Wingstop matures with focus on growth-minded operators
More sophisticated operators are driving Wingstop’s growth, says CEO Charlie Morrison.
Like many millennials at 25 years old, Wingstop is now maturing. The company got its own place, is focused on self-improvement and is becoming more globally minded.
Wingstop is set to move into a new corporate headquarters in Addison, Texas, only four minutes from the former HQ in Dallas. It comes with more room, a big kitchen, innovation labs and meeting space “that can actually hold our team,” said CEO Charlie Morrison. And it’s a long-sought escape from roommates.
“It takes us out of a multi-level building and puts us in a place of our own. It means we can really inject our culture into how the building lays out,” said Morrison. “We can add things in that we think will be essential about attracting and retaining best in class talent.”
The latter is a big factor in the Dallas area, where corporations are moving at a rapid pace as the region sees explosive growth.
As for the self-help, Morrison said there has been a lot of consolidation in the system. The franchise of 1,231 locations until recently had 120 single-unit franchisees. That is down to about 90, with almost all the locations being acquired by growing franchise operators. The number of total franchisees is down to 150, from 265.
Morrison said it’s not so much a directive of “grow or go” that’s driving the M&A. With average unit volumes increasing (they’re up to $1.25 million from $900,000 in 2012), there is ample demand from growth-minded buyers and for operators taking a long view. For sellers that might not have the drive or desire to operate for the long term, they’re getting good deals without brokers or complex sales processes.
“We facilitate every transaction, we find buyers and sellers and put them together,” said Morrison. “We want very long-term, value-conscious franchisees.”
Value is at the core of the discussion, he continued. A lot of smaller franchisees aren’t eager to take on debt or utilize the leverage to unearth the value in their business. Instead, they’ve been a little more conservative, waiting for cash reserves to grow before expanding.
“Our goal is to talk to everyone from one to 50 units about creating value; what does that mean, how can I use leverage for my business. This is one of those outcomes if they do it right instead of just reinvesting cash into the business,” said Morrison. “A lot of our newly scaled franchisees understand that. If you paint the picture not of what my margins are but what value I’ve created. And Wingstop has plenty of value if they want to get out.”
As the company moves toward a consolidated franchisee base, that means larger, more sophisticated operators and more capacity for the company to support them. That’s key as the company grows to what Wingstop sees as capacity for 3,000 domestic restaurants and becomes more important as the company looks further abroad. Morrison said the company envisions an additional 3,000 international locations—plenty of room to grow from the 154 locations spread across 10 countries outside the U.S.
The company worked with Boston Consulting Group to identify key international markets, some across Asia such as China, where chicken is highly consumed, and others which were surprising, such as Western Europe. In markets like that, the premium positioning and quality messaging resonated well.
Overseas, Morrison said the company will follow a market development model, someone who can own a market and grow to scale quickly.
“International operators will become a market developer—we also avoid sub-franchise rights,” he said. “That candidate is very well capitalized, has deep experience in food and beverage, and access to real estate. All three are really important.”
For Morrison, this was his plan all along, ever since Roark Capital sought a new CEO back in 2012 and his plan got full support from the parent company.
“When I first got to Wingstop, I took a hard look at the company. That was a requirement of the job, to dig in and see what you would make better,” said Morrison. “We had this great product that nobody else had, we also had a very simple operating model, our restaurants are 1,700 square feet that you can staff as little as two to three people.”
He said his first focus was digital, and the only directive in all caps was, “DFTU.”
“‘Don’t ‘mess’ this up.’ Why? Because we have so much going for us,” said Morrison.