Wingstop’s potential issues concern macroeconomic factors, like the volatile wing market. In Q4, bone-in chicken wing prices increased 17.7 percent compared to last year. To mitigate the rising prices, Wingstop worked with suppliers and discussed ways to use more parts of the chicken.
CFO Michael Skipworth noted that when comparing the environment to 2017 when Wingstop saw similar inflationary numbers, the chain is running much lower in food costs, even with higher wing prices. He attributed that to a combination of disciplined menu pricing and pricing mechanisms with suppliers.
Morrison views the issue as pandemic related. He believes as the country returns to normal, brands like Chili’s—which rolled out It’s Just Wings—will put their fryers to use to take care of the dining room, and the flow of chicken wings will reduce.
“A $1.5 million AUV, even with the unit economic challenges of high wing prices, still delivers exceptional cash on cash returns,” Morrison said. “So we don’t think that we need to get into a position of material changes. I think we’re fine right now. And we do believe it’ll remain transient. It’s proven that in the past. Other competitors are pricing at very low levels to generate volume. We know that’s not sustainable. We still believe we have pricing power within our top line, so we’re going to continue forging ahead on our strategy.”
Morrison said Wingstop will continue to work on ways it can use dark meat in its products, like the chain’s test of bone-in chicken thighs. The CEO said it “allows us to pull that lever if we need it.”
“We had a good test,” Morrison said. “We’re going to take that learning, expand upon it this year. There’s not a specific commitment to roll that out yet in our pipeline. But we do have enough learning to be able to support what we believe is going to be a product for the future for the brand. Dark meat in general becomes a great opportunity, as well.”
The other macroeconomic factor is the potential increase of federal minimum wage to $15. If such legislation were to pass, Morrison doesn’t expect Wingstop to be impacted significantly since it already operates in states above the current federal minimum wage, which is $7.25. He noted that systemwide, workers are paid between $11 and $12 on average, so the federal minimum wage would have to graduate up to those levels before it affected the company.
His personal opinion is that right now is not a good time in the economy—given what’s occurred in the restaurant industry—to discuss minimum wage.
“What we’re really talking about is trying to get especially small independent operators back on their feet and growing their business,” Morrison said. “… We do have pricing power in our P&L, and that’s how we’ve addressed minimum wage legislation over the past few years in markets where we’ve seen it grow. It’s challenging. Right now is not a good time to be even contemplating a minimum wage increase. What we should be doing is everything we can to stimulate the economy.”