternoon, and
evening). The momentum in our evening business, which rose significantly with the return of our Sonic Nights
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13