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Question:
 
Video Case: Sonic Is Booming
 
Entrepreneurship is the path to success throughout the world. More millionaires come from the
 
ranks of entrepreneurs than any other place. Because the work is so hard, however, fewer people
 
than you would imagine are willing to take the plunge.
 
One of the major decisions an entrepreneur must make is what form of business to use; sole
 
proprietorship, partnership, corporation, franchise, or what? Sonic is a large chain of fast–
 
‐food restaurants with over 3, 000 drive–‐ins located from coast to coast. It began as a sole
 
proprietorship, evolved into a partnership, later added many franchises, and eventually became a
 
publically traded corporation. This is not an unusual progression for a business, but Sonic did it
 
relatively quickly and effectively.
 
Troy Smith started the first Sonic in 1954. It was a sole proprietorship that took the form of a
 
drive–‐in restaurant, much like other drive‐ins of that era. Smith brought in a partner is 1956,
 
and the business began to grow. The partner shared profits and liability with Smith. When the
 
partner died, Smith found many other people who were interested in becoming franchisees. The
 
company grew even faster then. In fact, Cody Barnett’s father owned seven Sonic franchises.
 
Cody eventually took over those franchises and added 15 more. There is much to learn about
 
buying and running a number of franchises, and Cody schooled himself in the managerial
 
techniques and strategies that he would need. Like most franchisors, Sonic was a big help in that
 
regard.
 
Clearly, understanding the various forms of business is key to both getting started in business
 
and then growing the business later. If you plan to franchise the business, it is critical to find
 
franchisees like the Barnetts who understand that the business is their own and also understand
 
the value of having the foundation of a well–‐known brand name and a ready customer base.
 
One thing franchisees learn from the very beginning is that running your own business takes a
 
lot of work. At first, you have to be there whenever the business is open. That means long, long
 
hours of work – and away from the family. That is true of many businesses and the search for
 
balanced living is one of the most important skills a business owner must learn.
 
You don’t have to go very far in most towns to see the results of franchising. On every corner,
 
there is a fast–‐food restaurant of some other franchise that is serving the area and travelers that
 
come to that area. Many are obviously very successful. Sonic is one of them. But, as you can see
 
in this video, the success does not come easily. It takes lots of time and hard work.
 
>From Nickels, W.G., McHugh, J.M., and McHugh, S.M.. (2010) Understanding business. 9th
 
ed. New York, McGraw–‐Hill.
 
SONIC FRANCHISE VIDEO CASE 2
 
Thinking It Over
 
• Sonic started as a sole proprietorship and gradually evolved to a partnership, then to a
 
corporation, and finally to franchisor. Do you think that Sonic would have grown as large as it is
 
today if it had remained a sole proprietorship? Why or why not?
 
• What were the advantages and disadvantages to Sonic of each form of business ownership?
 
• There have been lots of drive–‐in and fast–‐food restaurants over time. In your opinion, what
 
makes Sonic and other major franchises more successful than the others?
 
Assignement
 
View the Sonic Franchise video case (“Choosing a Form of Business Ownership”) in Slide 10
 
of Learning Activity 2, Topic 1, and then download and read the document titled Video Case:
 
Sonic Is Booming. Sonic started as a sole proprietorship and gradually evolved to a partnership,
 
then to a corporation, and finally to franchisor. Please define each of these four forms of business
 
ownership and then respond to the following questions. Your response should be in an essay
 
format in at least 250-500 words.
 
• Do you think that Sonic would have grown as large as it did today if it had remained a sole
 
proprietorship? Why or why not?
 
• What were the advantages and disadvantages to Sonic of each form of business ownership?
 
• There have been lots of drive-in and fast food restaurants over time. In your opinion, what
 
makes Sonic and other major franchises more successful than others?
 
For citation guidelines, please refer to the table in the APA Style section of the syllabus.

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