Why McDonald’s and Domino’s better watch out for Wingstop

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Wingstop, the fast food chicken wing purveyor, opened 51 new restaurants and had same-store sales growth of 6% last quarter, it said in its earnings announcement Feb. 27. The company’s pace of growth and the speed with which it’s opening new stores should make competitors like McDonald’s, Dunkin, and Domino’s hot with envy.

McDonald’s reported 4.4% growth in comparable global sales. Domino’s U.S. same-store sales rose 5.6%, and Dunkin’s comparable store sales growth only went up 0.6% in the U.S.

Wingstop’s revenue rose 15.1% to $40.5 million for the fiscal fourth quarter in 2018 and the number of Wingstop restaurants grew by 10.5% to 1,252 locations worldwide. No one else is growing at a 10% rate on new-store development, says Matthew DiFrisco, Guggenheim Partners’ managing director.

Authority on wings

Wingstop (WING), which launched in 1994 and has more than 1,200 restaurants in the U.S., found a niche that was underserved in the fast-food restaurant industry: the wing category. Wings are traditionally known for being casual bar food. But Wingstop developed its own unique standalone menu, transforming wings in the minds of consumers from being just an appetizer or a side order, to being the main course. Wings are what’s for dinner.

“I think they’re a category of one. I really do think that they are a differentiated brand,” says DiFrisco. “They have the authority in wings. I don’t think anybody else has the brand equity that they’ve established, in serving chicken wings. Certainly, they share the consumer with a KFC and a Popeye’s and your fried chicken player, however, the occasion is different for wings and the appeal is different.”

A big part of Wingstop’s appeal: its innovative wing calculator that asks consumers how hungry they are. The three different levels are snacky, hungry, and starving. Once the consumer makes a selection, the wing calculator suggests the right amount of wings needed to satiate that hunger.

Catalyst for growth: delivery

A branch of the Wingstop fast casual dining restaurant chain in Harlem in New York on Saturday, July 16, 2016. Wingstop reported a strong fiscal 2017 sending tis shares up 6 percent. Stock in the fast-casual chicken wing chain have risen 31 percent in the last year. (Photo by Richard B. Levine)
A branch of the Wingstop fast casual dining restaurant chain in Harlem in New York.(Photo by Richard B. Levine)

Most of Wingstop’s sales don’t come from sales in the restaurants themselves -- 70% are from consumers who order wings and come in to pick them up. Delivery through DoorDash is offered at 30% of Wingstop restaurants. And by the end of 2019, the company expects to offer delivery at 80% of Wingstop locations.

Other fast-food chains such as Domino’s and KFC do offer wings, but no one is focused on wings as a standalone menu. No one else is competing at Wingstop’s size on a national basis in doing wings.

“That’s a very unique business model that very few have been able to replicate -- no one in scale,” says DiFrisco.