Sonic 2006 Annual Report Download - page 8

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Many factors drive Sonic's success, from fast, delicious, made-when-you-order food to
a menu loaded with unique selections not typically available at most quick-service
restaurants – like our signature Tater Tots, Extra-Long Cheese Coneys, and a vast
assortment of taste-tempting desserts and fountain drinks. Of course, we enjoy some
fame for the personal attention that comes with our carhop service that delivers
orders curbside in mere minutes. Those brand attributes, among other things, have
helped ensure our success in building our penetration in existing markets while
forming a strong foundation for our expansion to new markets. Supported by strong
media strategies, these fundamentals continue to produce tangible results for our
operators, like average unit volume that climbed to more than $1 million in fiscal 2005
and increased further in fiscal 2006, cumulative same-store sales growth over the past
three years that more than doubled the total for the four years preceding that, and
significantly higher drive-in level profits for the last three years. This performance has
provided our franchisees with strong incentives for ongoing development and, in fiscal
2006, helped spur our expansion to four new states – Delaware, Oregon, Pennsylvania,
and Washington – northern states where the reception for our drive-in concept has
been unequivocally warm. These incentives also have produced a strong pipeline for
new drive-ins to come. Next year, for instance, we expect to open between 180-200
drive-ins, including 150-160 by our franchisees, demonstrating, in our view, that Sonic's
expansion program is definitely running on high octane!
Over the past five years, we have opened more than 900 new Sonic Drive-Ins,
expanding the size of our chain by almost one-third. The accelerated pace of our
development continued this past year with the addition of 173 new locations, on top
of the 175 we opened last year. As in the past, our franchisees – who operate 80% of
our system – continued to take the lead in this process. This tandem approach to
expanding our chain promotes a healthy balance between revenue growth for Sonic
from partner drive-ins and the risk associated with developing markets. Moreover,
considering our unique ascending royalty rate, our franchise-focused development
also translates into a consistent and growing stream of franchising income for
the company.