The last 12 months for the stock market have been frighteningly very spicy. But not all spiciness is bad.Ask someone who stopped by wing stop (wing 3.70%) soon. This fast-casual restaurant chain has been pleasing customers for nearly 30 years.
But arguably, investors have been happier lately. Since going public in 2015, Wingstop has generated his 350% return, beating benchmarks. S&P 500 index. And all signs point to that rewarding journey ahead.
Key Pillars to Drive Your Business
Founded in 1994 in Garland, Texas, Wingstop is a fast casual restaurant chain serving wings, tenders and chicken sandwiches. It may not sound like anything special, but customers seem to love his Wingstop’s innovative flavors, ever-evolving menu, and smart combinations. Plus, the average meal he’s a reasonable $8 per person.
The company has been growing same-store sales for 18 consecutive years, and the cumulative growth rate for same-store sales from 2017 to 2021 is expected to be Starbucks, chipotle pepper, domino pizzaWhen McDonald’s.
Image Source: Getty Images.
About 98% of its restaurants are owned and operated by independent franchisees. Under the franchise model, franchisees pay Wingstop an initial fee and ongoing royalties for training, marketing, store set-up and other technical and operational services.
One of Wingstop’s key areas of investment is building brand awareness and data-driven marketing capabilities. With over 500 data points at your fingertips for each customer, the company has built a digital platform to effectively target customers. Additionally, the digital transformation of the entire business, from online ordering to shipping and other back-office functions, has improved the customer experience and reduced operating costs. In Q3 2022, 62% of Wingstop’s orders were placed via digital channels, compared to just 6% in 2014.
Wingstop also made smart operational decisions. Placing the store on a ‘Category B’ real estate site helped keep the leasing costs low. Wingstop also simplified store operations, enabling it to maintain a leaner workforce.
Finally, the company’s balanced sourcing and supply chain strategy has helped it minimize the impact of periods of high inflation like 2021, when the price of raw chicken wings rose by 72%.
Overall, a balanced strategy and focused execution give Wingstop an edge over its competitors.
A framework for reproducible success
With its growing popularity, Wingstop’s revenue grew at a compound annual rate of over 25% from the end of 2016 to 2021. The average annual revenue of the company’s US-based restaurants also jumped from $1.1 million in 2016 to $1.6 million at the end of 2016. Q3 2022.
With an average initial franchise investment of around $415,000 and growing sales per store, Wingstop is an attractive proposition for franchisors. From his 998 stores in 2016, it’s no surprise that he’ll jump to 1,898 stores by the end of Q3 2022, 225 of which are outside the United States.
In addition, Wingstop has grown profitably every year since going public. And there is still a long runway ahead. Wingstop believes he can more than double the number of restaurants in the US and several times the number overseas, reaching a total of over 7,000 locations. The company also sees a path to increasing average store sales from his $1.6 million to his more than $2 million.
Wingstop has delivered consistent performance over a long period of time. The company is resilient as it has met the challenges of the COVID-19 pandemic, inflation and disruptions to his chain of supply. Investors were naturally lured by its relatively cheap share price, which has risen 68% over the past six months.
High valuations shouldn’t scare investors away
Wingstop is currently trading at a price/earnings ratio of 105 and a price/earnings ratio of 13.7. Both of these metrics are well below their 2021 highs, but Wingstop’s stock certainly isn’t cheap. But this is typical of a market that values quality companies. So how should investors proceed?
One approach for long-term investors interested in Wingstop is to start by opening a small position with the company. Periodically review its performance to ensure it meets the high expectations built into the premium rating, and add shares incrementally over time, hopefully with favorable rating points.
Wingstop’s stock may have risen 68% in the last six months, but the business is just getting started. The company seems ready to spread its wings even further.
Kaustubh Deshmukh (KD) has positions at Starbucks and Wingstop and has the following options: The Motley Fool has positions and endorses Chipotle Mexican Grill, Domino’s Pizza, Starbucks and Wingstop. The Motley Fool recommends the following options: The Motley Fool’s U.S. headquarters has a disclosure policy.
