Wingstop CEO Michael Skipworth admits he didn't see it coming.
The fast casual's same-store sales rose 20.1 percent in Q1, rolling over 1.2 percent growth last year and a 20.7 percent rise in 2021. Nearly all of it was driven by transaction growth. There were a couple of points of price, but that was mitigated by softer menu mix related to the successful chicken sandwich, an item that's mostly bought at a lower average check during the lunch daypart—a value play that Wingstop is completely fine with.
The chain exited 2022 witnessing low-double-digit increases, and that momentum was projected to continue into this year. So Wingstop knew a big quarter was coming. And it was more than correct.
"We're encouraged by how the team rallied together and how effective the strategies have been and we're going to continue to put our foot on the gas," Skipworth said during the chain's Q1 earnings call.
Wingstop has eyes on AUV north of $2 million and 7,000 restaurants systemwide (4,000 in U.S. and 3,000 internationally). In April, the brand crossed 2,000 stores globally for the first time, and its AUV is approaching $1.7 million.
Because of the strong start to 2023, the brand raised its full-year outlook to high-single-digit same-store sales growth, from its prior guidance of mid-single digits.
The concept can point to specific levers fueling its rise. For one, at a time when some quick-service brands are seeing customers revert to sit-down occasions, the chain's digital sales mixed a record 65 percent. The first-party database is up to 35 million. And supporting its effort to digitize every transaction, Wingstop's goal is to convert phone orders, representing 10 percent of sales currently, to digital orders via AI customer assistance. Early results show guest satisfaction, increases in ticket size, and a better experience for employees, who can dedicate more time to helping customers at the front counter.
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Additionally, the fast casual's advertising fund keeps growing, which helps close the brand awareness gap with other national chains. Wingstop—now operating with an "always-on" message— has used its additional spend to increase its presence in social streaming, digital channels, and during NFL and NBA games.
In conjunction with the rising ad fund, the brand appointed 72andSunny, the lead agency for the NFL, as its new creative agency. Skipworth hinted at a new creative campaign to further support growth, which may include the new chicken sandwich. The product—mixing in the mid-single digits—has proven to build awareness, increase frequency, and win new occasions. The chicken sandwich also plays a meaningful role in Wingstop's supply chain strategy. The fast casual sees a path to boneless meat mixing more than 50 percent, which would yield long-term COGS in the low 30 percent range.
The chain's menu innovation also featured Hot Honey Rub, the highest-mixing flavor LTO on record. Skipworth teased that Wingstop has a pantry full of consumer-tested flavor options with "tremendous" potential that it can lean into. Another sales driver is delivery; the brand launched on Uber Eats in July 2022, providing more opportunities to build awareness with a new set of customers.
"Wingstop is well-positioned for another industry-leading year," Skipworth said. "I'm excited by our start to 2023 and our sights clearly set on the 20th consecutive year of same-store sales growth."
Although matters are going well now, Skipworth often hears "How are you going to lap these levers that you pull?" He responds by pointing out that these drivers aren't one-offs. In fact, there's a lot of runway. Uber Eats is one example. Wingstop has seen growth in the channel, but it's still in the low-single digits. Skipworth said there's an opportunity to double that total. Then there's the menu. The U.S. sees 2.8 billion chicken sandwich servings per year, meaning Wingstop is "just scratching the surface" with its own version.
"We really think about these strategies that we're executing against, the levers that we pulled specifically in the back half of 2022, as being multiyear drivers for our business," Skipworth said. "And I think kind of that statement is supported by the fact that 2022 was our 19th consecutive year of same-store sales growth. And based on our outlook for this year we think we're well on our way to our 20th."
The momentum continues to position Wingstop as a viable franchise investment. In 2022 the chain opened more than 200 net new stores systemwide for the first time in company history. A new mark should be set this year with 240 net new openings. At the end of Q1, Wingstop's global development pipeline was nearing 1,200 restaurant commitments—a new record. The brand is also seeing an unprecedented number of approved sites.
Wingstop finished Q1 with 1,996 restaurants, including 1,753 in the U.S. and 243 internationally. There were 37 net new openings in the quarter, 32 of which were domestic. International outlets make up about 12 percent of the chain's footprint, but the segment is starting to ramp up. In Wingstop's U.K. market, AUVs are bigger than $2 million. The chain entered Canada in June 2022, debuted in South Korea during Q1, and recently signed a 30-year deal in Puerto Rico. And earlier this week, the brand introduced Raj Kapoor—a 24-year veteran of 7-Eleven—as its new head of international.
With an initial investment of $450,000 and AUVs closing in on $1.7 million, operators experience a payback of less than two years.
"I think with the growth in the expansion of our margins with what you're seeing in the pipeline, and the level of commitments that we've continued to build on, and that low upfront investment, that's got our brand partner base energized to continue to grow and open more Wingstops," said CFO Alex Kaleida.
Skipworth said the brand feels confident regardless of what's happening in the macroeconomic environment. He added that Wingstop and operators don't have many talks around financing. Much of their growth is fueled by cash flow from operations.
"And then on top of that, compared to other brands, it's a relatively modest initial investment to open a Wingstop," the CEO said. "So, I think all those things help position us to be able to sit here today with confidence in delivering another industry-leading return from a unit development perspective."