Wingstop also unveiled a cashless, off-premises-only restaurant in Dallas that’s 1,300 square feet, or about 400 square feet less than a typical restaurant. If a customer didn’t order online or through the app, they can scan a QR code inside the store to initiate the ordering process. The unit is equipped with what Morrison calls a “refocused kitchen that we believe will be more efficient.”
“All of those factor into what will be generally a much smaller, more stealth execution of the brand, which means it’s playing upon the experience we’ve seen so far at over 60 percent digital, heavy delivery focus, and the fact that we haven’t still opened a vast majority of our dining rooms across the country here in the U.S,” Morrison said. “We believe the brand is well-positioned to be able to show up just about anywhere.”
The fast casual will support growth with a new marketing approach in which local and national funds will be consolidated, increasing total spend to more than $100 million.
Morrison said the strategy leans into Wingstop’s targeted 1:1 marketing platform that leverages a database of more than 27 million. This involves transitioning from a promotional brand to more of a martech platform.
“We can use that money much more efficiently on a national basis than we can on a local,” the CEO said. “… Our ability to market to [customers] 1:1 is much more efficient than more of a scattered approach in a local market. The other thing we notice is, we don’t need to be buying Facebook advertising at the local level just to buy it also at the national level. We can consolidate that purchase and in many cases, do substantially better—30-40 percent better with our money.”
Wingstop is coming off a year in which the spot price of bone-in chicken wings—which make up 65 percent of all product purchases—rose more than 70 percent. In Q4, cost of sales increased 8 percentage points, primarily due to record-high wing prices. Urner Barry prices for jumbo wings grew 41 percent in Q4 year-over-year, but restaurants only felt a 27.5 percent uptick thanks to mitigation strategies, like using more of the bird.
The brand believes the worst part is now over after seeing sequential improvement in company-owned restaurant margins. Prices have lowered to $2.60 per pound, down from a record $3.22 in the third quarter. Year-over-year deflation in wing prices is anticipated for the second half of 2022.
To avoid spot price inflation, Wingstop is actively exploring options to gain more control in its supply chain and deliver more predictable food costs to franchisees.
“We’re working with a lot of outside experts on what the right strategy is for Wingstop long-term in terms of taking more control of the supply chain,” Morrison said. “Right now we don’t have anything specific in front of us, other than we clearly understand what efficiencies we can generate for the system once we achieve that ability to generate more control and alleviate ourselves from the spot market.”
“In the meantime, we’re not going to allow a drop in wing prices—which we expect to see—to keep us on the sideline on that initiative,” he added.
Labor, however, has presented little conflict to Wingstop. Morrison said wage rate inflation has been a challenge, but the chain is achieving a roster fill rate of about 80 percent, which is enough to staff a restaurant on full volume. Units can operate with as little as four or five workers in the back of house.
Systemwide sales increased 19.8 percent to $601.9 million in Q4, and lifted 20.2 percent to $2.3 billion in 2021. Total revenue grew 13.8 percent to $72 million in the fourth quarter, and increased 13.5 percent to $282.5 million for the year.