Wingstop: Franchise Economics, Chicken Sourcing, & US Store Growth | In Practise

Wingstop: Franchise Economics, Chicken Sourcing, & US Store Growth

Former Vice President at Wingstop

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Executive Bio

Scott Lack

Former Vice President at Wingstop

Scott is a Former VP at Wingstop and has over 25 years running fast-casual restaurants. In 2004, he joined Wingstop when they had around 150 stores and scaled the business to over 1,000 units. Scott was responsible for managing franchise operations across the US and reported directly to the CEO. Scott enjoyed 15 years at Wingstop before joining Popeye’s running operations and is now running 4 Rally’s units and looking at more franchise opportunities.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Scott, can you share some context to Wingstop and the strategy, when you joined in 2004?

It was a small company of under 200 units; we had about 150 when I joined. We had another 75 or 100 in the pipeline. I remember when we opened up our 200thstore, it was a really big deal. It was in Las Vegas which became a really strong market for Wingstop, over time. During my time there, we got close to 1,000 stores.

Can you describe the original concept of Wingstop?

It was an interesting concept. Antonio Swad created Wingstop and, initially, they weren’t open during the daytime; they opened up at 4:00 in the afternoon until 11:00 or 12:00 at night. The thought was, someone who was retired could buy a retirement business, maybe go golfing during the day and run their business at night. Over time, there was a lot of pressure on sales to expand. If you can expand the day part, it’s almost a no-brainer. Wingstop eventually opened up for lunch.

There was a lot of initial push back from the original franchisees when that happened, because a lot of people liked the concept of just being open in the evening and not worrying about the restaurant during the day. Lunch didn’t take off at first; it took some growing. Eventually, the concept evolved out from a retired mailman buying a Wingstop franchise and operating it in the evening.

Another part of the initial start up was to not have a good location; to have a C location, a cheap location. Instead of paying $2,500 or $3,000 a month rent, to be on the corner slot, Wingstop encouraged you to buy the $1,500 rent slot, in the shopping center, two blocks away. That has also changed over time. You now want to have a great location and great sales. The initial Wingstop also took a couple of years to finds its customers. A franchisee could expect very low sales for the first two years and then start getting ramped up as more people started to get to know about you, to build your customer base that way.

They are now sourcing large multi-unit franchisors; people that can do 10, 15 or 20 locations without a problem.

But they do say that they even today they still look for only B and B minus locations; not the fully prime locations?

A lot of the franchisees that I worked with were looking at more and more prime locations. That might be in their sales literature.

So were those core, original franchisees retired males?

Yes, I would say that, typically, it was a male franchisee. A lot of husband and wife teams did it; it was often a family business. Maybe their kids were working the fryer, dad is cooking and mom is on the front register. That was very common in the early days.

What is so unique about the menu?

It’s so simple. A lot of restaurants think that if you add apple pies and so on, you’re going to increase sales. Wingstop was, pretty much, singularly focused. The economics of wings, over time, necessitated the installation of tenders and nuggets as the breast is more prevalent and easier to source than the wings. That was a hedge against the up and down wing market.

Basically, they’ve kept their menu simple. During the last crisis they tried chicken thighs and my understanding was that it didn’t go very well. The challenge with wings is that every chicken just grows two. When you think about a 10-wing order, it took five chickens to produce that. But generally, it has stayed singularly focused on chicken with just a couple of simple sides to go with it.

What is the $390,000 initial capex spend actually for?

It finishes out the space. Often, you will get a naked space that needs plumbing, adjusting, vent hoods and things like that, plus the cost of equipment. I think the investment is on the low end of the food service industry, as far as entry is concerned. One of the key reasons to Wingstop’s success is that they were so singularly focused and the food was cooked to order. They didn’t have heat lamps with a bunch of wings; if you walked in and ordered a 10 piece, it was dropped for you and you were told it will be 14 minutes. If you sat down and ate them, you were getting this piping hot piece of chicken and you were going to come back because it was a memorable experience. One of the keys to success is the cooked to order freshness.

They also had cravable flavors. I worked there for 10 years and I ate wings almost every day, I’m ashamed to say, but the flavors were cravable; you don’t get tired of them. It’s an interesting and unique product.

What exactly is the equipment required?

Basically, fryers, refrigeration and a small area of prep. I think the equipment package is still under $100,000. A lot of the $300,000 or $400,000 is finishing out the spot to have restrooms and so on.

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Wingstop: Franchise Economics, Chicken Sourcing, & US Store Growth

November 8, 2021

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