Despite the chicken sandwich and Uber Eats bolstering awareness, the fast casual still believes there’s a glaring gap between itself and national competitors. To close this margin, Wingstop folded its local ad fund into its national ad fund, bringing the contribution rate to 5 percent. The increased firepower allows the chain to use dollars more efficiently and place media in premium time slots, like during NFL games. With continued growth of system sales, the company is on track for another step-up in advertising investment in 2023.
All of these factors are only increasing the confidence of franchisees. Through the first three quarters, Wingstop opened 167 net new restaurants worldwide, including 40 in the third quarter. The chain is on pace to break last year’s record of 193. Wingstop increased its 2022 guidance from 220-235 net new stores to 225-235—an annual growth rate of 13 to 13.5 percent. Skipworth said the development pipeline is actually stronger now than it was at the same point last year.
Wingstop ended Q3 with 1,898 units globally, including 1,673 in the U.S. and 225 internationally. The long-term goal is more than 7,000 stores worldwide.
The CEO noted that Wingstop has been able to work around delays and permitting issues because construction is not that involved. The concept only needs an inline shell, which lowers initial investments and delivers high returns. Plus, the brand is proactive with suppliers to make sure equipment is on time. Staffing hasn’t restricted expansion either. Restaurants are achieving $1.6 million AUVs with as few as three to four employees at once.
Because the current real estate footprint works so well, Wingstop hasn’t felt the need to implement too much innovation around its prototype.
“We’re $1.6 million AUV today in a box that’s anywhere from 1,300 square feet to 1,700 square feet, inline, with majority of our business off-premise,” Skipworth said. “So when you start to introduce complexities around an asset out on a pad, drive-thrus, it starts to change the operating model. You start to add labor, you start to increase occupancy costs. … Really making sure we protect and enhance these unit economics. That’s something that’s paramount for this brand, and what we believe will continue to fuel industry-leading development. We’re going to stay true to that, and we see an ability again to drive AUVs to levels above $2 million with the existing box we have today.”
Systemwide sales increased 17.7 percent to $699.6 million. Net income grew 18.4 percent to $13.4 million, or $0.45 per diluted share, compared to net income of $11.3 million, or $0.38 per diluted share, in the prior fiscal third quarter. Adjusted EBITDA rose 32.7 percent to $28.4 million.
For fiscal 2022, Wingstop still expects same-store sales in the low single digits, which would mark the chain’s 19th straight year in positive territory.