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 | 5.0% |
| Marketing fee | 4.15% |
| Investment (mid-point) | $1,794,000 |
| Average sales | $1,522,000 |
| Sales to investment ratio | 0.8x |
| Payback period | 8 years |
| Minimum net worth | $1,000,000 |
| Minimum liquid capital | $500,000 |
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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, 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 $1,794,000 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 |
Sonic Drive-In Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
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.
Sonic Drive-In Franchise Business Plan
All the stats: startup costs, profits, breakeven, etc.
5-year financial projections built with the FDD
Excellent 4.8/5 based on 70 reviews
Disclaimer
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