I was back in the Chicago area a couple of weeks ago to present on the topic of global brands. But it was a local brand that was the subject of discussion during lunchtime in our Naperville office. The Sonic Drive-In that had opened more than a month ago in the nearby town of Aurora was still attracting crowds. What, I wondered, was the reason?
Apparently the news that Sonic was coming to town had caused a stir long before the fast-food joint had even opened. According to The Chicago Tribune, people had been gathering at the Kirk Road location for weeks, while employees were still in training. Staff tried to stop them by positioning cones and even dumpsters at the entrance but cones were regularly flattened, and sometimes even the dumpsters were pushed to one side. When Sonic Number 3456 actually opened, my colleagues told me that it took over an hour and a half just to get in to the parking lot.
Maybe the attraction is Sonic’s distinctiveness. Sonic is not McDonald’s. Sonic is a drive-IN not a drive-THRU. You drive on to the lot, order at a covered space, and your made-to-order meal, which might include Sonic’s signature items, such as Extra-Long Cheese Coneys, Tater Tots, and Cherry Limeade, is delivered to your car by servers on roller skates. Like MOS Burger in Japan and Sunset Boulevard in Denmark, Sonic presents an alternative to the standard and familiar offering of the global giant.
Sonic’s “retro” style also contributes to its appeal. Since 1998, Sonic outlets have been undergoing a neon-illuminated “retro-future” makeover. And come on, who can resist a place where the servers work on roller skates?
And there is one more factor that helps explain the overwhelming interest in the new Sonic: pent-up demand. The brand has advertised in the Chicago area for years simply to generate interest. As one blogger puts it, “Now before today, everything I knew about Sonic was due to their goofy TV commercials that have been airing here for years.”
So there you have it. Combine difference, nostalgia and pent-up demand and you have a runaway success. Or do you?
It’s not so long ago that I remember similar stories about Krispy Kreme. For years, Krispy Kreme doughnuts were available only in the southeastern United States. Then, the company undertook a national expansion, issued an IPO, and by August 2003, the stock price exceeded $49 per share. Today it’s down below $5. For years, revenue growth was driven by new store openings, but sales at these stores flattened or declined after the first year.
With demand drying up at home, now Krispy Kreme is investing abroad. Like other American brands before it, Krispy is rolling out to Canada, the U.K., Saudi Arabia and South Korea. The trouble is, many brands that have sought to go global suffered the same fate as Krispy Kreme in the U.S. Initially they found fertile ground as locals welcomed foreign brands for their quality and implied status. But once the allure wore off, sales fell off and companies had to return to building brands the old-fashioned way. As Starbucks found out in the United States, once the distribution runway runs out, it is tough to keep the revenue growing if you have not invested in your brand.
So as Sonic closes in on New York, we can expect to see the same interest there as in Chicago. The question is, how long will it ask?
So what’s your prediction? Is Sonic destined for success? Can you think of other brand which created demand and then lost it? What did they do wrong?
(6 votes, average: 4.17 out of 5)
Loading ...
Email This Post
September 22nd, 2008 at 3:05 pm
Krispy Kreme died once people understood its underlying nutritional value of their food and the impact it had on their personal health.
I doubt Sonic will last, its car centric and with the price of fuel…
just look at the pain being felt by Starbucks as consumers trade-off a cup of coffee for a gallon of gas. How many cars can you pack-in per square foot, versus a sit down establishment? How many cars/patrons will want to wait around for a bay to be free before sliding in - or will they simply point their cars elsewhere. How many “Youts”
hang around for hours on end socializing - will they be able to take up that valuable space at Sonics?
Nigel, re your point about investing in one’s brand.
I find most business go astray because they do not have a firm grasp of what brand promise their key constituents are looking to fulfill. Understanding that promise, and how to deliver against it then requires an honest/realistic assessment of the brand’s value chain - what its worth, and what it can sustain.
Building a brand takes years and only moments to eradicate.
As we have seen in the financial markets of late, many start with the best of intentions but as they run into the challenge of beating their comparables, foolhardy short-term actions are taken. Acqusition estimates are unfounded, let alone retention, upsell/cross sell
and so the planning horizon shifts to next quarter, then to this quarter, then to …
My office is open
Miro
September 23rd, 2008 at 9:48 am
As someone living roughly three miles from this store location, it’s been interesting to watch how they’ve handled the huge influx of business and the demand for the “experience”.
First some background that I became aware of through some of my contacts. Sonic is primarily a “southern” chain. Because of the outdoor nature of the dining experience, there have been several corporate concerns about what would happen if they moved “north”. So for at least the last year, they set up a test store in Ohio so they could see what would happen when it snowed.
They found that the brand was accepted readily and met revenue expectations but that they needed to alter their design and provide a “drive-thru” window for those just wanting the food, which I might say is a bit different than the traditional QSR stuff being thrown at us.
This specific Aurora location is in a larger shopping area which has Wal*Mart and Sam’s Club as its anchor stores. What Sonic has been doing is diverting the overflow traffic into the open parking lots that they share with those stores. They have staff out in those areas running and delivering the orders but it’s not delivering the message board/dining in car experience that one has if they can get into the parking lot.
I have to say that for years, I’ve been seeing Sonic advertising. The ads are mostly improvised by members of the Second City comedy troupe (out of Chicago). They are given the product and the price point and then sit in a car and just freestyle about them. I’m sure a lot ends up on the editing room floor, but what they produce is attractive and looks almost “independent”. They created the demand LONG before they decided to come “north” and so it’s no surprise that on Day 1, they had a 90 minute wait for food. It has calmed down of course, but at any given time when I drive by there are 5-10 cars sitting in the “staging” area.
(I haven’t eaten here yet myself, but imagine I’ll try it soon enough)
I think there’s something we crave as Americans and probably as Midwesterners and that’s the old-fashioned/retro drive-in; the old Route 66 sort of feel that one doesn’t get from dueling drive-thrus at McDonald’s. I DO think that Sonic has a firm grasp on their brand and what their consumers feel they are being promised so to that end, I don’t see them having issues continuing on for many years. All available franchise locations in the Chicago area have been sold for quite some time.
Lastly, creating demand for brands: Coors Beer for a very long time was only available west of the Mississippi River. Caravans of cars/trucks/motorcycles would make the trip so that they could buy it and bring it back “East”. I remember my uncles in the 70’s taking off early on a Saturday morning to get to Iowa or Nebraska so that they could buy a few cases and then drive back so that they could be enjoyed for the weekend in Chicago. They even made a movie about this demand called Smokey and the Bandit!
September 23rd, 2008 at 2:58 pm
My understanding of why Sonic advertised nationally was that it was actually cheaper for them to buy national TV media - they’d penetrated enough of the US that only being “on” in their markets would cost more.
An urban/industry myth, perhaps; but I always found it interesting that people who live in places where Sonic does not exist “yet” are ready and excited for the brand to arrive. I know this because when they visit me here, the first Sonic they see causes excitement and in some cases requests to pull over.
However, if I can hijack this thread to make an ethical point to balance out this demand generation success story: Sonic’s emphasis on drinks has scary implications for the country’s health. When people ask me “Why is Sonic so popular in Texas?” I usually say it’s because you can get a 32+ Ounce Cherry Vanilla Lime Ice Cream Cola - same answer to “Why is Texas so unhealthy?”