Wingstop Set to Launch New Technology Platform in Q2 next year
Wingstop Inc. is testing a new technology platform, tentatively called MyWingstop, in some restaurants and plans to roll it out to the entire system in second quarter 2024, executives said on an earnings call Wednesday.
The Dallas-based fast-casual company, which announced earnings for the third quarter ended Sept. 30, noted that digital sales increased to 66.9% in the period, up from 62% in third quarter 2022. Wingstop has a goal of eventually digitizing 100% of its transactions.
“We are continuing to scale our best-in-class digital platform, which we believe will help protect the moat around our category-of-one position,” said Michael Skipworth, Wingstop CEO and president, on an earnings call.
“During the third quarter our digital sales mix achieved a new record at 67%,” he said, “and we remain focused on our aspirational goal to digitize every transaction.
“We took a step three years ago to a beginning investing $50 million to build our proprietary tech stack,” Skipworth explained. “This investment serves two purposes: protect our digital business that is quickly scaled to $2 billion in systemwide sales and unlock new capabilities that tap into our digital database of more than 35 million users to enable further AUV growth.” Average unit volumes hit $1.8 million in the third quarter, up from $1.7 million in the second quarter, the company said, and it is targeting AUVs of $2 million per store.
“Our proprietary tech stack will deploy an increased level of hyper personalization that we believe will improve conversion retention rates and ultimately drive frequency,” Skipworth told analysts. “I’m thrilled to share that we are now pilot testing our platform in restaurants, which positions us for our anticipated launch in Q2 of 2024. We are just scratching the surface on personalization, and we see this as a key part of our strategy for sustaining same-store sales growth.” Domestic same-store sales in the third quarter ended Sept. 30 were 15.3%.
The tech platform is tentatively called MyWingstop, he said, “and we do believe it’s going to just continue to advance the ball forward and provide a best-in-class consumer digital ordering experience that will allow us to continue to win more digital occasions.” It is also intended to increase visit frequency, Skipworth said.
Skipworth said Wingstop corporate plans to keep the platform cost-neutral, working with franchisees to pay for the program.
“It is providing more insights and more visibility into the business within the four walls of the restaurants for our brand partners,” Skipworth said. “The additional analytics will just further help them improve profitability overtime, which is which is pretty exciting, and, as we deploy this, we will be replacing certain costs that sit on their P and L [profit-and-loss statements] today.”
Wingstop has also worked to reduce volatility in the supply chain, executives said, and provide more stable visibility into food costs when franchisee don’t have to rely on the spot market for wings.
Alex Kaleida, Wingstop chief financial officer, said the company continued to make progress on reducing food-cost volatility.
“At our recent brand partner convention,” Kaleida said, “we generated quite a bit of excitement with the visibility we shared into our 2024 food cost, which for company-owned restaurants would translate to approximately 35%. Our strategy is supported by the progress we are making on increasing our boneless mix now at a record level of 44% for the system. This compares to a low 30% boneless mix just a few years ago. We believe a boneless mix in excess of 50% could yield a structural change in our food cost target to a low 30% level.”
Boneless mix got a boost a year ago with the introduction of chicken sandwich flavors, which also introduced new guests to the brand, and an expansion of delivery from DoorDash to the additional marketplace of Uber Eats, Skipworth said.
“We’re seeing more of those guests come back and navigate the rest of our menu, winning more of their occasions which is yielding an uptick in frequency for our brand,” he said.
Skipworth said a big part of Wingstop’s growth strategy is our international development.
“In our U.K. market, our first restaurant that opened five years ago is hitting record sales volume,” he said. “New restaurants are opening stronger, including a new market such as Canada and Korea, and building awareness. We expect our newly signed markets, the Netherlands and Puerto Rico, to open within the next two quarters and our business development pipeline of potential new brand partners is strong. I continue to believe our international business is supercharged for growth.”
During the third quarter, Wingstop opened 53 net new restaurants.
For the period ended Sept. 30, Wingstop’s net income rose to $19.5 million, or 65 cents a share, from $13.4 million, or 45 cents a share, in the prior-year quarter. Revenues increased to $117.1 million from $92.7 million in the same quarter last year.
As of Sept. 30, Wingstop, founded in 1994, had 2,099 restaurants, including 1,837 restaurants in the United States and 262 abroad. Of the domestic restaurants, 1,791 were franchised restaurants and 46 were company-owned.