Sonic 2008 Annual Report Download - page 7

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performance and are painful, they also provide the opportunity for us to think more creatively
about how we approach our business.
We know today's consumers want quality food, delivered fast, at a reasonable price. Our goal
is to meet their needs while surprising and delighting them with our unique service and concept.
We have implemented a number of changes to improve our partner drive-in and system
performance. These changes include a renewed focus on customer service and products to
meet consumers' changing tastes and price sensitivity. Increased media expenditures will
continue to support new product news and emphasize Sonic's distinctive menu offerings
throughout the day. Happy Hour, launched system-wide in November 2007, has been
tremendously successful at highlighting Sonic's distinctive drink business. With continued
declines in consumer spending and confidence, we recognize the importance of providing
compelling snack and meal options at a value price. During fiscal 2009, Sonic will seek to provide
time- and wallet-pressed customers with plenty of options, while always emphasizing quality.
One of our strongest attributes is that Sonic always has been a great franchising business, with
franchise drive-ins comprising more than 80 percent of the system. This model has provided
increased opportunity and profits for franchisees as well as strong cash flow
and earnings for stockholders. Over the next several years, we plan to refranchise
underperforming drive-ins and moderate the growth of our partner drive-ins, reducing the
percentage of partner drive-ins from 20 percent of the system to approximately
12 to 14 percent of the system. This is not the first time Sonic has undertaken such an initiative.
In the late 1990s, we also pursued a similar strategy with great success. Refranchising is an
opportunity for us to better focus on improving performance at our remaining partner drive-
ins and allocate our capital more strategically. We intend to use the cash generated from this
initiative to reduce debt or for other initiatives that add stockholder value.
3