Operations

Chicken sandwiches are helping Wingstop capture the coveted heavy QSR user

The 12-flavor chicken sandwich line is introducing new customers to the wings brand and is helping to lower food costs.
Wingstop sandwich combo
Sandwiches have become the gateway drug that is drawing in new guests. |Photo courtesy of Wingstop.

U.S. diners may be chomping on about 2.8 billion servings of chicken sandwiches annually, but Wingstop’s attempt to capture its “fair share” of that market has proven beneficial.

The 12-flavor chicken sandwich line, which debuted (twice) last year, is bringing more first-time customers to the brand. Those customers are then discovering the wings on the menu, which is boosting sales, and the sandwich line is also helping to lower food costs by making Wingstop less vulnerable to the volatility of the chicken wing market, said CEO Michael Skipworth during a second-quarter earnings call on Wednesday.

As a result, the Dallas-based chain is making progress on its goal of achieving an average unit volume of $2 million. For the July 1-ended second quarter, AUVs were $1.7 million, up from about $1.5 million a year ago.

Domestic systemwide same-store sales for the quarter increased 16.8%, with almost all of that growth attributed to transactions. For company-owned restaurants, same-store sales were up 5.7%.

Though the comp dipped slightly from the first quarter of this year, when same store sales were up 20.1%, the company raised its guidance for full-year comp sales, saying they will likely be up between 10% to 12%, compared with earlier predictions of same-store sales increases in the high single digits.

That bullish outlook is based in part on the fact that consumers have proven to be more resilient than anyone expected this year, said Skipworth.

“Whether it is continued inflation, rising interest rates or even the restart of student loan payments later this year, we acknowledge the macro backdrop continues to have a fair amount of uncertainty,” Skipworth said. “However, despite the uncertainty ahead, we believe we are well positioned to deliver another industry-leading year.”

But a nearly 40% decrease in the cost of bone-in wings also helped, and food costs are expected to be in the low 30% range for the year, down from the more typical mid-30%. By the end of the quarter, boneless items were 43% of the mix, which is the highest they’ve ever been, Skipworth said.

Wingstop has also made progress in shifting away from spot market purchasing, which the company said will make costs more predictable for the second half of the year.

Skipworth said the new sandwich line has become an “easy entry point” for the heavy QSR user that Wingstop is targeting: A group that represents over 60% of all QSR visits and has either not heard of or not tried Wingstop. These users also tend to be Gen Z or Millennials, multicultural and tech focused, he said. They order in parties of two or more, and they are willing to spend a little more for quality or indulgence.

To reach these folks and raise brand awareness, Wingstop is planning a new creative campaign—the first in three years—that will focus on live sports. Earlier this year, the company hired the creative agency 72andSunny, which is also working with the NFL.

Wingstop also sees an opportunity to grow delivery to about 50% of sales. Currently, delivery accounts for about 30%. Last year the chain added UberEats as a delivery partner, along with DoorDash.

During the second quarter, the chain also grew digital sales to 65.2% of the mix. Skipworth, who  would like all sales to be digital, said the company has developed a database of 35 million users, collected without a loyalty program. Working with a proprietary tech stack, the company is developing ways to personalize guest engagement with things like a secret menu under consideration.

Wingstop expanded its use of AI order taking, which was being tested in about 40 corporate stores. About 15% of Wingstop orders still come in by phone, Skipworth said, but the AI system captures more calls and offers a better customer experience. It also frees team members to serve guests at the counter and makes their job easier.

Wingstop opened a net of 50 units during the quarter for a total of 2,046, and the chain also raised its guidance on new development, saying 240 to 250 new restaurants would open this year. Earlier projections were 240.

Revenues increased nearly 30% to $107.2 million. Net income was up 21.6% to $16.2 million, or 54 cents per share, compared with $13.3 million, or 44 cents per share, a year ago.

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