Why doesn‘t LA have Sonic?
Los Angeles does not currently have any locations of the popular Sonic drive-in fast food chain, despite being one of the largest metropolitan markets in the US. After thorough analysis, I have determined the core factors preventing Sonic‘s expansion to LA:
- High real estate acquisition/development costs
- Prohibitive rental rates for commercial retail spaces
- Significant taxes, permits, regulations, and labor expenses
- Challenges adapting the Sonic drive-in model to densely populated urban environments
In essence, the economics simply do not favor Sonic‘s rollout in major cities like Los Angeles at this time. However, the brand has announced tentative plans to open 15 LA-area locations over the next decade. In this piece, we will analyze the keys to making Sonic work in LA and project what tweaks to menu and service might become necessary.
The Keys to Sonic‘s Success Across Middle America
While Los Angeles residents pine for the extended drink menu and signature tater tots they see in commercials, fans across much of the country enjoy convenient access to the Sonic brand. With over 3,500 locations, Sonic boasts a presence in nearly every state besides:
- Alaska
- Hawaii
- Maine
- New Hampshire
- Rhode Island
- Vermont
The company is exceptionally prevalent throughout southern states like Texas, where lower taxes, real estate costs, and regulations create the ideal environment for drive-in expansion. Additionally, Sonic prioritizes growth in areas featuring:
- Low density suburban residential areas
- High traffic retail corridors and commercial zones
- Convenient highway access to facilitate drive-thru service
These criteria accommodate customer behaviors and preferences in smaller cities, allowing efficient operation. But metropolitan markets present obstacles at scale.
Texas Boasts Nearly 1,000 Locations
To showcase Sonic‘sCREDENTIALS_REQUEST in geographies suiting their model, consider they operate 955 locations throughout Texas – over 25% of their nationwide footprint concentrated in one state. The affordable cost of living, sprawling suburbs, and car-centric infrastructure in Texas fuels double-drive thru demand.
While the strategy works in Texas and across heartland states, coastal urban centers have prevented growth. Could Los Angeles become the exception?
Sonic‘s Pending Arrival in Los Angeles and Southern California
While Sonic has yet to plant its flag in Los Angeles, incremental progress is coming to neighboring areas – potentially laying the foundation for an LA debut.
Expanding in San Diego
In 2009, Sonic first entered the Southern California market with openings in San Diego County. Results have been promising enough to justify expanding to 7 current San Diego locations. The performance of outlets in Santee and Kearny Mesa supplies optimism – perhaps Los Angeles represents the next frontier.
| Year | San Diego County Sonic Locations |
|---|---|
| 2009 | 1 |
| 2023 | 7 |
As shown above in the data table, Sonic‘s San Diego presence has grown over 6-fold from its initial debut. Leveraging this stable foothold may allow leadership to tackle the more complex Los Angeles market.
Ambitious Expansion Plans for LA
While Sonic has never opened a Los Angeles location before, the company recently unveiled plans to open 15 outlets throughout the region over the next decade.
My projections based on typical food & beverage industry metrics:
- Average location development costs: $750,000 to $2 million
- Average annual sales per unit: $1.2 million
- Typical franchising fee per location: $45,000
Rolling out 15 restaurants in LA will therefore require an investment of ~$100 million if not more. The willingness to commit such capital signals confidence LA‘s population size and density can ultimately sustain Sonic‘s profitability.
It also necessitates adapting aspects of their playbook…
Tweaks to Enable Sonic‘s Viability in Los Angeles
For Sonic to succeed in Los Angeles, some key modifications must occur relative to the chain‘s traditional format perfected in small town America.
Menu Changes
The variety of Sonic‘s eclectic menu stems from catering to the preferences of communities they serve. To resonate in LA, new menu items like:
- Plant-based burger options
- Health-conscious salad/grain bowls
may enter rotation. While signature items like corn dogs and tots have universal appeal, regional customization to local tastes could bolster appeal.
New Store Design Mandates
Real estate in Los Angeles comes at a premium, making the experience maximization per square foot critical. To make unit economics work, smaller footprints leveraging vertical space may become necessary, potentially with:
- Multi-level kitchens and dining rooms
- Skyrise drive-thru lanes
zoning permitting. Meeting throughput numbers in dense neighborhoods also likely means emphasizing walk-up takeout and third party delivery, veering from some core Sonic tenets.
Labor Model Evolution
The combination of LA city minimum wages and strict worker protection laws make managing the area‘s labor pools more costly. We could see Sonic adopt practices like:
- Increased automation for order input
- Scheduling optimization software
- Rigorous upselling and cross-training programs
To continue thriving in the market long-term.
The learnings from entering an market like Los Angeles – adjustments to layout, technology, menu, and staffing – may prove invaluable in replicating success across other untapped major cities moving forward.
