Sonic_Corporation

            In 1953 Sonic Corporation, formally known as The Top Hat, was founded in Shawnee, Oklahoma by Tony Smith. The company uprooted as a drive-in service, which decreased start- up cost due to lack of room for dining in. This ground-breaking restaurant came equipped with drive-in stalls for automobiles that were enabled with a two-way intercom allowing customers to order as soon as they drove in, versus the predictable services of waiting for a carhop to take an order. The Top Hat’s menu consisted of hot dogs, hamburgers, and french-fried onion rings.  Smith executed an approach which involved a collection of franchise royalties. Sonic franchise holders were necessitated to purchase printed bags at an additional fee, which Smith assembled in connection with a paper-goods provider. Pyramid-type selling agreements were structured by franchisees in endeavors to make money by promoting other franchises through friends.  This lead to original store managers having multiple portions of the earnings. They would receive a portion of their own store plus that of the friend that they recruited. This idea grew into a multi-ownership of majority of Sonic operations, as store managers were also partial owners.  This notion of pyramid-type selling transmitted Sonic onward with hurried expansion. What they are doing Right In 1991 Sonic Corporation was the fifth largest franchise in the fast-food industry, providing in the hamburger division, behind McDonald’s, Burger King, Hardee’s, and Wendy’s.  Sonic has and is still carrying the custom of being a high-quality franchise-based organization in the United States.  Operating profit margin (return on sales) has risen from .170 in 1990 to .220 in 1991. The major factor donating to this enhancement is that sales in 1991 rose at larger percentage of profits before taxes and before interest as evaluated to the 1990 figures.  Another profitability ratio is return on stockholder’s equity or return on net worth.  This calculation came out to be (.181) and .128 in 1990 and 1991 correspondingly.  The reason for the great differentiation in numbers is due to the overall stockholder’s equity being depressing in 1990.  Also profit after taxes in 1991 were considerably superior than in the past years. In the past years Sonic Corporation had tremendously high negative interest income numbers which were most likely caused from loans at high interest rates.  The motive for choosing these two ratio’s were to show the before and after tax affects. What they are doing Wrong The speedy growth of Sonic was expanding at an unmanageable tempo during the late 1970’s. With such speedy development some stores failed.  In these situations Sonic assumed control over failed franchise units, driving the number of company owned restaurants from 3 in 1974 to 149 in 1979.  This speedy development of Sonic was a short lived whirl which resulted in frequent failures due to lack of planning, market analysis, and requirements for unit managers.  The company was required to manage the unsuccessful franchise as company units in most situations, to protect the franchise’s name and reputation.  A failure was stationed in 1980 as Sonic began closing some operations.  Grounds for the closings were that the board constricted its control which formed a procedure that left no services being provided to the franchise holders, including no advertising cooperation’s, no management training services, and no accounting services.  In 1983 Smith decided to go outside the company’s limitation and selected a professional manager that had no attachments to Sonic Corporation at all.  Stephen Lynn was introduced to Sonic Corporation as president and chief executive officer. Lynn, was appointed the judgment to construct his own management team.  This team was established and put into practice by mid 1984.  By acting out his personal management team Lynn could begin to take problems from the source. Lynn and his newly created management team made an effort to turn the company around with three major dynamics:  “(1) attack problems concerning franchise attitude and Sonic’s image; (2) improve purchasing; and (3) improve communications.” What Can They Do Better The Sonic Corporation should place their employees through management training before they actually begin their managerial role. This might entail lessons on accounting, prioritizing, managerial, leadership, and communication skills. The training will give them an insight on the way profits and stock holder’s equity are expected to be. They will also learn what items are generating the most income therefore that should be more of their target focus. Throughout the training they will learn how to interact with the customers. A warm, friendly carhop will always welcome customers to return. Advertising will also help attract customers. Ads, flyers, etc should be placed where they are sure to be seen such as highway bill boards, newspapers, and handing flyers out personally at events. By the Sonic franchises communicating with one another, they will know to stay within a certain mile radius from one another. This will help decrease the high number of failing franchises.