After completing military service, Troy Smith worked as a military truck driver. Eventually choosing to be his own boss, Smith opened a cafee in Shawnee, Oklahoma. He partnered with Joe McKimmey and the two owned the Top Hat hamburger drive-in and the Log House steak restaurant.
While driving the Texas-Louisiana border, hulled pulled into a fast food restaurant that used a series of intercoms at each parking spot that allowed customers to place orders directly from their cars.
In Smith’s version of the restaurant, parking spots were angled to provide greater privacy and music would be played while patrons dined. Eventually he renamed the spot Sonic, with the slogan “Service with the Speed of Sound.”
Sonic eventually adopted a franchise-based model which had a new location opening daily in the 1970s. Today, Sonic continues to be a heavily franchised brand owned by Inspire Brands along with other concepts like Arby’s, Buffalo Wild Wings and Jimmy John’s.
So you are ready to start making some money but wondering what it costs to open a Sonic franchise location? We reviewed the Sonic Franchise Disclosure Document and The total estimated cost to start operating a Domino’s traditional pizza store ranges from $. The initial franchise fee to open a Sonic store is given as a range between $361,900 and $3,537,700.
The ongoing royalty fee paid to the franchisor is 5.0% of the store’s weekly sales for traditional stores and 4% of gross sales for non-traditional stores. The ongoing advertising cooperative fee is 3.25% of the store’s weekly sales. The ongoing brand fee is 0.9% of gross sales.
How Much Money does a Sonic Franchisee Make?
So you have dropped maybe $1,500,000 on a new Sonic location but you are wondering how much money you will make? What should you expect? Well, according to industry reports, the average Sonic does $1,345,000 in sales and 11% EBITDA (profit) margins. Therefore, you could expect to make nearly $148,000 per Sonic location before paying for above store expenses.
Is Sonic a good investment? Well, if you make $150,000 and you invest $1,500,000 then that is merely a 10% return on your capital. From restaurant investments, that is towards the lower end but not uncommon for Burger concepts. Obviously one way to try to improve this is to try and build a store at the lower end of the estimated cost range. This will drive up your expected return, but you should also consult with a financial adviser to see if it is a good investment for you.
Estimated Initial Investment for Sonic Franchise
The range given covers from a non-traditional Sonic up to a traditional Sonic. The range does not include the cost of land. Here is how the initial costs break down:
- Franchise Fee: $22,500 – $45,000
- Payroll: $56,000 – $137,500
- Training, Travel and Living Expenses while training: $5,000 – $33,500
- A-Team Trainers: $48,000 – $92,000
- Advertising Funds: $2,000 – $5,000
- Beginning Inventory: $30,000 – $140,000
- Security Deposits, Impact fees, Utility Deposits, Business License: $0 – $250,000
- Insurance Premiums: $10,000 – $20,000
- Additional Funds (3 Months): $5,000 – $25,000
- Miscellaneous Pre-Opening Costs: $5,000 – $58,300
- Land: Variable
- Real Estate Rent or Building and Site Work: $15,000 – $2,300,000
- Restaurant Equipment: $120,000 – $260,000
- Point-of-Sale System and Digital Menu Housings: $43,000 – $136,400
- Sonic Sign: $0 – $35,000
- Estimated Total: $361,900 – $3,537,700
Sonic Net Worth Requirement
Maybe you can find the money to build a new Sonic, but along with that Sonic is also going to check out your net worth. The current net worth requirement to become a Sonic franchisee is a liquidity requirement of $500,000 with net worth of $1,000,000 if you own 1-2 units. If you own 3+ units, the liquidity requirement increases to $1.0 million and the net worth requirement increases to $2.0 million. If you can’t come up with all that cash yourself, you may also be able to use a partnership to qualify.
Royalties, Advertising Fees and Other Ongoing Costs
At most franchises, the major ongoing expenses include royalties and advertising fees. These usually amount to somewhere around 10% of sales. At Sonic, the structure is the same. Here is how it breaks down for Sonic:
- Royalty Fee: 5% (maximum) of gross sales for traditional and 4% of gross sales for non-traditional
- Brand Fee: 0.90% of gross sales
- Advertising Cooperative Fee: 3.25% (minimum) of gross sales for traditional and 3% for non-traditional
- Additional Training Fee: $500 per person
- Transfer Fee: $3,000 (if you are selling)
- Audit Fee and Surcharge: Cost of Audit plus 10% of unpaid amounts
- Late Charge: 1.75% per month of amount overdue.
- Technology Fee: 0.25% of Gross Sales
- Renewal Fee: $9,000 for traditional and $4,500 for non-traditional