DETROIT, MI - APRIL 29: Wingstop Charities and Jalen Rose celebrate the academic achievements of ... [+]
When Wingstop
After all, many digital channels were new at the time and had yet to prove much of a return on investment–a particular challenge in an industry with razor-thin margins.
But CEO Charlie Morrison was committed to winning them over. Morrison joined the company in June 2012 from the pizza space, where digital orders are the rule versus the exception.
During the company’s Q1 earnings call Wednesday, Wingstop reported a 9.9% same-store sales increase, a rare plus sign in the middle of a crisis unlike one the restaurant industry has ever seen before.
For context on just how impressive this is, consider the following Q1 same-store sales results from some of its peers:
- McDonald’s
MCD , down 17% - Burger King, down 3.7%
- Starbucks
SBUX , down 3% - Chipotle, plus 3.3%
- Domino’s, plus 1.6%
- Papa John’s, plus 5.3%
Though these numbers don’t come close to painting a complete picture (most companies have experienced wild sales swings from the beginning of the lockdown to now) Wingstop’s plus-33.4% April performance is a story on its own.
All of it is extraordinary considering just how much the COVID-19 pandemic has devastated the restaurant industry as a whole. The National Restaurant Association predicts the industry could lose $240 billion by the end of this year, with permanent closures in the double digits and more than 8 million job losses so far.
So, while much of the industry is reeling from nationwide lockdowns that have forced closures or cumbersome pivots to off-premise channels that generate a fraction of pre-pandemic sales, Wingstop has chugged along as though it’s business as usual.
It’s not just that people crave chicken wings in a crisis, though they’re certainly a very American comfort food. Rather, it’s the convenience that Wingstop has spent the past five years building. Notably, Wingstop has no drive-thrus. Instead, customers are used to ordering digitally from Wingstop; it’s intuitive for them. That’s why major pizza players have been somewhat insulated, too (as I wrote about here). Simply put, intuition, ease and comfort are big deals in the midst of such uncertainty.
Morrison points to this as a major factor that has insulated the brand.
“It starts with a strong foundation in our investments in a digital platform–notably for both digital orders for carryout as well as for delivery,” Morrison said during a phone interview Thursday. “As we went into this pandemic, already 80% of our sales were from off-premise occasions. We benefited from a lot of investments in technology in the last four or five years that has manifested itself in a seamless occasion for our guests.”
The other factor is the company’s culture. Wingstop’s “service-minded values” drive the company’s efforts to give back to their communities, including a $1 million donation to the Restaurant Employee Relief Fund in support of industry workers–a strong symbol of camaraderie that may appeal to many customers desperate for positive news. Morrison said its franchisees are aligned on these values, which also enables buy-in on other initiatives, like delivery.
“Our strong values system … is well integrated into our system and that’s why we were able to pivot quickly,” he said.
April’s results are a testament to that, as is the steep trajectory of its digital business when there was already a solid foundation in place. In the two or so months of the crisis, digital orders have jumped from 40% to 65%-plus. Further, Wingstop’s delivery orders have gone from about 13% to 30%. Morrison believes delivery will become a bigger part of its mix, especially since the company turned on its delivery advertising just this year.
It’s safe to call Wingstop a case study–of how to survive a crisis (notably, it performed well during the recession too), of how to ensure seamless access to the brand, of how to adapt. Fortuitous timing helps; no one predicted a global crisis that would all but force consumers to use the very digital channels Wingstop has spent years building.
This case study has a starting point. When Morrison arrived at Wingstop nearly eight years ago, the company had no technology within the four walls of its restaurants.
“We were getting orders digitally by way of fax machines,” he said. “I knew immediately we had to change this paradigm.”
Morrison (Pizza Inn) and many members of his team came from the pizza business, so there wasn’t much of a digital learning curve. The team’s first priority was to build a uniform point-of-sale platform across its system that could integrate third-party technologies like Olo and DoorDash.
“Now that it’s come together, it’s a tech stack that is well-formed and consistent,” Morrison said, adding that such a system is a catalyst as to why the company is relatively protected from this crisis.
This crisis just happened, however. There was a lot of convincing that had to be done prior. Morrison said it took a lot of candid, transparent conversations with franchisees to get them on board with that vision of becoming a tech-forward restaurant company.
“Once they started to see the benefits and how much easier it was to operate the restaurant through digital orders than to answer the phone, the more they wanted it,” Morrison said.
Wingstop made some concessions along the way, for example managing royalties at a certain level to free up more cash for franchisees to invest in tech. As for that hard to prove return on investment? Wingstop went public in 2015 at $19 per share. The company now hovers around $120. Systemwide sales at the end of 2018 were about $1.2 billion. At the end of 2015, they were about $768 million.
During the company’s Q1 call Wednesday, Morrison noted that check averages for digital and delivery channels typically have a $5 higher average check than traditional channels, and can be as much as $10 higher than dine-in orders.
Prior to the pandemic, Morrison made it abundantly clear that he wanted to get to a point where every transaction at Wingstop was digital. Now at 65%, the crisis may have expedited that goal. In fact, Morrison is plenty comfortable taking a page from Domino’s by referencing Wingstop as a tech company that just happens to sell wings.
“This business is a lot like the pizza business. The operational flow is similar, the simplicity. We have great respect for companies like Domino’s and I do think this brand can be considered a tech stock. That’s where we place all of our energies–creating efficiencies in technologies to enhance our business,” Morrison said.
Many habits are likely to stick around once we reach our new normal, including and especially the simplicity and convenience that comes with digital ordering. For companies that have those channels perfected, like Wingstop, well, they’ve got quite a head start.
“I’m not sure what normal will look like given this. What is normal now is to be adaptable and versatile,” Morrison said. “You’ll continue to see Wingstop be an adaptable brand and that’s how we designed it–all of those investments we put into place to be adaptable.”
