Morrison said Wingstop’s current pricing strategy will be set for the near-term, and then the company will revert back to its typical cadence.
“We've always believed that we do have pricing power in this brand. And while it's challenging right now I think that will stabilize,” he explained. “As we look to the wing market, will it stabilize and get back to historical levels? We don't know. And we're not going to just bank on that. That's why we've commented several times that we're going to look at strategies where we can take more control of the situation.”
In an effort to reduce volatility, Wingstop has been determined to use more parts of the chicken, which led to the launch of virtual brand Thighstop toward the end of the second quarter. The concept was originally available only through DoorDash and a native website, but the menu items were placed on Wingstop’s menu in September, doubling thigh sales.
Morrison said the trajectory of thigh products is similar to when Wingstop introduced boneless wings many years ago.
“We definitely think that the introduction of thighs through Thighstop was the right strategy and yields the desired outcome, which is not only to just create an opportunity for an item to mix at a lower cost level than what the bone-in wings are, which it has done, but we also know that it has a meaningful effect on our ability to secure entire birds, instead of just buying the wings and some of the breast meat off of the product from the spot markets,” the CEO noted.
The other major inflationary pressure is labor, but Morrison believes Wingstop is in better shape than most because of the brand’s streamlined kitchen operation and small roster sizes; a restaurant typically only requires roughly 16 employees. Labor costs were 24.6 percent in Q3, a 1.2 percentage point decrease from last year. The drop was mostly due to lapping COVID incentives; it was partially offset by investments in wages, hiring bonuses, and training.
Morrison thinks the lean labor model could be improved even further. Out of the nearly 1,500 stores in the U.S., only about 200 have reopened in-store dining, leading Wingstop to believe it can reduce the size of dining rooms going forward and move further into its accelerating digital and delivery business.
Digital sales represented 61.6 percent of sales in Q3, in line with last year’s mix. Delivery—which carries a higher average check—is accounting for 27.2 percent, almost three points better than 2020.
“I think our franchisees, as well as all of us corporately, feel like the digital side of our business is really what the long-term is all about, how can we create efficiencies inside the four walls of the restaurant to mitigate some of these challenges we're seeing in the near-term on labor,” Morrison said.