With more than 3,500 drive-ins from coast to coast, SONIC is the nation's largest chain of drive-in restaurants. More important, SONIC is the most highly differentiated quick-service (QSR) brand, offering:

• A fun, retro-future look that stands out in a crowded QSR segment, where customers can drive-in, drive-thru or dine on our patio;



• A streamlined delivery system built around personalized and friendly Carhop service that's fast, convenient and a lot more fun than the typical fast-food place; and



• Fresh, quality, distinctive food and drinks – completely customizable – made to order for each individual customer.

At SONIC, we're all about feeding our customers' desires for choices. Our made-when-you-order menu includes items you won't readily find elsewhere, going well beyond what may come to mind when you first think about fast food. SONIC features a diverse selection of sandwiches, salads and frozen treats in addition to burgers, fries and sodas offered at traditional quick-service restaurants. At SONIC, our customers can choose from eight different burgers to healthy alternatives such as the Grilled Chicken Wrap or our signature selections, like Ex-Long Chili Cheese Coneys, Tater Tots, and hand-made Onion Rings. Drink choices also abound to take our customers well off the beaten path to a place where Cherry Limeade reigns supreme. As Your Ultimate Drink Stop®, SONIC's line-up of Fountain Favorites® drinks offers unique combinations of slushes, juices, teas, fruits, and flavors (more than 168,000 drink combinations and counting). And no meal at SONIC is complete without a final flourish provided by our famous Frozen Favorites® treats.

Serving Up Solid Financial Returns

How do we do it? - Multi-Layered Growth Strategy



Since becoming public in 1991, SONIC has consistently served up solid financial returns for its stockholders. As with all restaurants, sales have been affected by the onset of a severe recession in late 2008, which since has had a significant impact on consumer discretionary spending. Still, the company maintained generally level traffic levels compared with down traffic for the QSR industry as a whole in 2009, and its pace of new drive-in development, while restrained somewhat by tight credit markets over the past year, remained solid and among the strongest for similar-sized QSR chains. Highlights of the company's financial results for the fiscal year ended August 31, 2009, included:

• System-wide average unit volume of $1.1 million;



• Revenues of $718.8 million;



• Net income per diluted share of $0.81; and



• Solid growth in operating cash flow, which helps support SONIC's development of new partner drive-ins and opportunistic acquisitions of franchised drive-ins.

To remain relevant to today's budget-sensitive customers, SONIC implemented an Everyday Value Menu at the beginning of calendar 2009. The addition of these value selections, combined with the success of Happy Hour and other product promotions, enabled SONIC to maintain relatively level customer traffic throughout 2009 against a backdrop of declining traffic overall for the QSR segment during that same time.

Concurrent with building awareness of the value menu, we also emphasized a number of other initiatives aimed at driving Traffic, Loyalty and Check (TLC). We re-focused our attention on improving combo meal sales, which was necessary to maintain and, in some cases, regain traffic. Over the long run, we think our strong line-up of premium, distinctive products and combo meals, together with our Everyday Value Menu, will give us strength at both ends of the menu spectrum. Furthermore, we implemented a strategic pricing initiative to ensure that price increases were approached strategically and that our menu is competitive at an individual drive-in level. We also focused on improving system operations and the customer service experience, particularly at the drive-in level.

We believe long-term success will be measured by providing consumers compelling reasons to see SONIC as the place for high-quality, distinctive food and service. In 2010, we will be emphasizing our unique drive-in experience, featuring personalized Carhop service, along with our core brand strengths. Smiling, friendly, skating Carhops are one of our service trademarks that enhance the overall experience, and our research shows that the overall SONIC eating experience is consistently ranked higher when there are smiling, skating Carhops. So we are placing increased emphasis on this aspect of the experience at the drive-in level. So whether it is the quality and differentiation of our products, like Coney's, Tater Tots, Onion Rings and a boundless selection of drinks, or our drive-in format with personalized Carhop service, our brand appeals to consumers and our future messaging will be focused on highlighting those key features.

Even as we emphasize the experience in 2010, we will sustain our focus on value since it is still an important factor for many consumers. However, we will work to define value on SONIC terms, offering a series of value propositions that will not only provide an attractive price point to consumers, but also emphasize and highlight our distinctive brand offerings – a formula that delivers high-quality offerings at a reasonable price.

For more current FY 2009 earnings information




Capitalizing on the traditionally stronger performance of our franchise drive-in business model, the company embarked on a refranchising initiative in fiscal 2009 to sell partner drive-in (SONIC Drive-Ins in which the company owns a majority interest, typically at least 60%) to existing and new franchisees. The refranchising effort originally was envisioned as a multi-year program to increase the mix of franchise drive-ins from 80% to 86%-88% of the chain. It was aimed at improving the performance of partner drive-ins by reducing the number of partner drive-ins to allow greater management focus on this part of the company's operations. As a result, the program represented a way to limit the overall risk of SONIC's business and provide a less volatile financial model for stockholders.

Because of the favorable response this program received among franchisees, the bulk of the planned refranchising was completed in just one year with the sale of 205 partner drive-ins. The success of this program, together with the planned moderation of partner drive-in development and ongoing expansion of franchise drive-ins, increased the mix of franchised drive-ins to approximately 87% of the chain at fiscal year-end 2009.




The primary objective of SONIC's capital management strategy is to maximize total stockholder returns - including earnings per share and share price appreciation - while managing the capital structure to an acceptable level of debt and financial risk.

Utilizing a portion of the proceeds from its refranchising program, SONIC repurchased approximately $25 million of its senior debt at a discount during fiscal 2009, thereby supporting the company's efforts to strengthen its balance sheet. The company ended the year with more than $100 million cash and continues to easily exceed all debt covenants. SONIC continues to consider strategic uses of its excess cash.


How do we do it? - Multi-Layered Growth Strategy

To achieve solid gains in earnings per share for stockholders, we pursue a multi-layered growth strategy that includes:

• Media expenditures and new product news to drive same-store sales and average unit volume growth;



• A broad menu focusing on alternative day parts to increase operating leverage and sales;



• Increased expansion in core and developing markets with a primary emphasis on franchise drive-ins; and



• Increased royalty income through SONIC's ascending royalty rate, which increases as sales increase.

Increased marketing expenditures, with almost one-half focused on network cable, build brand awareness efficiently and effectively across developing and new markets. National cable provides 12 months of commercials to feature new products, emphasizes alternative day parts and targets specific customer segments. It reaches cities and towns across the country to plant seeds of interest in our future markets, raise brand awareness and create a high level of anticipation among SONIC's future fans. And it's a big reason why our drive-in openings in new markets continue to draw long lines and fanatically enthusiastic customers, all awaiting their first taste of our unique style of fast food and a great feel for the drive-in experience that is quintessentially SONIC.
At SONIC, we increasingly have viewed our business in terms of day-part performance and have placed greater emphasis on how we can improve sales and profits by day part for our partners and franchisees. These goals intersect critically with our marketing strategies as we deploy our advertising dollars both to promote specific products and build our business across the day - not only in the typical peak times of lunch and dinner, but in non-traditional day parts, particularly mornings, afternoons, and evenings after dinner.

Over the past five years, we have opened almost 900 new SONIC Drive-Ins, expanding the size of our chain by almost one-third. This growth has taken us into several new markets and new states. With strong opening and sustained sales in new northern markets, our concept has proven successful in all regions. We now operate in 42 states, having entered 13 new states in just the last four years, and we continue our progress on the way to becoming truly a national brand.

SONIC Locations Coast to Coast

Our franchisees - who operate approximately 87% of our system - continue to take the lead in our development process. This tandem approach to expanding our chain, complementing the growth of our partner drive-ins, promotes a healthy balance in our revenues and limits the risk associated with developing markets. Moreover, considering our unique ascending royalty rate and the implementation of new licenses from time to time, our franchise-focused development also translates into a consistent and growing stream of franchising income for the company.



These multi-layered strategies have enabled SONIC to emerge as a leader in QSR, providing perhaps the most attractive growth and financial returns to franchisees and stockholders of any company in the QSR industry. More important, these strategies, coupled with our distinctive concept, position SONIC to continue its strong expansion program nationwide, draw new franchisees to SONIC family, and build the brand among a growing number of loyal customers.