Sonic Details Its 2017 Consumer-Facing Technology Strategy and Plans

Sonic Corp. CEO Cliff Hudson outlined the 63-year-old brand's plans to enhance its consumer-facing technology for 2017 during its Q1 earnings call.

The technology initiative is part of a strategy to boost results across the brand's more than 3,500 stores. The strategy also includes refranchising (56 stores in Q1, 104 since the initiative was announced in June 2016, and plans for 71 more in the next two quarters). While earnings per share were flat for the quarter, and same store sales were down 2 percent system-wide, Hudson sounded optimistic about the role consumer-oriented technology will play in the coming year.

A PowerPoint presentation accompanying the call featured a slide titled "Scaling 21st Century Consumer-Facing Tech," in which Hudson showed the steady progression in the adoption of its POPS (point of personalized service) initiative, now up to 71 percent of the system since it was announced in January 2014.

POPS is part of Sonic's broader ICE (Integrated Customer Engagement) platform initiative, which ties into the brand's POS system. "It leverages our point-of-sale system, and in addition to our digital menu board (or POPS) and mobile payment processes," said Hudson. It also includes the brand's CRM engine and social media activity. "When these things are integrated, it creates the most personalized customer experience in QSR, in our view," he said.

Hudson said Sonic has begun testing "limited enhanced ICE functionality" that includes customization of product messaging shown on individual POPS units, based on a transaction or on store-level data. He highlighted two POPS tools in particular:

1. Store segmentation, which allows Sonic to show different POPS content to different store types, even within the same market. Using store segmentation, for example, a customer would pull into a drive-in stall and see a message unique to the characteristics of that store or market.
2. "Smart suggested sell," which uses a rules engine to show suggested and complementary products as customers place their order. Automating upselling based on past behavior, day part, day of the week, or time of year has already proven itself in boosting check amounts.

Hudson said both tools are under test in numerous markets right now. "As we commence rollout of these tools over the coming months, we also expect to start testing Order Ahead... in the spring or early summer time frame."

Said Hudson, "Our view is that the digital ordering can help customers, especially new customers, unlock two of our biggest sources of competitive advantage: variety and customization - and it can do that in a way that an analog menu cannot, It's one thing to say you have 1.3 million drink combinations, and it's another thing to guide them through a customization process on a user-friendly customer interface that allows them to handle that however they would like."

The specific technical features "may not necessarily be unique, except that the technology plays very well with our menu and the whole customization piece," said Hudson. However, he added, "This is a technology and ordering process that does beautifully in our view with our business concept and our brand."