McDonald's Goes Chicken Wings but Will Boneless Fly?

NEW YORK ( TheStreet) -- Chicken wing lovers across America are either rejoicing or snubbing McDonald's ( MCD) new "Mighty Wings" offering this week whereby the fast-food giant will offer the meal at more than 14,000 nationwide locations. The roll out began this week and extending through the end of November.

Mighty Wings will be sold with so-called bone-in chicken wings either as a "drummette" or a "wingette." The wings are sold in three, five and 10 pieces starting at $2.99 and come with an assortment of nine sauces including Chipotle Barbeque Sauce, Creamy Ranch Sauce, Honey Mustard Sauce, among others, McDonald's says.

As wing-centric restaurants consider the chain's impact on their food costs -- especially if large bulk purchases by McDonald's limits overall supply thereby causing chicken wing prices to spike -- another scenario could emerge if the Oak Brook, Illinois-based company decides to continue the item for a longer period or even permanently: the mass adoption of the boneless wing.

McDonald's shares are up 9.9% this year, but underperforming the S&P 500, which has risen about 18% year-to-date.

Boneless chicken wings aren't actually wings, but more typically made from boneless meat of the chicken breast. Boneless wings have been riding a wave of popularity.

Also see: Wingstop Knows You Want More, More, More Wings

Chicken wing franchises are a relatively new concept that have only taken off as a viable business in recent years. While Buffalo Wild Wings ( BWLD) (technically a sports bar and not a standalone wing concept) is the top selling establishment of chicken wings, according to Technomic, a host of smaller concepts are coming up with innovative wing-centric menus that have unique flavoring and options. The result is a big hit with consumers who appreciate being able to choose their own flavored wings at an affordable price.

The economics of wings is an interesting cycle. Prices tend to go up for the selected parts during football season, the strong selling season for wings (paired in many establishments with beer specials) topping out the week before the Super Bowl then declining during the off-season and summer seasons.

McDonald's seasonal promotion has already affected chicken wing prices. The company bought chicken wings for all their stores in bulk, so the price of wings jumped over the summer, even though prices have leveled off since then, says Dan Corrigan, marketing manager for Wing Zone, a chain with 70 U.S. locations and 10 international locations.

Still, wing meat is in high demand and while it doesn't take as long to raise a chicken as it does say cattle, demand for the excess chicken could be challenging.

"If it's successful, McDonald's wing rollout would likely impact wing chains," says Mary Chapman, director of product innovation at Technomic. "Chicken wings are already in greater demand than the rest of the chicken. And as demand goes up, prices go up. A large chain like McDonald's has greater purchasing power than smaller chains, so it wouldn't suffer as much if chicken prices went up. Smaller chains would see more of a cost increase and/or limited supply."

Chapman adds that it also means that the rest of the chicken is available to be -- for better or worse -- processed, "so we may see an increase in boneless wings and strips on menus," she says.

The question is: will there be enough chicken demand to offset the wing purchases that McDonald's makes and has there been enough time to raise chickens to feed into the wing selling season?

Andy Wiederhorn, CEO of Buffalo's Cafe and the famous Fatburger chain has concerns.

"Wings are very price sensitive," he says. "It's a hot commodity with limited supply today."

Buffalo's Cafe, with 25 locations in the U.S. and plans for about three dozen co-branded stores with Fatburger in the works, already offers bone-in and boneless wing menu items. While Wiederhorn doesn't plan to make any changes as a result of McDonald's wings launch, expanding the boneless offerings in the future could be a possibility if supply becomes too pricey or limited, he says.

Still, franchisors say the attention McDonald's is giving to chicken wings is good for the industry. Wing franchisors are confident that the large assortment of choice as well as quality means the competition will be minimal from McDonald's.

"Wings are a specialty item," Wiederhorn says. "It's a positive for those of us who sells wings because it draws more attention to the space and creates more awareness of the different options and to buy wings in different restaurants."

Wing Zone's Corrigan says McDonald's has inspired the company to get even more creative with its unique sauce flavors.

Last month, the franchise launched three new flavors and reformulated another handful of flavors. Wing Zone customers can order their wings with Mango Fire, BBQ Bacon Nirvana or Cinnamon Maple, for instance.

Franchisors also say that another large difference between McDonald's wings and theirs is that the former's are frozen, while many wing franchises cook their wings to order and are never frozen.

Martin O'Dowd, president Hurricane Grill & Wings, a wing chain with 55 restaurants in 10 states, says McDonald's wing purchases doesn't affect its' franchisees food costs.

The company says it uses a jumbo size, fresh, never-frozen wing as well as 30-plus signature and sauces, whereas McDonald's will be using a smaller, frozen wing.

"For a real wing eater, McDonald's wings are not going to affect us much," O'Dowd says. "For an occasional eater they may get their wing fix at McDonald's instead of us, but this is a temporary thing. We don't think that this is going to impact us in the long run."

"We're going to stay true to our course by quality, value and flavor. We think that our pricing for the product you're getting is much better than McDonald's. The only thing McDonald's can beat us on is marketing," he says.

Still to be sure, Hurricane Grill plans to do some advertising explaining the difference between a fresh and a frozen chicken wing. "We have to help our customers make the distinction between quality and value," O'Dowd says.

-- Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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