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Local fast-food operator has big plans for a Sonic boom

Young entrepreneur, a UH grad, capitalizes on the company's push to refranchise some of its locations by purchasing 34 in the Houston area

Years ago, as Kamal Singh delivered subs to Houston customers, the young entrepreneur eyed the bustling Sonic locations that did far more business than his lone sandwich shop.

Less than a decade later, Singh has graduated from dropping off sandwiches to commanding a fleet of carhops. He recently purchased 34 Sonics throughout the city and plans to open another 20 in the coming years.

"Sonics are very profitable," he said of the Oklahoma City-based fast-food chain known for serving customers at their cars. "The experience is there, the product is there."

Singh, 31, capitalized on Sonic's push to refranchise some of its company-owned locations, a move that has benefited new operators and boosted the company's sales. During the last year, Sonic sold more 100 stores in Texas, Florida and Kansas in cities where its franchised locations had been more successful than the company-owned restaurants.

"We felt like these were underperforming markets," senior vice president of development Drew Ritger said. "Our franchisees were doing a much better job of taking care of the guest."

The initiative, announced last June, opened a door for ambitious operators like Singh, who acquired his first restaurant, the sub shop, in 2009 after graduating from the University of Houston. He quickly bought more, then expanded his portfolio with other small restaurant chains.

He eventually scored a chance to take on big-name brands and now operates 16 KFC and Taco Bell locations in Texas and Louisiana.

The challenge of climbing the fast-food ranks made him a more competitive candidate to tap the Sonic chain. During the course of his career, he said, he learned to boost performance at restaurants that had fewer sales and less brand recognition than larger franchises.

"The challenges with the smaller brands is that you don't have the support that Sonic can provide," he said. "You don't have the (revenue) or as strong of a marketing campaign."

His track record, he said, gave him access to the credit he needed to purchase a substantial share of Sonic's 173 Houston stores. He declined to disclose how much he paid.

Sonic expects its refranchising effort to improve sales throughout the chain by turning over operations to franchisees with a deeper understanding of their respective markets. In its most recent quarter, same-store sales dropped 7.3 percent at franchised locations, while company-owned stores saw an 8.9 percent decline.

Boosting performance in Houston, Sonic's second-largest market by store count, was of particular importance to the company, Ritger said.

"Houston is an extremely competitive market," he said. "There is lots of opportunity to grow the brand, and we wanted to afford ourselves that opportunity."

The sale process will also trim overhead costs during a particularly competitive time in the restaurant sector. Within the last year, minimum-wage increases and changes in health care coverage requirements have increased operating expenses and restaurant prices across the country, said industry analyst Bonnie Riggs of NPD Group, making products and service quality all the more important in the fight for customer loyalty.

"Restaurants have to be giving consumers a compelling reason to visit their concept," she said.

During his career as a restaurant operator, Singh said he learned the value of building relationships with employees and creating a service-oriented culture at each location.

"I have the edge in this industry because I understand my people," he said.

He plans to build more Sonics in smaller towns in the Houston area, which has been somewhat insulated from a nationwide slowdown in restaurant industry growth.

Fast-food and "fast casual" establishments have continued to expand fairly quickly throughout the region, said Jonathan Horowitz, president of the Greater Houston Restaurant Association and CEO of Legacy Restaurants.

"I think there is room for those additional locations," he said. "Houston is still growing at such a crazy clip."

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