Sonic 2012 Annual Report Download - page 5

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In calendar year 2013, consumers will get the word about Sonic more than ever due to reallocation of a
significant portion of our media dollars from local to national cable. This media effort will more powerfully
support our strengthened product pipeline. Every market, as a result, will be able to promote all five day-
parts in every quarter, something not previously experienced at Sonic on a chain-wide basis.
Our new product pipeline, across all day-parts, will also strengthen in 2013, so the power of the
incremental media discussed in the preceding paragraph will be even more potent!
In calendar 2013, we will also begin the implementation of a new point-of-sale system, starting with our
company drive-ins. This initiative will assist every Sonic Drive-In with labor and inventory management,
cash controls and the integration of our store operations more completely with an improved supply chain
management system. All of this will result in considerable improvement in profitability at the drive-in level.
In 2013 and beyond, we'll continue to focus on improving customer service and, as important, the
consistency of the experience customers have at Sonic. Few things could strengthen the perception of our
brand more!
As same-store sales have grown, profitability at our drive-ins also has increased – by more than $11,000
per drive-in during the last fiscal year. This increasing profitability also raises our franchisees' appetite for
new drive-in development. In addition to improved drive-in level sales and profitability, we have also
focused on the cost of a new drive-in, the other half of the ROI equation. We have done this by achieving a
$150,000 to $200,000 reduction in construction costs, while positively impacting the drive-in's throughput
capacity. A half-dozen drive-ins have opened utilizing this structure and are now achieving an enhanced
return on investment. This initiative results in improved returns for our franchisees and shareholders alike.
This lower cost construction and operating model positions us to focus on smaller core markets we've
previously bypassed, but it will also enable us to revamp the rate of growth of new drive-ins across the
system. We have added management talent and depth to this area of our company to drive the effort. The
anticipated regeneration of new drive-in development will contribute to the scale of our marketing efforts
and the profitability of all franchisees and our company!
The combination of these initiatives and the strong cash flow we generate each year supported our fiscal
year 2012, stock repurchase program, which totaled $30 million. We executed that program in full, and our
Board of Directors has approved an additional repurchase plan for fiscal year 2013 totaling $40 million.
We are confident our multi-layered growth strategy, including an expected reacceleration of new drive-in
development, will enable us to achieve double-digit earnings per share growth in the near and long term.
With this business update, I hope you will take away why we believe our business is stronger and will result
in continued growth of our brand and our earnings. We appreciate your investment alongside us and look
forward to sharing the outcome of these investments in the coming years!
Sincerely,
Clifford Hudson
Chairman and Chief Executive Officer
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