Wingstop Knows You Want More, More, More Wings

RICHARDSON, Texas ( MainStreet) -- With 500 stores in the U.S. and Mexico and its 3 billionth wing sale fast approaching, it's probably not necessary to identify Wingstop as CEO James Flynn sometimes does: "We are not Buffalo Wild Wings ( BWLD)."

Wingstop, which was founded in 1994 and began franchising three years later, has new private-equity owners and sees plenty of opportunity to expand in the U.S. and internationally.
Wingstop, a 500-franchise chain, isn't done growing nationally, internationally or into a whole kind of business.

Why not? It has had eight consecutive years of same-store sales increases despite a tough economy that stalled many other franchises, which Flynn attributes to consumers trading down from casual dining to so-called fast-casual restaurants as they tightened the purse strings. "We are for a really good value for what we do," he says.

But more importantly, there doesn't seem to be a lot of direct competitors. Combined with a strong management team, industry experts says, that makes selling the Wingstop story to consumers and franchisees that much easier.

"If you look around, we are the only company that I know of virtually specializing in nothing but wings. If you take wings plus beverages plus french fries, you got 90%" of the menu -- an exaggeration, though Wingstop's menu is no-frills. It sells only wings, boneless and bone-in, but with 10 flavors to sauce them up, including "Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ and the newest offering, Louisiana Rub." Orders are made fresh, cooked to order and customers can get a variety of side dishes.

Wingstop is a fast food joint. Buffalo Wild Wings, on the other hand, has been hugely successful as a part sports bar, part casual-dining restaurant franchise.

"We don't have any real significant chicken-wing competitors," Flynn says of Buffalo Wild Wings. "We really consider pizza probably a bigger competitor."

Still, the company is trying out a new concept -- a larger store with an expanded menu and sports theme, Wingstop Sports, that will fall short of a full-service sports bar and restaurant. A grand opening comes to Brownsville, Texas, next week.

"It's not going to be like Buffalo Wild Wings," he says. "Our alcohol sales are 1% to 2%" of sales, and Wingstop Sports locations should see a rise to between 6% to 8% -- far short of the roughly 20% an establishment such as Buffalo Wild Wings does in alcohol sales.

Wings appeal to consumers
The wings industry is growing, and there's lots of reasons for it.

"Wings are a fun, shareable and social food and are the perfect food when you're getting together with friends to watch sports," Buffalo Wild Wings CEO Sally Smith says. "They are easy to combine with a favorite side dish or two for a meal."

Wings are cheap to buy in bulk and consumers can order them in mass amounts without spending a lot of money.

Wings also play to the consumer trend of customization. Customers can choose flavors, order size and bone-in or boneless wings. That's opening up the typical demographic of a wing eater to nontraditional demographics -- meaning women, says Mary Chapman, director of product innovation at consulting firm Technomic.

Approximately 36% of Technomic's Top 500 restaurant chains sell wings, a number that keeps rising year over year. "Buffalo Wild Wings has so much influence over the category -- as long as it is growing, the segment will be growing," Chapman says.

Wings is a good franchise concept
Chicken as a commodity is cheaper than beef, making it easier to increase (or decrease) production as demand changes. "So even if commodity prices go up and down, it's not as long-term an impact on costs like beef, where cattle have a longer life span and takes longer to get new beef products to market," Chapman says.

As a business, fast-casual wings franchises are also less costly to build out and operate than other food concepts, such as burger joints, because there is less equipment, fewer supplies and less overhead in general, says Sam Oches, managing editor of QSR Magazine.

Wing concepts such as Wingstop do a lot of carry-out business, so they don't need large spaces to accommodate a lot of seating, Oches says.

And because it's cheaper to run a wing franchise, it likely became a more appealing concept for a franchisee to open during the recession. As wing exposure rose, that probably added to the increase in consumer demand, Oches says.

It's also easy for wing-centric restaurants such as Wingstop to tie marketing to various national and local sporting events. Wingstop takes advantage of this niche by having three-time Super Bowl champion and Hall of Fame quarterback Troy Aikman as its national spokesman.

Wingstop sold 5.6 million wings Super Bowl Sunday, an 11% increase from a year earlier and the 12th year of record sales for the day, it said, helped by pre-ordering by customers online and a mobile app. As of mid-February, same-store sales at Wingstop franchises were up 11.7% year-to-date compared with the same period last year, the company says.

Wingstop is using the March Madness college basketball playoffs, which officially started this week, to promote its first systemwide Twitter campaign -- #WingMadness. Twitter followers will be automatically entered to win one of five $150 Wingstop gift cards, a spokeswoman says. Aided by the tweets of Aikman and franchisee Drew Gooden, an NBA forward for the Milwaukee Bucks and former University of Kansas player, the number of Wingstop Twitter followers is reported as doubling since the campaign was launched Sunday.

"Chains that struggled did so in a tough operating environment, and their customers are likely feeling the slow economy more than the general population," Technomic's Chapman says. "Wingstop is able to weather some of that because of its scale and segment leadership and its strong franchise program, supporting current operators and recruiting strong franchisees for new stores."

It also doesn't hurt that the company has new owners with deep pockets. The company was acquired by Roark Capital Group in 2010. "Success begets success. They're a leader, so they attract the investment money and the best operators, and their leadership grows," Chapman says.

International expansion
Now Wingstop and others are looking to international expansion.

"We set a plan to open 1,000 stores in five more years," Flynn says. The company recently signed a 100-store contract for locations in Mexico, he notes.

"We've got tremendous geography to fill and international opportunity," he says, noting the potential to succeed alongside Yum! Brands' ( YUM) KFC, which "does fantastic in the Far East and the Middle East."

QSR's Oches believes that the concept will do well outside the U.S. " Wing Zone is starting to prove it," he says. "They opened in Panama and from when I talked to their CEO, they just blew up when they went down there."

"The whole industry is really resonating, and the distinction between fast-casual and casual dining is important," Oches says. "Buffalo Wild Wings, it's harder for them to find locations because they need more space , which is more expensive and a whole other beast with alcohol and TVs. It's easy to grow a chain like Wingstop that's going to have low overhead and bigger profit margins selling a cheaper product in bulk orders. That model is something that really works and has worked for Wingstop and continues to work for them."

While setting its sights on international expansion is certainly commendable, the company has plenty of U.S. territory to cover as well. In the Northeast, for instance, "we're really just beginning to move in that direction," Flynn says.

-- Written by Laurie Kulikowski in New York.

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