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Fast Food Update: Arby’s Buys Sonic

The company behind Arby’s and Buffalo Wild Wings has added the Sonic Burger chain to its stable, making it an even stronger contender in the frenetic Fast Food sweepstakes. Inspire Brands (IB) clearly wants to challenge the likes of McDonald’s, Wendy’s and Burger King…

Sonic Roller Skaters - © mlive.comYou can get your order delivered right to your car during evening drive-in
service at Sonic, the last of the old-fashioned Drive-ins.

The logistics of the merger…

Sonic, which has some 3,500 outlets in 44 U.S. states, was purchased by IB for a cool (US)$2.3 billion.

“Sonic is a highly differentiated brand and is an ideal fit for the Inspire family,” Paul Brown, CEO of Inspire Brands, said in a statement.

The acquisition gives IB a combined infrastructure of over 8,000 locations with annual sales of more than (US)$12 billion.

For those who don’t know Sonic, it’s the last of the big drive-in Fast Food joints, and differentiates itself from other Burger chains further with a diverse menu some have called ‘quirky’, plus fast service the others can’t match.

Into the storm…

I’ve said it before, and now seems as good a time as any to say it again: The Fast Food sector is heading for a major shakeout which will calm the current frantic game of one-up-man-ship the players are fighting in the face of stagnant sales and diluted market shares. Novelty menu items and a constant barrage of ‘limited-time specials’ no longer seem to make a difference in customer preference or loyalty for one brand over another. Some well-known brands, notably Subway, which have failed to keep up with dining trends or ignored customer demands for changes in their menus and service, are suffering badly. Subway, for example, closed more than 1,000 locations last year, alone. And, on top of this jungle-like environment, recent market research shows that restaurant dining in the western world, overall, has declined significantly over the past 18 years.

I predicted, a couple of years back, that the shakeout would come between then and about 2025, when major brands will have bought out complementary smaller chains and some of the smaller players will just have just fade away into regional or novelty markets. I noted that things were starting to move in that direction when Arby’s bought Buffalo Wild Wings. Now, the big picture is becoming clear.

The acquisition of Sonic by IB is an unmistakable sign that the industry is beginning to concentrate its powers in new ‘corporate communities’ of complementary brands which can create a business whole which is greater than the simple sum of the parts, and which will weather the coming storm successfully.

An interesting comparison…

It’s interesting to compare the parallel evolutions of the IB fast Food empire and the similar effort by Restaurant Brands International (RBI), owners of Burger King, Tim Horton’s and Popeye’s.

RBI has fallen into a mud pit of declining sales and popularity, along with massive franchise owner and employee protests in its Horton’s branch, thanks to ruthless policies designed to increase profits for the shareholders every quarter. But IB has taken a polemically different approach to managing it brands and has, at the very least, saved Buffalo Wild Wings from disaster, and broadened Arby’s horizons to encompass much more than Roast Beef. IB says it plans to start its evolution of Sonic by getting the brand into the U.S. states it’s not already serving and applying some of its menu innovations it’s developed while working with Arby’s and Buffalo Wild WIngs.

Here’s another situation we’ll be watching with great curiosity as the future unfolds…

~ Maggie J.