SONIC is looking to take a bite out of the breakfast market where other fast food restaurants have failed, and analysts say the Oklahoma City-based drive-in chain stands a good chance of being successful.

Sonic recently announced it plans to double the number of its restaurants offering breakfast from 400 to at least 800 beginning in the spring. Sonics in Oklahoma City were in the test groups and have long served breakfast.

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If successful, the move could be a boon for Sonic. Breakfast accounts for 15 percent to 20 percent of McDonald’s and Burger King’s total sales, analysts said.

McDonald’s established itself very early as a fast-food breakfast alternative, Morningstar stock analyst Corey McElveen said.

But not all fast-food chains found success. Wendy’s, for example, experimented with a breakfast menu several years ago. The restaurant chain “didn’t fail so much as it just pulled out of the breakfast market,” he said. “For some reason, it just didn’t click.”

For Sonic to succeed, it will have to appeal to the same mobile customer with easy-to-handle food served quickly, he said.

Fast-food restaurants that serve breakfast have to be mindful of extra expenses, such as new equipment and additional staffing.

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“Anything that increases total sales will be beneficial, especially if it doesn’t incur too many additional expenses,” McElveen said. Because Sonic’s breakfast items are similar in preparation to its lunch fare, he said, “it sounds as though there won’t be much of a change for the restaurants.”

W. Scott McLain, Sonic’s senior vice president and chief financial officer, said offering breakfast items requires only a few more employee work hours and new toaster ovens.

The breakfast menu takes the same form as other car-based meals – for example, Texas-toast sandwiches, a pancake-wrapped sausage on a stick served corndog style and tube-shaped scrambled egg burritos and fruit taquitos.

The menu has been extensively tested, McLain said. The new items are offered throughout the day alongside the lunch menu.

Elk City franchise owner David Castleberry, who has 12 restaurants in western Oklahoma and 16 in north Texas, helped design the menu and expects it to be a success as more customers are exposed. He’s been offering breakfast items since the early 1980s, long before the corporate headquarters started investing in the concept.

“It wasn’t the same program, of course – we served the more conventional biscuit-type breakfast, and we stopped at 11 a.m.,” he said. “As the menu evolved, that was one of the things that we used to determine the items – no additional equipment in the store, and items we could serve all day long with fresh product.”

Castleberry was seeking ways to increase the revenue of his small-town restaurants. The need was driven by the spread of home appliances such as microwave ovens for home dining and VCRs for home entertainment, he said: “Our late-night business dropped off a little bit. And it got to the point where at 8 o’clock in the morning you could see a lot more traffic on the road than you did at 8 at night.”

Sonic Chief Executive Clifford Hudson said recently, “It continues to be our view that expansion into the morning day part is a tremendous opportunity for our operators, not only to increase sales and leverage fixed costs but also to enhance store-level management.”

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Castleberry said staffing the extended morning hours isn’t difficult, especially in the current job market. He said a lot of people prefer to work early hours so that they can be home by the middle of the afternoon.

As for recouping the investment in manpower and supplies, Castleberry said most restaurants will see a turnaround right away.

“My own managers started asking, ‘Gee, why is that store beating my sales now?’ Once they added breakfast, nobody was willing to take it back out,” he said. “Of course, one of the commitments we made when we rolled it out here was that it was a long-term program. You’re not going to bring breakfast to a market and in 30 days be totally successful at it…. It may hurt your profits for the first few months, but in the long run you’re looking to make more money off of it.”

Michael Smith, an analyst for Fahnestock & Co. in Kansas City, noted that Sonic has been testing the breakfast menu for about 18 months, “so they probably know what they’re doing by now.” The risk of breakfast failing is minimal, he said.

The Oklahoma City metro area was among about 60 communities selected for the initial test. Outside Oklahoma, restaurants in Springfield, Mo., and San Antonio and Amarillo, Texas, also tested the breakfast menu.

The company plans to introduce breakfast items in at least 10 new markets, which will expand the breakfast menu to about one-third of the restaurants in the Sonic system. McLain won’t discuss Sonic’s new breakfast markets.

Smith, who covers several restaurant stocks, also said, “It’s unlikely this was a knee-jerk response” to recent soft earnings, reported at the same time as the menu expansion plans.

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