One of Wingstop's favorite mottos is that it's a "category of one," and 2022 couldn't have demonstrated that more.
While several chains had to take significant price in 2022 because of record inflation, Wingstop said it benefited from "meaningful" deflation. Last year, spot market prices for bone-in wings lowered 44 percent. In just Q4, cost of sales decreased 900 basis points year-over-year, thanks to better food costs and a 49 percent drop in the cost of bone-in chicken wings.
As a result, same-store sales lifted 8.7 percent in the fourth quarter, driven entirely by transaction growth.
And even though the industry has seen consumers return to more dine-in occasions, Wingstop's digital mix didn't waver. The channel represented 63.2 percent of sales in Q4, an all-time high. CEO Michael Skipworth said it shows stickiness from new customers and validates investments in greater personalization.
"2022 showcased the resiliency of the Wingstop brand and the strength of our strategy, and it's what gives us confidence in our ability to navigate 2023, particularly due to uncertainty ahead with the current macroeconomic backdrop," Skipworth said during the chain's Q4 and full-year earnings call. "While Wingstop isn't immune to these macro challenges, we have a proven playbook that's helped deliver 19 consecutive years of same-store sales growth."
Wingstop's Unit Economics Keep Moving Upward
Wingstop's Chicken Sandwich Returns to Menu
Wingstop Reveals Comprehensive Plan to Curb Sluggish Sales
Fueled by this advantage, the fast casual continued to build a unit economic model that's "as strong as it's ever been," Skipworth said. AUV is above $1.6 million, food costs are in the low 30 percent range, and adjusted EBITDA increased 23.1 percent in 2022. Operators were energized last year, to the tune of 228 net openings globally, representing 13.2 percent growth. That includes a net of 187 domestically and 41 internationally—both records. The chain's long-term goals are 7,000 restaurants globally and AUV north of $2 million.
The future appears promising, with roughly 1,100 restaurant commitments. In year one, stores are earning about $1.2 million to $1.3 million in AUV, well past the $900,000 figure Wingstop saw a few years ago.
With an initial investment in the mid-$400,000 range, franchisees are seeing payback of fewer than two years.
"I think we're not immune to inflation, and we have seen the build costs tick up a little bit, but I think it speaks a little bit just to the efficiency of our model and the fact that we're building out an inline space, which requires a little bit less of maybe some of the more inflationary areas you've seen in construction, a lot of that being labor, quite frankly," said Skipworth, explaining how Wingstop's managed to maintain costs of roughly $400,000 in the past few years. "And so I think that's helped us a little bit."
But growth isn't gratuitous. In 2021, Wingstop announced plans to develop Manhattan as a company-owned market, with more than 20 traditional units and ghost kitchens opening across three years. Close to 10 have opened, and a few others are on the way, but the brand is taking a measured approach.
"I think we remain committed to the long-term opportunity we see there to build that market out," Skipworth said. "But I would say probably similar to other brands that have a much bigger presence in the city, it still feels like it's not quite back, still recovering. And so we're staying close and watching the traffic within and how other businesses are faring as well as when it makes sense to continue to lean in and further expand there."
Wingstop plans to keep playing offense in 2023, primarily by creating brand awareness. The chain will leverage a national advertising fund that grew by more than 40 percent in 2022. In the latter half of last year, the company implemented an "always on" national media message strategy where it showed up during live sporting events and invested heavily in streaming and social channels.
Additionally, Wingstop targeted 160 million chicken sandwich consumers by introducing its own version, but with 12 flavors. The product exited Q4 with a high-single-digit mix and has proven highly incremental, particularly during the lunch daypart. The chicken sandwich is serving more as an add-on to orders as opposed to consumers trading down. The menu item also played a material role in nearly $1.7 billion in digital sales and significant guest acquisition rates in 2022. As Wingstop gains more chicken sandwich occasions, it sees a path toward a boneless mix of over 50 percent, which would keep long-term food costs in the low 30 percent range.
The chicken sandwich started at $5.49 a la carte and $7.99 as a combo, but Wingstop added price throughout the system. Skipworth said it was an opportunity to "further enhance unit economics and flow-through for our brand partners."
"We had the chicken sandwich initially priced at a very compelling value that would drive trial," the CEO said. "And even as we took price throughout the country, throughout the system on the sandwich and the combo, we benchmarked it and it's still priced competitively. And so we haven't really seen anything that gives us concern around that pricing and just saw an opportunity to improve the economics."
Delivery presents another growth lever. In 2022, Wingstop added Uber Eats as a second provider, joining DoorDash. With the channel mixing around 30 percent, Skipworth said the fast casual is "just scratching the surface" and that there's an opportunity to double in size. Although he wasn't specific, the CEO named competitors with heavy off-premises businesses that experience delivery mixes north of 50 percent. And he thinks there's no reason why Wingstop can't get there too.
"Our awareness on these delivery platforms is still really low," Skipworth said. "And so we'll continue to build that, whether it's through specific promotions or actually using some of our ad dollars to advertise on those platforms. But it's not anything different than some of the other strategies we're executing. ... It's just the acquisition of new guests as we scale awareness."
For 2023, Wingstop projects mid-single-digit same-store sales growth and a favorable outlook around bone-in wings and breast meat. Skipworth said the company will return to its historical approach to pricing, consisting of two windows of about one to two points.
The chain also expects 240 net new restaurants, which surpasses the chain's three-to-five-year growth rate target. The brand finished 2022 with 1,959 restaurants, including 1,721 in the U.S. and 238 internationally.