The chain plans to open 180 to 200 new drive-ins in the coming fiscal year, including 150 to 160 by franchisees, despite obstacles. Some 35 to 40 new units (including 30 to 35 franchised units) will open in the first quarter, which ends Nov. 30.
"The development arena continues to be challenging, as our operators deal with rising land costs, a more complex development environment and rising interest rates," said W. Scott McClain, president of SONIC Industries, the company's franchising subsidiary. Capital expenditures for the year are estimated at $75 million to $80 million.
Sonic has approximately 3,200 drive-ins in the US and in Mexico. The chain opened 173 new locations and expanded into four new states during fiscal 2006, the company reported Tuesday. The company embarked on a new retrofit program during the past year and has implemented the new Sonic look at more than 100 partner drive-ins. Management expects to roll out the retrofit program to approximately 150 additional partner drive-ins this year and to begin to extend the program to franchised drive-ins in January.
"Retrofitting the entire system will likely take place over the next several years, proceeding on a market-by-market basis," McClain said. Retrofits should ramp up even more in 2008 as more franchisees come on board.
The company is also heading east and entering new markets. "We have received a very strong welcome in these new markets owing to a media strategy that employs increasing use of cable network advertising," says Clifford Hudson, chairman and CEO. During the past year Sonic increased its media expenditures 16% to about $145 million, with approximately one-half of that going to cable advertising. This year the chain plans to raise the $145 million figure to about $160 million.
In commenting on the company's financial performance for the year and the fourth quarter, Hudson pointed out that Sonic now has posted positive same-store sales for 20 consecutive years. He called it an accomplishment that is "even more significant considering the economic challenges that have pressured consumers over the past several years."
The same-store growth that Hudson cited amounted to 4.5% for the year and 4% for the fourth quarter, on total sales that grew 11% to $693.3 million for the year and climbed 10% to $198 million in the fourth quarter. Net income increased 12% for the year to $78.7 million, and on a per-share basis the increase was higher, 17%, or 88 cents per share versus 75 cents per diluted share in fiscal 2005. For the fourth quarter, net income rose 12% to $25.5 million, or viewed on a per-share basis, the net climbed 16% to 29 cents per share.
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