With 3,551 stores in the US, of which the vast majority are franchised, Sonic Drive-In is a popular franchise opportunity for entrepreneurs and investors. But with a whooping $1,467,083 investment cost and $1,617,000 in average annual sales, is this really a good investment?
In this article we’re looking at Sonic Drive-In franchises and their financial performance disclosed in its Franchise Disclosure Document.
We’ll look into how much it costs to open a Sonic Drive-In franchise, how much you can make with this business, and more importantly, whether it’s a good investment. Let’s find out!
Sonic Drive-In: key figures
| Franchise fee | $45,000 |
| Royalty fee | 4.5% |
| Marketing fee | 3.5% |
| Investment (mid-point) | $1,467,083 |
| Average annual sales | $1,617,000 |
| Investment to sales ratio | 1.1x |
| Investment payback* | 6 years (average) |
| Minimum net worth | $1,000,000 |
| Minimum liquid capital | $500,000 |
Sonic Drive-In: a brief introduction
Founded in 1953, but incorporated in 1990, Sonic Drive-In is an American drive-in fast food chain restaurant. Currently, the brand is owned by Inspire Brands.
The restaurant chain offers French fries and hamburgers along with chili dogs, corn dogs, onion rings, soft drinks, milkshakes, slushes, floats, and sundaes. The company has 3,551 outlets operating in the United States but has no international presence.
Sonic Drive-In Franchise Pros and Cons
If you are interested in opening a Sonic Drive-In franchise store, here are the list of advantages and disadvantages you must know:
Pros
- Sonic Drive-In has a lower royalty fee of 5% and an additional ad royalty fee of 3.5%
- The company offers thorough on-the-job and classroom training, and they also offer ongoing support to all franchisees
- Sonic Drive-In provides exclusive territory protection to its franchisees
Cons
- They have a high franchise fee of $45,000
- They do not allow absentee ownership and you cannot run the franchise as a part time business
- You must have 25 employees, which increases the overhead costs significantly
How much does a Sonic Drive in franchise cost?
To open a fast food restaurant as a Sonic Drive-In franchise, you would invest $1,467,083 on average. This amount includes the $45,000 franchise fee that needs to be paid to the franchisor.
Besides the franchise fee, the investment covers any costs that could arise when a fast-food restaurant starts its operation.
For example, you would have to pay for things like initial license fees, training costs, franchisee-certified training team expenses, building costs, restaurant equipment, POS system, starting inventory, external signage, as well as advertising funds, insurance, and additional funds for working capital for the first 3 months, etc.
The investment amount is an estimated average; it can vary based on whether it’s a traditional (freestanding, c-store) or non-traditional restaurant:
| Type of restaurant | Lowest | Average | Highest |
|---|---|---|---|
| Freestanding | $1,768,000 | $2,655,000 | $3,543,000 |
| C-Store | $717,000 | $1,061,000 | $1,405,500 |
| Non-Traditional | $348,500 | $684,500 | $1,020,500 |
What is the turnover of a Sonic Drive-In franchise?
A Sonic Drive-In franchise makes $1,617,000 in sales per year. This number is the median gross annual sales of the 3,184 franchised restaurants (both traditional and non-traditional) operated in 2021.
What’s quite impressive is that the average sales of Sonic Drive-In franchises has been steadily growing over time:
| Fiscal Year | Number of Restaurant | Median Gross Sales |
|---|---|---|
| 2017 | 3,237 | $1,180,000 |
| 2018 | 3,316 | $1,189,000 |
| 2019 | 3,154 | $1,259,000 |
| 2020 | 3,200 | $1,540,000 |
| 2021 | 3,184 | $1,617,000 |
How profitable is a Sonic Drive-In franchise?
As per our analysis, a Sonic Drive-In franchisee makes $485,100 in profits per year. This corresponds to a 30% adjusted EBITDA margin.
To be absolutely clear: the adjusted EBITDA of $485,100 is not the franchisee’s take-home pay. Instead, it’s the profits the franchise generates on average, taking into account COGS, labor costs, rent and royalty and marketing fees. As such, this adjusted EBITDA doesn’t include other expenses (like bookkeeping, taxes, debt interest, etc.).
| Profit-and-loss | Amount ($) | As % of sales |
|---|---|---|
| Sales | $1,617,000 | 100% |
| COGS | $(404,250) | 25%* |
| Labor | $(468,930) | 29%* |
| Rent | $(129,360) | 8%* |
| Royalty + marketing fees | $(129,360) | 8% as per FDD |
| Adjusted EBITDA | $485,100 | 30% |
In order to look at the take home pay (the dividends to the franchisee), we need to estimate instead net profits which we estimate at $242,550 per year (15% of sales).
Is a Sonic Drive-In franchise a good investment?
So you would make $242,550 profits per year as a Sonic Drive-In franchisee on average. But does it justify the investment cost of $1,467,083?
In order to assess whether opening a Sonic Drive-In is a good investment, we need to consider the payback period: the time it would take you as the franchisee to recoup your original investment.
Unfortunately, the payback period for a Sonic Drive-In is 6 years as per our calculations. So it would take you 6 years on average to reimburse your original investment of $1,467,083. Even though not necessarily mediocre, it is average.
Yet, note that this number is an average of the 3,184 stores. Therefore, your franchise may be more successful than the average, which would improve your payback period. In order to find out whether your franchise store is a good investment, download our template below.
Download the Sonic Drive-In business plan and get your franchise funded
Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers