Editors note: All week, Restaurant Business will run profiles of the five nominees for Restaurant Leader of the Year.
Monday: White Castle CEO Lisa Ingram
Today: Cheesecake Factory CEO David Overton
Wednesday: Brinker International CEO Wyman Roberts
Thursday: Jersey Mike’s CEO Peter Cancro
Today: Sonic President Claudia San Pedro
Few people have had quite the introduction to the C-suite as Claudia San Pedro.
San Pedro was named CFO of Sonic Drive-Ins in 2015. Since then, she helped with the implementation of a complex and costly new point-of-sale system across the chain’s 3,500 restaurants. She worked on its sale in 2018 to Inspire Brands, after she was named brand president. She then worked on its integration. And when all that was done the pandemic hit.
“It has been busy,” San Pedro said.
Busy, maybe, but it’s certainly been effective. Sonic has thrived since San Pedro took over as the brand president. The company has overhauled its marketing and solidified its technology position. It recovered from one of the most difficult periods in the company’s history and then bested that by taking off during the pandemic.
Few big restaurant chains grew as much in 2020 as did Sonic, and though the company won’t divulge numbers it appears 2021 wasn’t all that bad, either. Now, San Pedro is one of the nominees for 2022 Restaurant Business Restaurant Leader of the Year.
Not bad for a former government employee.
From politicians to franchisees
Claudia San Pedro didn’t take a typical path to become the president of Sonic Drive-In, if there is such a thing.
San Pedro, who was born in Mexico and whose parents moved to the U.S. when she was 2, got her start working in state government. She worked for the Oklahoma State Senate for a decade in the 1990s. She was appointed the Oklahoma governor’s budget director in 2003. Two years later, San Pedro was named director of the Office of State Finance. She was the first woman, and the first Hispanic person, to be in the position.
“On the one hand I’m like, ‘Really? I’m the first? That’s kind of sad,’” she said. “On the other, it’s incredibly thrilling and humbling. I felt just this great sense of responsibility. As a first-generation immigrant, I was raised with a sense of what this country brings.”
And then she left to go make hamburgers.
In 2006, San Pedro took a job as treasurer for Sonic, at the time a 2,500-unit drive-in chain that was only beginning to make noise with its national cable ads.
But San Pedro knew there was more to the job than just hawking Cherry Limeades and Patty Melts. The restaurant industry is one of the few that enables someone to come in off the street with no education and no skill and work their way up, quickly, into a high-paying job and ultimately ownership.
After working in government so long, she had an appreciation for the role restaurants play in the economy.
“I remember some colleagues saying, ‘You were dealing with weighty issues like healthcare reform, economic development, corrections, public safety. Now you’re going to sell hamburgers? Are you sure?” she said.
“But it’s not about selling hamburgers. It’s about the American dream at a whole different level and a whole new appreciation for the role of the restaurant industry.”
Indeed, there is more in common between the two jobs than just a few numbers.
“Working in the franchising business is a lot like working in government and working with elected officials,” San Pedro said. “Franchisees are their own CEOS. They all have different ideas and different perspectives.
“It’s about establishing relationships, building trust, and listening to their needs.”
Also, it’s not like San Pedro would avoid weighty issues in her restaurant career.
The technology effort, and the sale
San Pedro was named VP of investor relations in 2009 and in 2015 was promoted to chief financial officer. And then she went to work on a complicated and costly effort to move to a single point-of-sale system to improve Sonic’s efforts on technology.
At the time, restaurants knew they needed to improve technology. Big chains were making moves to go with a single POS system, believing them to be easier to integrate with things like mobile ordering and other up-and-coming technologies. Sonic felt it needed to do the same.
In a franchise system, however, that requires convincing the operators to spend the money. And historically franchisees prefer shopping around, rather than be directed to buy a specific item. It did not help in Sonic’s case that the costs would prove more expensive than expected and took longer to complete. San Pedro was part of a small group of executives that worked on the problem.
“I give a lot of credit to the CEO at the time. There were some tough conversations,” San Pedro said. “It was costing more money and it was taking more time. It was rough.”
There were other factors, too. In 2015, Sonic enjoyed a strong year from a sales standpoint. But there were problems beneath the surface. “We were killing our operators,” San Pedro said, saying the new technology the company was adding combined with overly complex promotions to make life challenging.
Sales began weakening after that. In 2017, system sales declined 2.4%.
But the period would prove important for Sonic’s future. Technology since then has proven to be a difference maker for restaurant chains as more sales have shifted to takeout.
That period also proved to be an influential one for San Pedro and her leadership style. “It was an incredible learning experience,” she said. “It showed that if you build a high-performing team and you’ve got a trusting and collaborative environment, you can pull everybody through this. That helped us in a state of uncertainty.”
But the damage was done. In late 2017, an activist investor approached Sonic and urged the company to put itself up for sale. In January 2018, San Pedro was named president. She would spend part of her time working on that process.
By December, Sonic was sold to Inspire Brands, the owner of Arby’s and Buffalo Wild Wings, for $2.3 billion.
The pandemic hits
Cliff Hudson, who had long been Sonic’s CEO, was shifted to an advisor role after the sale. That gave San Pedro oversight of the chain by early 2019.
The company’s sales had already started improving. That year, same-store sales rose 4.3%. “I remember thinking in early 2020, pre-pandemic, ‘Oh my gosh, we’ve got some good initiatives, but comping over 4.5% was going to be challenging,’” San Pedro said.
And it certainly didn’t seem like the company would do that come March of that year, when dining rooms were shuttered across the country, consumers drained supermarket shelves and then stayed in and ate what was in the cupboard for a few weeks.
“The mantra I took was that we needed to reframe our mindset, redefine success, and as a result of that reprioritize,” San Pedro said. “Health and safety has taken on a whole new meaning of importance. Before that we took that for granted. It was all about same-store sales.”
As it turned out, Sonic’s business model would prove beneficial. Unable to eat inside restaurants, customers flocked to the chain’s drive-ins, where they could enjoy a meal from the comfort of their cars.
“There was an opportunity for us,” San Pedro said. “We can do this like no other brand. It was up to us to step up and deliver on our brand promise in a new and different way in that context.”
The company did do a few things. Sonic changed its marketing, moving away from the popular “Two Guys” promotion the chain had run for so long into one that emphasized the time customers spent together.
Those ads, it turned out, reminded customers they could hold their celebrations at Sonic. And all that technology the company added enabled diners to order ahead using their phones.
The result was remarkable. System sales that year rose 21%, according to data from Restaurant Business sister company Technomic. By contrast, the average for fast-food burger chains that year was just a 1.7% increase. In a market with so many big restaurants offering drive-thru service, Sonic dominated.
That didn’t mean the company didn’t have challenges. Product shortages would become common. So did staffing shortages. Sonic held numerous town-hall meetings with franchisees, assuring operators that customers would be more patient than they had been in the past.
“In the restaurant industry, when we talk with operators, they have a couple of edicts. One of them is to never run out of product,” San Pedro said. “All of a sudden you face an environment in which we can say that and we can work as hard as we can and we’re going to get creative, but we really can’t.
“We had to adjust our mindset and give ourselves a bit of grace. We may need to be more honest with our guests.”
It worked. While the chain won’t provide sales figures, the company is “extremely pleased with the results” from 2021.
There are certainly other challenges. Supply chain problems persist. So do labor issues. But San Pedro’s career, first working with politicians, then with franchisees, has prepared her to face them.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.