Wingstop knows its customers.
The fast casual learned that half of its new chicken sandwich guests purchase only a sandwich during their first visit, and a majority of them purchase other proteins on their second visit. These new consumers tend to be Gen Z or millennials, middle-income, and less likely to have children. Also, their average ticket and boneless mix are higher than existing consumers and they tend to engage through digital ordering platforms.
The brand has this knowledge at its fingertips thanks to a database of 35 million users and a record digital mix of 67 percent. But the fast casual is looking for more. Three years ago, Wingstop took a step toward greater personalization by investing $50 million to build a proprietary tech platform. CEO Michael Skipworth said the initiative serves two purposes—to protect the company’s $2 billion digital business and better leverage its robust database. The fast casual is now in a pilot phase in restaurants, with an anticipated launch in Q2 2024.
“Our proprietary tech stack will deploy an increased level of hyper-personalization that we believe will improve conversion retention rates and ultimately drive frequency,” Skipworth said during the chain’s Q3 earnings call. ” … We are just scratching the surface on personalization and we see this as a key part of our strategy for sustaining same-store sales growth.”
The platform, dubbed MyWingstop, is expected to “advance the ball forward and provide a best-in-class consumer experience and digital ordering experience” that will help Wingstop win more visits, Skipworth told investors. In terms of financing, the brand will be “displacing certain costs that sit on [franchisees’] P&L today.” MyWingstop will be structured in a way that’s cost-neutral on the corporate P&L. The ongoing expense will be covered by operators, according to the CEO.
“We’re really excited about the progress we’ve made and where we are today with our proprietary tech stack,” Skipworth said. “This is end-to-end—the entire consumer journey—and something we’ve been able to build leveraging the most modern technology. We think it’s something that’s going to be a step change or even an unlock as we continue to advance our digital transformation and expand our digital business. This is going to allow us to really lean into personalization, really leverage that database that’s over 35 million users strong, and lean into hyper-personalization and leverage things like AI that I think will ultimately impact conversion, impact frequency.”
As Wingstop moves forward with this new tech stack, it’s seeing record levels of new guest acquisition across all channels. Under third-party delivery—a rich source of previously unengaged consumers—the chain continues to see growth in average weekly transactions with DoorDash. And since partnering with Uber Eats last year, Wingstop has sustained transactions at a level that doubles the initial launch. Additionally, Skipworth said the chain captured more new consumers this quarter than it did last year during the debut of its 12 chicken sandwiches.
The chain’s same-store sales rose 15.3 percent and its AUVs lifted to $1.8 million in Q3, despite lapping the add-on of Uber Eats and chicken sandwiches in the year-ago period. The comps growth is supported entirely by transactions instead of average check, unlike many of its quick-service peers. The company saw an uptick in frequency from low-income consumers and won share from higher-income guests pulling back from dine-in occasions.
“Wingstop is uniquely positioned to gain more new guests and introduce them to that indulgent, high-quality occasion that our core consumers have come to appreciate over the years,” Skipworth said.
The CEO attributed much of the new customer expansion to the ad fund, which has quadrupled in size since the company launched national advertising in 2018. It’s allowed Wingstop to show up more in premium placements, such as live NBA and NFL games. Still though, the brand is only appearing once or twice during these games, meaning there’s further opportunity on traditional television.
“We’ve talked about it over the years that the opportunity we have to scale our brand awareness to where other more mature national brands are—that opportunity in front of us is significant,” Skipworth said. “And we think as our ad fund continues to grow with system sales, we’ll continue to show up more. But at the same time, we definitely lean into looking at being a digital-forward brand and leveraging that first-party data that we have to show up in the right channel with the right message, even leveraging that database to target consumers who look just like those who engage with us.”
New customers’ love of boneless meals bodes well for Wingstop’s profitability. The chain’s objective is to push boneless chicken mix to north of 50 percent, which should place food costs at 30 percent long-term. Currently, the mix is at 44 percent, up from the low 30 percent range a few years ago. Meanwhile, corporately owned food expenses were 33 percent in Q3, a decrease from 37.2 percent last year.
The favorable cost structure entices further development, with franchisees experiencing differentiated unit economics. Based on a $1.8 million AUV, food costs in the mid-30 percent area, and an initial investment of around $400,000, operators see a payback of less than two years. The brand projects that it will finish this year with its highest level of development agreements ever.
Wingstop opened a net of 53 stores in Q3. For the year, the chain reconfirmed its guidance of 240–250 global net new units, which would be a record. As of September 30, there were 2,099 restaurants systemwide. This included 1,837 locations in the U.S., of which 1,791 were franchised restaurants and 46 were company-owned, and 262 franchised outlets in international markets.
“We don’t see a lot of headwinds from some of these macro elements,” Skipworth said. “And a lot of our brand partners in our system, quite frankly, are funding growth with existing cash flow. So there’s not a high degree of leverage in our system that this current interest rate environment might impact. So we’re encouraged by how our pipeline is shaping up as we close out 2023.”
Based on year-to-date results, Wingstop upped its 2023 U.S. same-store sales guidance to 16 percent, an increase from 10–12 percent. In all likelihood, the fast casual will achieve its 20th straight year of comps growth.