Wingstop Executive Summary
Wingstop is the only $1B+ national chain with an exclusive specialization in the hot chicken wing category and this positioning has helped drive a steady share gain of $1B+ chicken chain segment sales from 4.5% in 2011 to 14.4% by 2021. Its “Wing Expert” brand attributes include: cooked-to-order chicken wings (in a deep fryer without the use of heat lamps or microwaves) that are hand-sauced & tossed in a choice of 11 flavors ranked by heat; freshly-prepared sides including its hand-cut, seasoned fries (made daily from whole Russet potatoes) and fresh, hand-cut carrots and celery with ranch and bleu cheese dips that are made in-house daily; and convenient off-premise/digital access. Numerous bundling options (individual/combo meals/family packs) facilitates usage across a broad spectrum of occasions (quick carry-out snack, family dinners or party size) for prices comparable to cost effective pizza deals. Further, its highly successful new Wingstop Chicken Sandwich is offered in 12 flavors for $5.49 or as a $7.99 combo. However, it is notable that bone-in wing cost volatility represents the chain’s most significant risk with cost spikes necessitating menu price increases (and reduced wing sizes) while prohibiting price certainty. As an example, a huge 2021 spike in wing prices led to a system low 2021 EBITDAR margin. Fortunately, the chain is pursuing wing cost mitigation strategies which include: better utilization of the entire bird (with sandwiches, boneless & Thigh Bites); possible plans to co-invest in a poultry production plant; and possibly building its own plant after that. Notably, Wingstop’s digital engagement rate far exceeds the industry average, helping the brand to successfully diversify beyond its core lower income demo to a slightly more affluent and less ethnically diverse consumer over the last couple of years. Further, 2H22 ad spend is expected to increase +35% y/y which will facilitate an always-on TV presence and more ads on live sports (helping raise brand awareness which is depressed by the chain’s use of B sites for its restaurants). In any case, 18 consecutive years of positive annual comps is testimony to the brand’s appeal provided by a fun, flavorful menu well suited for families and groups with convenient access facilitated by a tech stack that rivals the major pizza chains. In conclusion, while Wingstop enjoys strong positioning and adept execution around an extremely popular menu item (propelling the chain into the big league), its progress is dependent on mitigating volatile wing costs which is key given the brand’s orientation towards a lower-income demo in a challenging macro environment.