How Wingstop fixed its election problem

After a rare decline in same-store sales a year ago, the company started advertising and quickly recovered.

The election wasn’t good for Wingstop’s sales.

The Dallas-based chicken wing chain’s same-store sales declined 1.1% in the first quarter of 2017, a rare decline for a chain for whom quarterly increases had become commonplace.

And Charlie Morrison, the company’s CEO, said the decline could be easily traced to the election in November 2016. Same-store sales slowed by 300 basis points in the immediate aftermath of the election—suggesting that the chain’s consumers were discouraged and withheld their spending.

“Post-election sentiment really dropped,” Morrison said during the ICR Conference in Orlando, Fla., this week. “Many of our customers were freaked out over the election results.”

So how did Wingstop get out of it? The chain started to advertise.

The 1,133-unit fast-casual chicken wing chain launched a national advertising campaign immediately after the Super Bowl.

The campaign increased customer awareness of the company, and sales quickly recovered and have improved every quarter since. Same-store sales increased 2% in the second quarter and 4.1% in the third quarter, and ended the year with 5.2% growth.

That’s particularly strong given the overall performance of the restaurant industry over that period: Same-store sales in 2017 declined 1.1%, according to newly released data from Black Box Intelligence.

“The brand really responded to the national ad campaign,” Morrison said. “It was a great way to bring the brand back to life.”

The sales recovery worked wonders for the chain’s stock. Wingstop shares rose 32% last year. Only four other restaurant companies performed better, and no fast-casual company performed better on Wall Street. And the company’s stock is up another 13% this year, thanks largely to those fourth-quarter results.

And the company believes it has strategies in place to keep its sales going.

Wingstop is quickly establishing itself as one of the restaurant industry’s most digitally savvy companies, with a rapidly increasing digital presence and tests of delivery unlike what many other chains are doing.

Morrison said that 23% of the chain’s occasions come through digital channels. He said that alone is more than most restaurant chains outside of pizza and is far higher than the 6% average for fast-casual chains. And he said the addition of delivery could push the company’s digital presence closer to those pizza chains.

The company’s digital ordering includes Amazon’s Echo devices, Twitter and Facebook Messenger.

Digital is big for good reason: Digital orders typically bring a $5 higher average check and cannibalize phone orders that are more labor-intensive.

Wingstop is testing delivery in Las Vegas, a market without much delivery; Chicago, a complex market for the chain; and Austin, Texas, a mature market.

Wingstop plans to expand delivery market to market late this year and take the service into 2019.

The company is using DoorDash as its “logistics partner,” providing the actual chicken wing delivery. All of the chain’s delivery orders come through its own digital channels, including its website and its smartphone app.

“The economics work better,” Morrison said. “It’s more efficient. And we don’t need the market to drive people to take our food home.” That’s because the vast majority of Wingstop customers already do that.

Wingstop has long had views on delivery, even before the current delivery trend. The chain’s franchise agreement doesn’t allow operators to deliver without going through the company.

To Wingstop, that’s important because the chain’s chicken wings are made to order and are “not made for delivery without the proper care,” Morrison said.

“We wanted to make sure we were well-positioned to control the process,” he said. So, third-party delivery providers without a relationship with Wingstop are not allowed to deliver the company’s food.

The company has done considerable research on its food preparation and containers to ensure that french fries arrive hot and crispy, Morrison said.

The biggest challenge for the company, however, is the price of chicken wings, an infamously volatile commodity that hit record highs in September.

“We had the highest wing costs in the history of mankind” last year, Morrison said. The price alone led to a 680-basis-point increase in food costs for the company.

In response, the company changed its contracting, increased prices and advertised more lower-cost “boneless” wings. In the meantime, however, chicken wing prices have come down as companies “ran away from wings,” Morrison said. The company paid $1.55 per pound for wings in December.

Morrison said that the chain’s lower labor and occupancy costs help offset the wing prices.

“It tests our strength,” he said. “But we can deal with this once in a while.”

But the volatility also works in the chain’s favor: Wingstop has few competitors, in part because entrepreneurs avoid bone-in wings. “There’s nothing like us,” Morrison said.

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