Chicken chain Wingstop aims to expand in face of competition, higher costs and bird flu

Wingstop, a chicken restaurant chain, has ambitious plans for a company that says it's "the largest brand no one has heard of."

The fast-casual chain made up of mostly franchises ended last year with 2,563 restaurants after 359 new openings — and it has 2,000 more in development. Buoyed by strong sales, Wingstop raised its long-term target to over 10,000 locations globally — a total that some industry analysts see as ambitious, but not impossible, along with its goal to raise average annual sales per restaurant to $3 million from $2.1 million.

"There remains a significant runway ahead of Wingstop, and we believe we are entering this next phase of growth," CEO Michael Skipworth said during the Dallas-based company's most recent earnings call.

The growth and plans reflect how chicken has soared as a dining choice, partly because of its perceived healthiness versus red meat and lower cost compared to other meat. Businesses serving chicken have grown to span a variety of restaurant concepts.

But the landscape has grown more challenging. Chicken prices are up because of the avian flu as flocks found to contain infected birds are culled, Skipworth acknowledged to analysts. Competition in the sector is fierce. In the quarter the company missed some Wall Street predictions, sending its stock tumbling. Skipworth still remains bullish on Wingstop's prospects and momentum based on its performance so far.

"Our strategies consist of scaling brand awareness, driving menu innovation, expanding our delivery channels, leveraging data-driven marketing, and continuing our digital transformation," Skipworth said.

Wingstop, billing itself as the world's largest fast-casual chicken wings-focused restaurant chain, prides itself on "serving the world flavor." Its locations, featuring aviation-inspired decor, offer a menu that includes classic and boneless nuggets, tenders and chicken sandwiches with a choice of a dozen sauce flavors. The wings are fresh cooked-to-order and the company said they attract millennial and Generation Z consumers, a group Pew Research Center defines as born between 1981 and 2012. Rapper Rick Ross is a franchisee, and he has mentioned the chain in his songs.

"Wingstop has numerous competitors in fast food — Chick-fil-A, KFC, Popeyes and Church's" Texas Chicken, Darren Tristano, CEO of consulting firm FoodserviceResults, said in an email to CoStar News. "In fast casual, they compete with all wing stores and brands that focus on wings like Raising Cane's. Lastly, they have a strong competitor in full-service restaurants like Hooters and Buffalo Wild Wings, which have both experimented with fast casual and continue to provide a healthy off-premise sales push with pickup and delivery."

Wingstop restaurants only average about 1,700 square feet, allowing them to be flexible and fit into smaller locations at shopping centers, the chain said in a regulatory filing.

Last year, Wingstop achieved record top and bottom-line results, including a streak of 21 consecutive years of same-store sales growth, according to the CEO. In the fourth quarter ended Dec. 28, the chain opened 105 restaurants and saw 10.1% domestic same-store sales growth. Systemwide sales increased 27.6% to $1.2 billion. The chain's digital business is "north of 70% today," according to Skipworth.

Furthermore, the company expects 14% to 15% unit growth this year, with a pipeline that includes 20 new restaurants in New York City.

"The growth of Wingstop is rare for fast casual or any category for that matter: 14% growth signifies continued confidence and demand in the segment," Tristano said. "Given the small footprint, the cost to open and maintain overhead for a brand that has strong off-premise opportunities is very good. The growth of third-party delivery and the integrity of the product in transit support the sustainability of the sales of Wingstop."

This year will be "another accelerator ... to scale Wingstop to a top 10 global restaurant brand," according to Skipworth.

In a report, Morningstar analyst Sean Dunlop was upbeat on Wingstop, but he expressed some skepticism about its goals.

"While we don't quite foresee Wingstop achieving management's target of becoming a top 10 restaurant brand within a decade, we do see an enviable development runway for the chicken chain," he said. "We believe that management's strategy is cogent, with priorities falling into three key buckets: improving unit economics, driving brand awareness, and expanding into international markets."

Dunlop questioned Wingstop's estimate of "an addressable market of 10,000 global stores, with 6,000 in its home U.S. market alone (up from 7,000 and 4,000 respectively, prior to its second-quarter 2024 earnings call)."

His takeaway is that the chain "remains in the early innings of its growth narrative, although our current estimates — based on the firm's penetration in key markets such as Dallas-Fort Worth and Los Angeles — don't yet pencil out to 6,000 U.S. stores."

However, Dunlop added that "it's not implausible" for Wingstop to get there, "given that it continues to attract incremental customers in its mainstay markets and build transaction-driven growth, but we would have liked to see a little bit more commentary regarding how the firm plans to push out of its three core markets (California, Illinois, Texas) in which more than half of its U.S. stores reside."

He said his two biggest concerns for Wingstop are "concentration risk and concept portability."

Wingstop didn’t respond to a request from CoStar News to comment on Dunlop’s opinion.

Nicole Larson, manager of U.S. national retail research for real estate brokerage Colliers, said the chicken-chain sector can support aggressive expansion like Wingstop is planning.

"This level of growth is not uncommon in the fast-casual sector, especially for chicken chains," Larson said in an email to CoStar News. "Brands like Wingstop, Dave's Hot Chicken, and Raising Cane's are rapidly expanding, with ... Dave's planning 950 new openings in 2025. Established players like Chick-fil-A and KFC are also growing aggressively, driven by high consumer demand, efficient operating models, and scalable concepts. The popularity of chicken-focused menus fuels rapid expansion, adaptable operating formats (like drive-thrus and digital ordering), and strong brand loyalty. This growth trajectory is impressive but not unusual in the fast-casual category, reflecting the sector's dynamic appeal."

Overall, chicken chains continue to outperform the restaurant industry as a whole, according to Tristano.

"Chicken is still a relatively lower cost option compared to beef and seafood," he said. "Consumers are more focused on the price of eggs and chicken is still pretty inexpensive in supermarkets. Until the Avian flu issue directly affects consumers, its not top of mind when eating out. As long as prices stay relatively stable, there shouldn't be much of an impact to sales."

Larson agreed.

"Chicken chains continue performing well despite rising chicken prices and avian flu threats," she said.

According to Skipworth "Wingstop has transformed into a brand with scale," albeit one that needs a higher profile.

"While the consumer is facing tough choices when it comes to restaurant occasions, they also are recognizing the quality and value proposition Wingstop delivers, and yet we still believe we’re the largest brand no one has heard of," he said.

The company is stepping up its marketing efforts and has a bigger ad budget. It's now the official chicken-and-chicken-wing partner of the National Basketball Association and executed "multiple activations" at the NBA All-Star Game this month, according to Skipworth.

"With inflation increasing, sales volume per unit should continue to rise at a 3%-to-5% annual increase," Tristano said. "As chains like Wingstop grow their footprint in larger markets, their advertising effectiveness/spend will increase and although there will be some cannibalization (i.e. Subway), stores should see traffic increases and thus a rise in per unit sales volume. If stores look to add drive-thru pickup windows, likely these stores will see a larger increase."

But Tristano added that getting to and maintaining a $3 million annual unit sales volume will be tough for some Wingstop restaurants.

"But likely there are many that already hit that number and provide a roadmap for others to get there," he said. "Catering will be an important factor to get to their goal but certainly in the next five years, this number is achievable."

Other chains hit and even surpass that $3 million mark, according to Larson.

"Reaching $3 million aligns with industry trends and is a reasonable target in the competitive landscape," she said. "In the chicken quick-service segment, $3 million is around the industry average. For comparison, Dave's Hot Chicken averages $3.14 million, while Raising Cane's sees $5.54 million per unit, and Chick-fil-A leads with $8.3 million."

On the earnings call, Skipworth discussed a proprietary artificial intelligence-enabled kitchen operating platform that Wingstop has developed to increase the speed of service. It has begun rolling it out.

"We actually believe this is going to fundamentally change our kitchen operations," Skipworth said. "And it isn’t just a digitization of kitchen ticket and order workflow. ... Ultimately, we think it’s going to increase the productivity of our team members. But this solution also includes consumer-facing ready order screens that will allow us to manage guest expectations around their order and their order status."