What would you like today, Ryan? So I'll do a split combo. Would you like five, six, eight, ten, or twelve? Eight, sounds great. What began as a Buffalo chicken wing restaurant in 1994, in Texas, has now grown to more than 2000 restaurants nationwide. Right now, we're just dropping some chicken. I love this. I don't know any other flavor. Hi, honey. Oh, man. I'll take it. I'll take hot honey more than anything. Ever. Mm. That's the lemon pepper. It's one of their most popular. It's delicious. Since initially going public in 2015, Wingstop stock price is up over 100% over the past five years. It's up nearly 300%. And in the past year alone, it's more than doubled. So Wingstop's growth is really unprecedented in the restaurant industry. You know, if I went back to Chipotle in the 2000 when the brand was emerging, we saw growth

almost at Chipotle at Wingstop's levels. But what's different about Wingstop is the fact that it's over 2000 stores. You know there's no other brand grand scale to the growth that Wingstop is doing. The company's systemwide store count reached over 2300 at the end of June. That's about a thousand more locations than it had in 2019. Consequently, revenue has more than doubled in that same time period. On average, our franchisees invest about $500,000 to open a Wingstop, and they're basically getting that entire investment paid back to them in less than two years because the income statement is so strong. With chains like Starbucks and McDonald's facing consumer pullback, how did Wingstop become one of the hottest restaurant chains in the country? Across fast food chains, chicken has been a hit, especially this year. And with school coming back around, football scaling back up, it's starting to pick up in the morning.

They love chicken in the morning. They love chicken in the morning. I love chicken. But you know I love chicken in the morning. That's good news for Wingstop because, well, chicken is about all it sells. Its menu also lends itself well to an experiential offering for hanging out with friends or watching a football game. If you're thinking about someone who has to make a decision on where to trim spending, the likelihood that they're going to give up something that is associated with your social event is much lower than, Hey, I'm going to forego my Starbucks coffee this morning. Wingstop is a special occasion. Our frequency over my ten years has really averaged about three times a quarter or once a month, a low-frequency occasion. And we're just now, for the first time, starting to see that tick upwards, which we're pretty excited about. Going beyond just wings has helped drive that uptick.

The chicken sandwich wars took off right before the pandemic, and his chain after chain vied for market share. Wingstop eventually got in on the game. The chicken sandwich was introduced in the middle of 2022. Chicken is a very popular protein with the consumer, particularly fried chicken. And so the ability for Wingstop to offer their chicken sandwich in 11 flavors really is an opportunity for continued utilization of the company. Wingstop has seen an increase in new guests visiting its locations ever since the chicken sandwich was introduced, and those new customers are visiting more frequently than its traditional wing customer. The company reported same-store sales growth, increasing nearly 30% in the US for the second quarter of this year. That means that the company generated more sales per store compared to last year. The company says that this growth was driven by increased transactions. I would say depending on the day, we will receive typically around 300

400 transactions. Investors look at same-store sales as the key metric for the health of the restaurant concept. Wingstop has experienced same-store sales growth for 20 years. The stores themselves require relatively low operational costs. We run a very efficient labor profile. You can run that Wingstop that's doing on average $2 million. You can run that with as few as four team members in the restaurant. We run in a very efficient box on average about 1600, 1700 square feet. And so our occupancy cost where we target B, B minus real estate is extremely efficient. So this Wingstop in Neptune, New Jersey opened a few years back. And I initially thought it was a very interesting location choice. It's set off from the main road across from a grocery store in the middle of a shopping center. But that's exactly the type of real estate that Wingstop targets. It doesn't need to target prime real estate, because last quarter, nearly 70% of its sales came

from digital orders, meaning people were not just impulsively stopping by; they were coming here intentionally. The use occasion or the consumption occasion for Wingstop is the consumer coming to them. And so, I don't care if I have to go next to the pet store to pick up my wings because I'm going there to pick it up. Whereas, like I said, if a McDonald's was in the middle of a strip mall, you lose a lot of those impulse purchases because it's, you know, there's not a drive-through. Brand awareness is growing. Franchisees contribute a percentage of sales into the national advertising fund. So, as system sales grow, so does ad spend, which nearly doubled from 2021 to 2023. From about five years ago to now, not a lot of people knew about Wingstop, but not everybody knows about Wingstop. The viral nature of the brand and how it's cropped up so many different

times on social media has really helped feed into the, you know, the customer acquisition and hashtag. Wingstop has been tagged in over 150,000 TikTok videos that have garnered millions of views. The company has leaned heavily into marketing with live sports. It has official partnerships with multiple NBA teams, and its free wing promotions have led to viral moments with top athletes. Giannis wants the chance to get the QR code to get his free wings. Although the chain saw its U.S. same-store sales grow over 28% last quarter and beat Wall Street earnings expectations, the stock price has actually fallen more than 10% from the highs that were seen in June. Wingstop is still one of the best-performing restaurant stocks, I think, as of recent. You've seen a big divergence in the valuations of restaurant stocks. So, a stock like Wingstop, a stock like Sweetgreen, a stock like Kava have varied premium valuations relative to the overall restaurant space.

And then other more mature restaurant stocks like McDonald's, like Starbucks, have seen their stocks, have their valuation beat down. Take a look at Wingstop stock price. Now look at the company's earnings per share. Over the last 12 months. That price-to-earnings ratio is high. Now take a look at the same valuation for stocks like McDonald's and Starbucks. Trading at a higher premium means more volatility in its share price. The rest of the story, though, is really macro. That the consumer base for Wingstop historically skewed more lower income and on a price per calorie basis. It's just cheaper to go to a quick service drive-thru to get food relative to a Wingstop. However, Charles says that Wingstop is seeing a shift from a middle to higher income consumer with increased transaction on third-party delivery apps. Plus, unlike its fast-food competitors, Wingstop has kept a tight leash on prices since 2019. Wingstop has only increased prices by around 15%, while its peers in the

quick service restaurant category fall into the 30 to 40% range. Reasonably quick service is underperforming. Wingstop is really about the amount of price that quick service is taken, and that there is a lot less discipline relative to what Wingstop has done in recent years. In 2021, wing prices soared, so Wingstop pushed chicken thighs instead to combat this type of volatility. Going forward, the company changed the way it sourced its chicken wings. They shifted from a spot where they're just buying whatever the market price is to negotiating that price for the whole bird. They'll use the parts of the bird they need for their operation - the wing, the breast, etc. - and they'll effectively sell the remains to either a soup or pet food company that can use the remaining part of the birds. And that's allowing us to create predictability. And most importantly, it's minimizing the volatility that our franchisees

see on their income statement within their food cost line. In its most recent earnings call, Wingstop raised its store count goal to reach a domestic total of 6000 locations. That would be about triple its current total and more locations than Kentucky Fried Chicken currently has in the U.S. However, that kind of growth could be a long way out. TD Cowen anticipates the chain to have about 4000 locations domestically and 5000 locations globally by 2030. You know, I don't think this is going to be the new Kentucky Fried Chicken or some big chain, but they've got another 2 or 3 years of packing on 250, 300 stores before they start saturating America. The company also says it has room for growth within the world of third-party delivery systems. On DoorDash and on Uber Eats. Our awareness levels are still really low. Our delivery channel mix is about 30% today. When we benchmark delivery channel mix to other, more mature,

heavy off-premise businesses. Think big pizza. Their delivery channel mix is north of 50%, so we see a lot of runway there. Wingstop is still relatively low awareness, even as the broader consumer is maybe pulling back from spending on food away from home. Wingstop has the opportunity to gain incremental consumers that have never heard of the brand before. Skipworth says that Wingstop has a goal of transitioning entirely to digital ordering. Does that mean, like you would eliminate that face-to-face interaction? And it would be more of just kind of a pickup model? Is that the goal? We're not holding chicken that's been previously cooked. We're making it to order. And on average, it takes about 18 minutes to get your order at a Wingstop. So training guests to order ahead through our digital platform, it's actually just a better guest experience. But then from our perspective, we tend to see a higher average check.

The average annual sales per store are over $2 million, and the company now aims to make that $3 million. About 98% of Wingstop's are franchises. And as we grow our average sales per restaurant, it's continuing to make those income statements for our franchisees better. And that's going to make them want to open more Wingstop's. And that's how I think we'll continue to be able to scale Wingstop into what our overall vision is, is to become a top ten global restaurant brand. In order to be a top ten restaurant brand, you're talking about roughly about $10 billion in scale. And so this is an ambition that getting to $18 billion based on their long-term targets will put themselves pretty solidly there. And just to give you some perspective, the $18 billion target puts them right now in between Chick-fil-A and Taco Bell. In terms of what that would mean for today.

How Wingstop Became One Of The Hottest Restaurant Stocks

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How Wingstop Became One Of The Hottest Restaurant Stocks

How Wingstop Became One Of The Hottest Restaurant Stocks

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