Sep 15, 2021 | Report Announcements

Wingstop is the only $1B+ national chain with an exclusive specialization in the hot chicken wing category. Its “Wing Expert” brand positioning is centered around: 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. The brand’s mission is to “serve the world flavor”. The system’s 64% digital mix is comparable with the major pizza chains and a 100% off-premise mix consists of 75% pick-up & 25% delivery. Bundle deals can feed groups and families for prices generally comparable to pizza deals. A steady share gain from the $1B+ chicken chains (from 4.5% in 2011 to 14.1% by 2020) was driven by consecutive years of positive annual comps (providing a testimony to the brand’s appeal with a fun, flavorful menu item well suited for families & groups with convenient access facilitated by an impressive tech stack). Long-term sales growth strategies include: building even greater awareness through national advertising; innovating through tech to further enhance the guest experience; and supporting delivery with national ads. A system high AUV translates into a near all-time high EBITDAR in absolute dollars and this explains the chain’s strongest-ever development pipeline. Having said all this, bone-in wing price volatility represents perhaps the chain’s most significant risk (exemplified by spot market prices for bone-in wings which increased +50% during 1Q21). This partially reflects that wing demand is skyrocketing as an extremely crowded menu category is exacerbated by the entrance of new virtual casual brands (including Applebee’s Cosmic Wings & Brinker’s Its Just Wings). COGs inflation challenges the chain’s value positioning, necessitates menu price increases and prohibits price certainty. In conclusion, while Wingstop’s strong execution around a very popular menu item has propelled the chain into the big league, its competitive bar has never been higher with notable implications around COGs and value.

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