The unique carhop service at Sonic Corp. is coming with a new menu option: plastic.
Although customers have been able to pay with credit and debit cards, the Oklahoma City-based company said Tuesday it plans to roll out card readers in the drive in stalls at its 544 company owned restaurants by the end of January.
"We've installed credit card terminals at each stall in most partner-owned drive-ins to make paying by credit card more convenient, Chief Financial Officer Steve Vaughan said in a conference call with analysts.
It may be some time before the stall-based payment option is available at Sonic's 2,373 franchised stores. Most of them have different "point of-sales systems from company-owned stores.
"We're working with another vendor to address the technological challenges of this, Vaughan said in a later interview. "We have it installed in a handful of (franchised) stores right now. Like other new initiatives, we try to make the investment in our company-stores and then let it sell itself to our franchisees.
Franchisees also may see some resistance initially from their carhops, who count on customer tips. The card readers don't allow for tips on the transactions. The system accepts credit cards from Visa, MasterCard, American Express and Discover, as well as most debit cards.
Executives said they don't see carhops most of whom make at least minimum wage losing money if customers use the stall-based credit card readers.
"The pattern appears to be that the consumer charges the meal and on a regular enough basis slips the carhop a buck (in cash), so the carhops come out OK, Chairman and Chief Executive Officer Cliff Hudson said. "It was a concern initially, but it has not manifested itself.
Americans charged more than $30.2 billion at fast-food restaurants in 2004, according to estimates from Visa's SpendTrak survey. That's a 134 percent increase since 2003, when customers charged $12.9 billion at fast-food restaurants.
Most restaurants have found that customers increase their spending when they can pay with plastic. In 1989, Whataburger was one of the first burger chains to take credit card payments. Wendy's International Inc. has accepted plastic since 2003, while McDonald's Corp. and Yum! Brand Inc.'s Taco Bell rolled out their programs last year.
Analyst Mark Sheridan with Johnson Rice & Co. in New Orleans said he doesn't expect any problems as Sonic expands its card payment program.
"As far as the capital outlay that their franchise partners might have to make in terms of the equipment to scan at the stalls, they'll just run the numbers and do a cost-benefit analysis of that versus the sales you get from credit cards, Sheridan said. "As we become more of a plastic-based society, it's a form of payment that their company and franchised stores will need to adopt over time.
Meanwhile, shares of Sonic Corp. surged 6 percent Tuesday, a day after the company posted solid first-quarter earnings. Trade volume was more than four times the recent average as 1.46 million shares changed hands.
The stock closed at $31.44, up $1.80, on the Nasdaq exchange.
"The earnings results were a little bit better than expected and the sales results were quite a bit better than expected, Sheridan said. "They had pretty strong fundamental results, and that's what we saw the market respond to today.
Sonic has outperformed its larger rivals in the quick-serve hamburger restaurant sector. Since July, Sonic shares have gained more than 30 percent, compared with increases of 21 percent for McDonald's and 11 percent for Wendy's.Archive ID: 2201822