Lea Cabrerra

Sonic Corporation F3Q09 (Qtr End 05/31/09) Earnings Call Transcript

Sonic has major service issues, pricing issues as well as food quality issues.

To be brief, sonic is becoming notorious for 20 minute wait times on a simple drink order (coke, limeade).

Many Sonics have a hip hop culture. Many of the employees dress like thugs (i.e dreadlocks, saggin' pants, hat turned sideways on their heads, tatoos, etc) Furthermore friends of employees hang out on the premises and play the thump thump bass music. It's common to see the employees hangin with their friends or trying to pick up customers. This certainly contributes to slow wait times on drinks. In short the employees dress and act as though their employer (sonic) is simply a place to chill and hang out.

Sonic has pricing issues. $2 for a simple soft drink is appalling. Nevermind the fact the soft drink is overloaded with ice (90%).

Sonic's food quality has suffered greatly. Sonic used to be the premiere name when you wanted a coney, hamburger, onion rings or tator tots. They have changed food vendors and their onion rings and chili dog is the worst in the industry. The breakfast is attrocious.

Management has destroyed the menu by overloading it with everything under the sun. They have sacrificed quality for quanity. Im sure the large menu also contributes to delays and wait times as well.

Management made a $700m capital finance blunder in 2006-2007 when the share price was at an all time high of $35 and 30p/e. Management issued $700m in debt to buyback shares.

The stock now sits around $10 and the company has a negative book value.

Current management has and continues to destroy shareholder value.