Operations

Facing headwinds, consumers turn to Wingstop chicken sandwiches

A year after debuting 12 flavors of chicken sandwiches, the fast-casual chain is winning new customers who spend more and keep coming back.
Wingstop restaurant
Wingstop is projecting comp sales will reach 16% for the year, up from earlier projections of 10% to 12%. |Photo: Shutterstock.

When times get tough, consumers want chicken sandwiches.

So contends Wingstop CEO Michael Skipworth, who reported domestic same-store sales up 15.3% for the Sept. 30-ended third quarter, driven almost entirely by transactions. Systemwide sales increased 26.5% to $885 million.

That increase is particularly impressive given it laps the debut last year of Wingstop’s new line of chicken sandwiches, which has been a game changer for the brand. The move has brought in a new boneless-chicken-loving customer that tends to spend a bit more.

And Wingstop is benefitting from the pressures on consumer wallets today, with inflation, student loan payments resuming and high housing costs. The chain saw an uptick in lower-income consumers during the quarter, but is also seeing trade down from higher-income diners.

“When there is pressure on the consumer, particularly that lower-income consumer, they do tend to pull back on more high-frequency occasions. And where Wingstop plays well, and where we win, is we see those guests almost save up and want to treat themselves or indulge, and that’s where Wingstop shows up in a really good way,” Skipworth said. “At the same time, we’re seeing that higher-end consumer potentially pull back on dining out occasions, dining at home more. And we’re winning those occasions as well.”

Last year, Wingstop also expanded its delivery platform to include Uber Eats, in addition to DoorDash. Since then, the chain has been able to sustain transactions through Uber Eats at double the initial launch rate—while still also growing average weekly transactions through DoorDash.

Skipworth said about half of the chain’s new chicken-sandwich guests start by buying only a sandwich on their first visit, but then most return to try other things on the menu.

Those customers tend to be middle-income Gen Z or Millennials, with no kids, and they tend to have a higher average ticket and prefer boneless options, including both sandwiches and chicken tenders, which boosts unit economics by lowering food costs.

Wingstop expects boneless chicken to account for more than 50% of sales soon (it was 44% in the third quarter). That would bring food costs down to the low 30% range, from the current 35%.

The Dallas-based chain is also moving closer to its goal of digitizing all transactions. Digital sales accounted for 67% of the mix during the quarter, which Skipworth said was a new record.

And the chain has big plans to further boost digital sales.

Three years ago, Wingstop invested $50 million to build a proprietary tech platform called My Wingstop, which the chain is now piloting in some restaurants with the goal of rolling out systemwide in the second quarter next year.

The plan is for that new platform to tap the chain’s digital database of 35 million users in ways that are “hyper-personalized” and will also use artificial intelligence to drive retention and frequency.

Skipworth described the technology as end-to-end, encompassing the entire consumer journey.

“We think it’s something that’s going to be a step change or even an unlock as we continue to advance our digital transformation and expand our digital business,” he said.

Wingstop has also quadrupled its advertising fund since 2018, and the brand’s media strategy of placing ads during live sports events is paying off, but there’s room to do more. Skipworth said there is ample opportunity to reach the brand awareness of other national restaurant brands.

All of these efforts helped boost Wingstop’s average unit volume to $1.8 million during the quarter, up from $1.7 million in the prior quarter, and positions the brand on its path to reach more than $2 million, Skipworth said.

The company upgraded projections for the year rather dramatically, saying it expects same-store sales to increase 16%, up from earlier guidance of increases between 10% to 12%.

The chain reiterated guidance that it will add 240 to 250 net new units this year, which would also be a record. The company has set its sights on tripling in size, reaching 7,000 units globally, including 4,000 domestic. The chain ended the quarter with 2,099 units, including 1,837 in the U.S.

Skipworth said international units are also seeing double-digit comp sales, driven by transaction growth, particularly in the U.K., Canada and Korea. New units are expected to open in the next two quarters in the Netherlands and Puerto Rico.

 

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