Wingstop Reached 1,731 Restaurants After 18 Straight Years of U.S. Same-Store Sales Growth

This is an English adaptation of a FoodBud historical article originally published on March 17, 2022.

Wingstop is a U.S. quick-service chain that originated in Texas. The company went public in 2015 at an IPO price of $19 per share. In 2021, its share price reached a historical high of $183; at the time of the source article, the share price was $123 and market capitalization was $3.6 billion.

In Technomic's Top 500 chain ranking for the U.S. market, Wingstop was one of the fastest-growing franchised chain brands and ranked No. 44.

Product Mix

Wingstop is built around chicken wings. Bone-in wings are the core product, accounting for 65% of sales.

Sales Momentum

The business had shown strong performance since 2004. From 2004 onward, Wingstop had recorded 18 consecutive years of U.S. same-store sales growth.

From fiscal 2017 through fiscal 2021, U.S. same-store sales increased by a cumulative 49.6%.

Store Network

Wingstop's stated vision was to become one of the world's top 10 restaurant brands. Based on the company's internal analysis, its potential store ceiling was more than 4,000 restaurants in the U.S. and more than 3,000 restaurants in international markets outside the U.S.

As of December 25, 2021, Wingstop had 1,731 restaurants. Of those, 98% were franchised. The system included 36 company-operated restaurants and 1,695 franchised restaurants. Among the franchised restaurants, 197 were outside the U.S., across six countries.

In 2021, Wingstop opened 193 net new restaurants. In the U.S., it had more than 700 signed commitments, which the company said laid the foundation for a new store-opening record in 2022. It also planned to accelerate international expansion that year.

2021 Financials

In fiscal 2021, Wingstop's systemwide sales reached $2.34 billion, up 20.2% year over year.

U.S. average unit volume was $1.592 million. Annual revenue was $280 million, up 13.5% year over year. Net income was $42.65 million, up 83% year over year.

Digital channels accounted for 60% of revenue. On the earnings call, the company also noted that 30% of transaction volume came from phone orders, a behavior also seen in pizza chains, including in markets such as Indonesia.

Wingstop's revenue came mainly from three sources: franchise fees, advertising fees tied to brand licensing, and sales from company-operated restaurants. In fiscal 2021, these contributed $130 million, $81.529 million, and $70.297 million respectively, representing year-over-year growth of 20%, 8.8%, and 8.2%.

The company had 890 employees, including 240 full-time employees.

Company-Operated Store Economics

In fiscal 2021, sales from company-operated restaurants increased by $5.3 million. Seven new restaurants contributed $2.7 million of that increase. Same-store sales rose 3.4%, mainly driven by price increases.

For company-operated restaurants, food costs were 44.8% of sales and labor costs were 22.8%. Food costs increased from 35.9% in fiscal 2020 to 44.8% in fiscal 2021, mainly because the cost of bone-in wings rose 40.9%.

Bone-in wing prices were still rising at the time. In January 2022, spot prices reached a peak, with prices up more than 70%.

Bone-in and boneless wings were Wingstop's main restaurant ingredients, accounting for 69% of total procurement costs in fiscal 2021. Procurement of ingredients and packaging was primarily consolidated through Performance Food Group.

Franchise Model

The initial investment for a single Wingstop restaurant was $400,000. The franchise fee was $20,000. Franchisees also paid a royalty equal to 6% of sales after discounts, with the same 6% standard used in international markets.

Advertising fees were 4% of sales. From fiscal 2022, the advertising fee standard increased from 4% to 5%.

Franchisees were required to attend and complete four weeks of training covering company culture, food preparation, POS systems, and related operations.

Since 2014, the number of franchisees operating 10 or more restaurants had more than doubled. As of December 25, 2021, U.S. franchisees operated an average of six restaurants each.

International Expansion

The U.K. market was performing well, with annual restaurant sales above $2 million. Wingstop was also steadily expanding in Mexico, Indonesia, and Singapore.

On its earnings call, Wingstop said it was considering expansion into Western Europe and the Middle East. Asia, including China, was also under consideration. The company said China would require substantial research on how to scale quickly. The source article noted that China and South Korea both had significant potential, but were also more challenging markets.

Note: IPO, share price, market capitalization, forward expansion targets, and 2022 plans are historical figures from the March 17, 2022 source article.