Sonic Drive-In Franchise Costs $1.5M: Costs & Profits (2023)
This article was updated with the 2023 Franchise Disclosure Document
With 3,551 restaurants 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 $1,794,000 initial investment and $1,522,000 Average Unit Volume (AUV), is it a profitable business?
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!
Key stats
| Franchise fee | $45,000 |
| Royalty fee | 5.00% |
| Marketing fee | 4.40% |
| Investment (mid-point) | $2,002,000 |
| Average sales | $1,528,000 |
| Sales to investment ratio | 320.0x |
| Payback period | [franchise_value_investment_payback] |
| Minimum net worth | $1,000,000 |
| Minimum liquid capital | $500,000 |
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 | Sonic Drive-In |
| FRANCHISE FEE | $45,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $699,000 – $3,371,000 |
| AVERAGE REVENUE | $1,528,000 |
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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, sundaes and more. 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:
The Pros:
- Multiple franchise formats: The franchisor has three different franchise formats for franchisees to choose from, such as traditional, non-traditional, and non-driving sonic drive formats. Franchisees have the flexibility to utilize the available real estate opportunities.
- Exclusive territory protection: The franchise grants its franchisees the right to operate in an exclusive territory. The franchisor does not authorize any other franchise or a competing business in the designated area.
- Comprehensive training and support: Sonic Drive-In provides its franchisees with a detailed training program of 16 hours of classroom training and 440 hours of on-the-job training. The franchisor prepares them for a successful grand opening, growth strategies, and ongoing operational concepts.
- Marketing support: The franchise has detailed marketing and branding strategies to help franchisees attract and retain customers. Franchisees can leverage national media and targeted local store promotional campaigns to reach a wider area.
- Site selection and build-outs: The franchisor has helpful demographic data and in-depth site analytics to help its franchisees in the discovery process and build-out of their ideal restaurants.
The Cons:
- Not a passive investment opportunity: The franchise does not allow for absentee ownership. Franchisees must be actively involved in the day-to-day operations of their franchises.
- High staff requirements: The franchisees require at least 25 staff members to launch. This translates to increased staff costs.
- Not a mobile business: The franchise cannot be run from home or a vehicle. Franchisees must have an office establishment, which means higher startup and ongoing costs.
How much does a Sonic Drive in franchise cost?
To open a fast food restaurant as a Sonic Drive-In franchise, you would invest $1,794,000 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 freestanding or c-store:
| Type of restaurant | Lowest | Highest | Average |
|---|---|---|---|
| Freestanding | $1,714,200 | $3,370,900 | $2,542,550 |
| C-Store | $699,200 | $1,390,900 | $1,045,050 |
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| Sonic Drive-In |
| FRANCHISE FEE | $45,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $699,000 – $3,371,000 |
| AVERAGE REVENUE | $1,528,000 |
What is the turnover of a Sonic Drive-In franchise?
A Sonic Drive-In franchise makes $1,522,000 in sales per year. This number is the median gross annual sales of the 3,129 traditional franchised restaurants operated in 2022.
What’s quite impressive is that the average sales of Sonic Drive-In franchises has been steadily growing over time. (Althogh 2022 sales is low compared to prevoius years. (-5% growth vs 2021):
| 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 |
| 2022 | 3,129 | 1,522,000 |
Considering the geographic location, franchises based in the west did well compared to other regions:
How profitable is a Sonic Drive-In franchise?
We estimate that the average Sonic Drive-In franchised restaurant makes $240,000 in profits per year (16% EBITDA margin).
Note that Sonic Drive-In doesn’t provide any detailed information about the financial performance of its franchises in its latest Franchise Disclosure Document. Instead we had to make assumptions which we have summarized below.
| Profit and loss | Amount | % Sales |
|---|---|---|
| Gross Sales | $1,522,000 | 100% |
| COGS | $(380,500) | 25% |
| Gross Profit | $1,141,500 | 75% |
| Labor | $(441,380) | 29% |
| Royalty | $(139,263) | 9% |
| Rent | $(136,980) | 9% |
| Other Expenses | $(182,640) | 12% |
| EBITDA | $241,237 | 16% |
Is a Sonic Drive-In franchise a good investment?
In other words: do the profits justify the initial investment of $1,794,000?
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.
We estimate the payback period for a Sonic Drive-In is 8 years. So it would take you 8 years on average to reimburse your original investment of $1,794,000.
This is a good payback period, in line with restaurant franchises in general, and as such we consider a good investment from a financial perspective.
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| Sonic Drive-In |
| FRANCHISE FEE | $45,000 |
| ROYALTY FEE | 5.00% |
| INITIAL INVESTMENT | $699,000 – $3,371,000 |
| AVERAGE REVENUE | $1,528,000 |
Disclaimer
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