What would you like today, Ryan? So I'll do a split combo. Would you like five, six, eight, ten or twelve? Eight, sounds great. What began as a Buffalo chicken wing restaurant in
1994, in Texas, has now grown to more than 2000 Restaurants nationwide. Right now, we're just dropping some chicken. I love this. I don't know any other flavor. Hi, honey. Oh, man. I'll take it. I'll take hot honey more than anything. Ever. Mm. That's the lemon pepper. It's one of their most
popular. It's delicious. Since initially going public in 2015,
Wingstop stock price is up over 100% over the past five years. It's up nearly 300%. And in the past year alone it's more than doubled. So Wingstop's growth is really unprecedented in the
restaurant industry. You know, if I went back to Chipotle in the 2000 when
the brand was emerging, we saw growth Almost at Chipotle at Wingstop's levels. But what's different about Wingstop is the fact that
it's over 2000 stores. You know there's no other brand grand scale to the
growth that Wingstop is doing. The company's systemwide store count reached over 2300
at the end of June. That's about a thousand more locations than it had in
2019. Consequently, revenue has more than doubled in that
same time period. On average, our franchisees invest about $500,000 to
open a Wingstop, And they're basically getting that entire investment
paid back to them in less than two years because The income statement is so strong. With chains like Starbucks and McDonald's facing
consumer pullback, how did Wingstop become one of the Hottest restaurant chains in the country? Across fast food chains, chicken has been a hit,
especially this year. And with school coming back around, football scaling
back up, it's starting to pick up in the morning. They love chicken in the morning. They love chicken in the morning. I love chicken. But you know I love chicken in the
morning.
That's good news for Wingstop because well chicken is
about all it sells. Its menu also lends itself well to an experiential
offering for hanging out with friends or watching a Football game. If you're thinking about someone who has to make a
decision on where to trim spending, The likelihood that they're going to give up something
that is associated with your Social event is much lower than, hey, I'm going to
forego my Starbucks coffee this morning. Wingstop is is an is a special occasion. Our frequency over my ten years has really averaged
about three times a quarter or once a Month, a low frequency occasion. And we're just now, for the first time, starting to
see that tick upwards, which we're pretty excited About. Going beyond just wings has helped drive that uptick. The chicken sandwich wars took off right before the
pandemic, and his chain after chain vied for market Share. Wingstop eventually got in on the game. The chicken sandwich This was introduced in the middle
of 2022. Chicken is a very popular protein with the consumer,
particularly fried chicken. And so the ability for Wingstop to offer their chicken
sandwich in 11 flavors really an Opportunity for continued utilization of the company. Wingstop has seen an increase in new guests visiting
its locations ever since the chicken sandwich was Introduced, and those new customers are visiting more
frequently than its traditional wing customer. The company reported same store sales growth,
increasing nearly 30% in the US for the second quarter Of this year. That means that the company generated
more sales per store compared to last year. The company says that this growth was driven by
increased transactions. I would say depending on the day, we will receive
typically around 300 400 transactions. Investors look at same store sales is the key metric
for health of restaurant concept. Wingstop has experienced same store sales growth for 20
years. The stores themselves require relatively low
operational costs. We run a very efficient labor profile. You can run that Wingstop that's doing on average $2
million. You can run that with with as few as four team members
in the restaurant. We run in a very efficient box on average about 1600,
1700 square Feet. And so our occupancy cost where we target B, B
minus real estate is Extremely efficient.
So this Wingstop in Neptune, New Jersey opened a few
years back. And I initially thought it was a very interesting
location choice. It's set off from the main road across from a grocery
store in the middle of a shopping center. But that's exactly the type of real estate that
Wingstop targets. It doesn't need to target prime real estate, because
last quarter, nearly 70% of its sales came From digital orders, meaning people were not just
impulsively stopping by, they were coming here Intentionally. The use occasion or the consumption occasion for
Wingstop Is The consumer coming to them. And so I don't care if I have to go next to the pet
store to pick up my wings because I'm going there to pick it up. Whereas like I said, if a McDonald's was in the middle
of a strip mall, you lose a lot of those impulse Purchases because it's, you know, there's not a drive
through. Brand awareness is growing. Franchisees contribute a percentage of sales into the
national advertising fund. So as system sales grow, so does ad spend, which
nearly doubled from 2021 to 2023. From about five years ago to now, not a lot of people
knew about Wingstop, but not everybody know about Wingstop. The viral nature of the brand and how it's cropped up
so many different Times on social media has really helped feed into the,
you know, the customer Acquisition and hashtag. Wingstop has been tagged in over 150,000 TikTok videos
that have garnered millions of views. The company has leaned heavily into marketing with
live sports. It has official partnerships with multiple NBA teams
and its free wing promotions have led to viral moments, With top athletes. Giannis wants the chance to get the QR code to get his
free wings. Although the chain saw its U.S. Same store sales grow over 28% last quarter and beat
Wall Street earnings expectations, The stock price has actually fallen more than 10% from
the highs that were seen in June. Wingstop is still one of the best performing restaurant
stocks, I think as of recent. You've seen a big divergence in the valuations of
restaurant stocks. So a stock like Wingstop, a stock like Sweetgreen, a
stock like kava have Varied premium valuations relative to the overall
restaurant space.
And then other more mature restaurant stocks like
McDonald's, like Starbucks, have seen their stocks have their valuation
beat down. Take a look at Wingstop stock price. Now look at the company's earnings per share. Over the last 12 months. That price to earnings ratio is high. Now take a look at the same valuation for stocks like
McDonald's and Starbucks. Trading at a higher premium means more volatility in
its share price. The rest of the story, though, is really macro. That the consumer base for Wingstop historically
skewed more lower income and on a price per calorie Basis. It's just cheaper to go to a quick service
drive thru to get food relative to a Wingstop. However, Charles says that Wingstop is seeing a shift
from a middle to higher income consumer with increased Transaction on third party delivery apps. Plus, unlike its fast food competitors, Wingstop has
kept a tight leash on prices since 2019. Wingstop has only increased prices by around
15%, while its peers in the Quick service restaurant category fall into the 30 to
40% Range. Reasonably quick service is underperforming. Wingstop is really about the amount of price that
quick service is taken, and that there is a lot less Discipline relative to what Wingstop has done in
recent years. In 2021, wing prices soared, so Wingstop pushed chicken
thighs instead to Combat this type of volatility. Going forward, the company changed the way it sourced
its chicken wings. They shifted from a spot where they're just buying
whatever the market price is to negotiating that price For the whole bird. They'll use the parts of the bird they need for their
operation the wing, the breast, etc. And they'll effectively sell the remains to either a
soup or pet food company that can use the remaining Part of the birds. And that's allowing us to create predictability. And most importantly, it's minimizing the volatility
that our franchisees See on their income statement within their food cost
line. In its most recent earnings call, Wingstop raised its
store count goal to reach a domestic total of 6000 locations. That would be about triple its current total and more
locations than Kentucky Fried Chicken currently has in The U.S. however, that kind of growth could be a long
way out.
TD Cowen anticipates the chain to have about 4000
locations domestically and 5000 locations globally by 2030. You know. I don't think this is going to be the new Kentucky
Fried Chicken or some big chain, but they've got Another 2 or 3 years of packing on 250, 300 stores
before they Start saturating America. The company also says it has room for growth within the
world of third party delivery systems. On DoorDash and on Uber Eats. Our awareness levels are still really low. Our delivery channel mix is about 30% today. When we benchmark delivery channel mix to other, more
mature, Heavy off premise businesses. Think big pizza. Their delivery channel mix is north of 50%, so we see
a lot of runway there. Wingstop is still relatively low awareness, even As the broader consumer is maybe pulling back from
spending On food away from home. Wingstop has the opportunity to gain incremental
consumers that have never heard of the brand before. Skipworth says that Wingstop has a goal of
transitioning entirely to digital ordering. Does that mean, like you would eliminate that face to
face interaction? And it would be more of just kind of a pickup model? Is that the goal? We're not holding chicken that's been previously
cooked. We're making it to order. And on average it takes about 18 minutes to get your
order at a Wingstop. So training guests to order ahead through our digital
platform, it's actually Just a better guest experience. But then from our perspective, we tend to see a higher
average check. The average annual sales per store is over $2 million,
and the company now aims to make that $3 million about 98% of Wingstop's are franchises. And as we grow our average sales per restaurant, it's
continuing to make those Income statements for our franchisees better. And that's going to make them want to open more
wingstop's. And that's how I think we'll continue to be able to
scale Wingstop into what our overall vision is, is to
Become a top ten global restaurant brand. In order to be a top ten restaurant brand, you're
talking about roughly about $10 billion in scale. And so this is an ambition that getting to $18 billion
based on their long term targets will put Themselves pretty solidly there. And just to give you some perspective, the $18 billion
target puts them right now in between chick fil A And Taco Bell. In terms of what that would mean for
today.
