Brand
Pixabay

Industry press is filled with stories of business leaders caught between preserving tradition and confronting the need for change. One principle I have championed for decades and carried into our Bricks & Clicks framework is that innovation is not a luxury — essential for thriving in the 21st century. The leadership challenge is not whether to change, but how to innovate without sacrificing the roots of the brand.

In my 25 years leading the Sonic Drive-In brand (23 of them as CEO of Sonic Corp.), innovation was an ever-present theme. From evolving marketing campaigns to multiple trade dress initiatives, technology applications, and continuous new food product development, innovation was woven into our culture and an ever-present theme for our brand's evolution and growth.

Nonetheless, these initiatives did not occur on their own and were rarely achieved without controversy. In fact, in a system 95% owned and operated by independent franchisees, this type of change was even more of a challenge.

Let me share an example of an early technology initiative that seemed unorthodox to our operators at the time: advancing the nature of our 1950s-style drive-in restaurant business by attaching credit card readers to the menu housing in each drive-in parking stall, an initiative we came to call PAYS.

As Sonic closed out the last century, its business was healthy, having reached its first $1 billion in systemwide sales in 1997. Things were so healthy that we reached $2 billion in systemwide sales in 2001, yet even with that amount of sales, 95% of our transactions were in cash. So why would I ask our operators to look to credit cards for expansion?

Our customers. As Craig Miller, former Chief Information Officer at Sonic, often repeats to me, your customer will never steer you wrong.

I attended a Visa-sponsored CEO conference around 2001 where the Visa representative said that women made most of a family's food-buying decisions. This caught my attention, given that 58% of Sonic's transactions were with women. In addition, the Visa representative said that if we made it easier to accept credit cards, women would be more than twice as likely to stop at our shops. Finally, the Visa representative said that with the ease of credit-card usage, we would also find that people would spend more money. This was music to my ears.

Without a great leap of innovation, it occurred to me that we could address our customers' growing preference by being true to our brand's operation simply by doing what the gasoline service stations were already doing — attaching credit-card readers to their dispensing devices. In our case, the readers could be attached to the menu housing stationed in each drive-in stall.

So, first we had focused on our customer to meet a growing customer trend — greater use of credit cards.

Second, we had been true to our brand's core attribute by weaving the innovation (credit cards) into the drive-in experience, quite literally, by physically attaching it to the menu housing.

Third, we had pursued an innovation that increased convenience for both the customer and the operator. The customer could use their credit card without giving it to the carhop (who would then carry it away), and the drive-in operator did not have to handle payment physically for the credit transaction.

Fourth and finally, the return on investment was rapid and complete. Customers' credit card orders were 40% higher than cash orders, and most operators' capital investment was returned to them in 12-24 months — and then kept on giving for years.

We successfully completed this initiative in no small part because it was true to our customer and true to our brand.

Was there opposition? Well, of course. Some operators initially resisted the investment, suggesting installation in some stalls, but not others. But our customers were moving this way, so as the Wayne Gretzky quote goes, we skated to where the puck was going.

From 2003, when the last of the PAYS units were installed, until 2018, when our company was acquired by Inspire Brands, almost 100% of our incremental systemwide sales came through credit card transactions. They had grown from 5% of sales to 55%.

In retrospect, this innovation may seem like low-hanging fruit, but success often appears so after the fact. Truth be told, even members of my own staff and some franchise operators resisted the change. Our customers' rapid adoption of it paved the way, and, as with so many other initiatives, they never led us wrong.

Throughout my years leading Sonic, innovation was woven into not just our business plans, but our structure and culture. For decades, we evolved new products, emerging technologies, new trade dress, methods of customer engagement, etc. Engagement of our franchise operators and system vendors into these processes was customary, and our structure drove it while our culture pretty much required it. This was an aspect of our culture that I so admired.

About Clifford Hudson

Clifford Hudson is the co-author of Bricks and Clicks: How We Drove Sonic Into the Digital Age and a recognized authority on brand transformation and digital strategy in the QSR space. As the longtime CEO of Sonic Corp., he led the company through more than two decades of sustained growth and one of the industry's earliest and most successful digital reinventions. Hudson holds a Juris Doctor from Georgetown University Law Center and continues to advise brands on customer-centric innovation and long-term value creation.