Cliff Hudson spent 30-plus years in various roles with Sonic Drive-In, 23 of them as chief executive, and guided the company through numerous challenges and changes leading up to its sale in 2018 to Inspire Brands. Speaking in Philadelphia today, September 28, at Springboard, a conference for emerging franchisors, he called out listening, the co-opting of ideas and innovation as key concepts for any leader.
Hudson, who was part of the management team that in 1986 purchased Sonic in a $10 million leveraged buyout, noted the brand had about 1,000 locations and $300 million in systemwide sales at the time. In 2018, when it was purchased by Atlanta-based Inspire as its fourth brand, Sonic had nearly $4.5 billion in sales and about 3,600 units. Getting there, he said, required a “healthy, communicative culture—a collaborative culture.”
Listening skills count. It was 1995 and a franchisee in the Carolinas came to Hudson to ask for help after being told by the company’s field reps to shut down an ice cream program he was promoting because, as they said at the time, “That’s Dairy Queen, that’s not Sonic.” Hudson soon learned the franchisee’s store was doing 30 percent of its sales in ice cream, an incredible figure.
“My comment was, please don’t stop doing this. Let us send some folks out to see how you’re doing it,” he told the Springboard audience. “Then about a year later, we rolled out an ice cream program: Frozen and Fountain Favorites.”
Every Sonic store already had soft serve ice cream machines, he said, but the brand wasn’t promoting frozen treats. “So we packaged it, we promoted it and it was enormously profitable,” Hudson said, with store-level profits up 40 percent in the first year of the program. “The impact on our business was extraordinary. And it was sustaining.”
Now, said Hudson, Sonic “probably does about $500 million in ice cream sales.”
Don’t be afraid to co-opt ideas. About five years after the launch of the ice cream program, recalled Hudson, he was at a conference with other quick-service restaurant CEOs listening to a presentation from Visa about the desire from customers to shop with their credit cards. At Sonic back then, about 95 percent of sales were in cash because, Hudson said, customers didn’t want carhops to disappear inside to run their credit cards.
The solution was to attached credit card readers to each ordering stall. “When people can use credit cards, they spend more money. We found our average check was 40 percent higher when people could use a credit card. It went from $5 to $7,” said Hudson, with the installation completed across the system in 2003.
“It wasn’t a new product, a new service, it was a convenience to the customer,” he said. “It had a huge positive impact. So when I say co-opt others’ ideas … take advantage of ideas and apply them to your business in an incredibly successful way.”
Innovate when it fits. “Don’t try to bolt something on that doesn’t make sense for your brand just in the name of innovation,” said Hudson as he recounted a major digital shift for Sonic that was really a progression of its model.
Most Sonic locations have 25 ordering stalls, which after the company had undergone a complete overhaul of its technology platform starting in 2015, it was able to use as individual digital touchpoints with customers. The brand rolled out mobile ordering in 2018, before the sale to Inspire.
“Sonic had 25 points of contact and we had an opportunity to utilize technology and change the experience for the consumer and it would benefit our business quite handsomely,” Hudson said, as mobile ordering quickly accounted for almost 30 percent of sales. The move to mobile also allowed the company to collect customer data and begin creating a one-to-one marketing engine, he said, that’s since been effective in tailoring offers and messages to consumers.
“Innovation is an absolute necessity. Your customers are looking for it, your partners are looking for it,” he said. “But at the same time, do it as you’re prepared to do it. And be bold in the process.”