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McDonald's, Sonic Turn to Tech, Mobile for Major Growth

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Can apps fuel growth in the fast food sector?

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With the latest earnings reports starting to filter in from the fast food sector, some players say they are expecting a further technology boost to help fuel growth this year.

Sonic Corporation (NASDAQ:SONC) was first out of the gate this week, reporting net income of $0.14 for its fiscal first quarter, compared with $0.11 for the same quarter of last year, in line with analysts' expectations. The company also reported a 2.2% jump in same-store sales in the quarter and outlined its plans to expand into California, with as many as 300 of its drive-ins expected to launch in the state by 2020.

In a statement, Sonic Chairman, CEO, and President Cliff Hudson said that the drive-in chain will focus on same-store sales growth, increasing royalty revenues and new drive-in development to build shareholder value this year. He also further commented on the company's plans to ramp up its use of technology, previously mentioned in Sonic's fiscal 2014 outlook.

"Over the next few years, we are implementing a number of technology initiatives such as a new digital point-of-purchase technology and a new point-of-sale system to drive improved sales and profits for our brand. We believe these initiatives will fuel our multilayered growth strategy and will enable us to achieve double-digit earnings per share growth in the near and long term," Hudson said.

Elsewhere, Bloomberg reported last month that McDonald's (NYSE:MCD) is also testing its new McD mobile app in 1,000 US stores. At the moment, the app allows customers in San Francisco, St. Louis, New England, and Albany, NY, to locate the nearest McDonald's and redeem deals with their phones.

Last fall, McDonald's also announced that it was bringing Amazon's (NASDAQ:AMZN) former general manager of Kindle Direct Publishing, Atif Rafiq, on board as its new chief digital officer, to focus on growth in e-commerce and "modernizing the restaurant experience."

In a recent report, food-service research and consulting firm Technomic said operators finding new ways to use technology to improve order speed and accuracy is a trend that is likely to impact the restaurant industry in 2014.

"IPad (NASDAQ:AAPL) orders placed tableside will be a point of differentiation for a few tech leaders, but we'll primarily see a bring-your-own-device system of advance and inside-the-restaurant ordering -- as well as more customer feedback and interactive conversations," says the report.

On the earnings front, McDonald's is expected to report on January 23, with analysts forecasting earnings per share to come in at $1.39. Meanwhile, Burger King Worldwide (NYSE:BKW) is set to report in February. The Wendy's Company (NASDAQ:WEN) is scheduled to report its fourth-quarter 2013 earnings before market open on January 13, in conjunction with its participation at the 16th Annual ICR XChange in Orlando. Analysts are reportedly expecting earnings per share to come in at $0.06, down from $0.09 in the same quarter last year.

Analysts at Zacks Research recently noted that Wendy's has been "gaining traction" since early 2013 thanks to its value menu, and they are "optimistic on the company's solid menu pipeline and marketing initiatives planned for the period ahead."

Over the last two years, shares of Wendy's have jumped more than 50%, while Sonic has surged 82% in the last year, and more than 200% since early 2012. Burger King is up 26% in the last 12 months.

Twitter: @helenbnichols
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