Q4 2020 Wingstop Inc Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by welcome to the Wingstop, Inc. Fiscal fourth quarter 2020 earnings Conference call.
Note that this conference is being recorded today Wednesday February 17th 2021.
On the call, we have Charlie Morrison, Chairman and Chief Executive Officer, and Michael Skipworth, Executive Vice President and Chief Financial Officer.
Now I'd like to turn the call Conference every day Michael Please go ahead.
Thank you and welcome everyone should have access to our fiscal fourth quarter and full year 2020 earnings release of <unk>.
Coffee is posted under the Investor Relations tab on our website at IR Dot Wingstop dot com or.
Our discussion today includes forward looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect our SEC filings describe various risks that could affect our future operating results of <unk> financial condition.
We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Reconciliations to comparable GAAP measures are contained in our earnings release.
Lastly for the Q&A session. We ask that you. Please each keep to one question and a follow on to allow as many participants as possible to ask a question with that I'd like to turn the call over to Charlie.
Thank you Michael and good morning, everyone. We appreciate you joining us for our call. This morning, and hope everyone is safe and well.
As I reflect back on the unprecedented year of 2020, it was clearly challenging for us all.
But it is also underscored the resiliency of the Wingstop brand and given us confidence that our growth strategies will enable our long term vision of becoming a top 10 global restaurant brand.
I am extremely grateful for our team members, our brand partners and supplier partners and their commitment to the success of the brand and living our mission to serve the world flavor.
Our growth strategy is predicated on expanding our global footprint and despite the challenging backdrop of the COVID-19 pandemic. We opened 153 net new restaurants in 2020, including a record 59, new openings in the fourth quarter alone.
Our brand partners are eager to build more wingstop restaurants, as a result of our best in class unit economics are.
Our domestic restaurants have achieved an average unit volume of $1 $5 million up from $1 million to $5 million, just a year ago.
With an average initial investment of $400000 or brand partners can enjoy cash on cash returns approaching 70%.
As we close of the year, our domestic development agreement pipeline hit an all time high with more than 700 restaurant commitments at the end of 2020.
This compares to our prior record pipeline of agreements at the end of 2019 totaling 610 restaurant commitments, though.
Commitments for new openings are primarily spread across the coming three to four years. Thus we remain confident in our ability to deliver against our three to five year development growth target of 10% plus unit growth and believe that the current 'twenty 'twenty, one outlook will be slightly above that target and in la.
Line with current consensus estimates.
2020 also marked our 17th consecutive year of positive same store sales growth closing the year at 21, 4%.
On a two year basis that equates to 32, 5% same store growth.
Our strong topline growth coupled with our restaurant expansion led to system sales of approximately $2 billion and exciting inflection point for Wingstop.
Another milestone achieved in 2020 was our ability to exceed $1 billion in annual system wide digital sales.
Our digital business represented about 40% of total restaurant sales at the start of the year and has now grown to more than 60% of sales and is sustained above this level of the last three quarters pointing to the stickiness amongst our new digital guests at.
As a reminder, 2020 also represented our first year introducing delivery system wide as a new channel and now represents more than 25% of total sales, which has nearly doubled after only one year.
Guests that use us for delivery of typically new to our brand representing a great growth opportunity for the future in 2020, our database of digital users has now expanded to more than 20 million guests.
While 2020 was a record year for topline growth for the brand. We believe there are a number of levers for us to pull to continue to drive long term sustainable growth and deliver on our three to five year target of mid single digit domestic same store sales growth.
The 20 million guests in our digital database driven by our continued growth in our delivery channel will fuel our CRM engagements efforts as a key lever.
Our personalized one to one marketing will play a bigger role to quickly generate repeat orders from the increasing number of new digital guests as well as continue to increase frequency amongst our core fans.
We won't stop there.
Our national advertising strategy is working and we continue to have a significant opportunity to close the gap to other top 10 brands in brand awareness and consideration.
In 2021, we will leverage our system sales growth of nearly 30% achieved in 2020 and carry a multimillion dollar surplus of advertising funds and utilize them to pull all of these growth levers, including an aggressive strategy to lap our strong second and third.
Quarter 2020 results with premium placed ads in places, we know people will be watching notably live sports.
We believe we are well positioned to lap our remarkable 2020 results with continued domestic same store sales growth.
I'd like to provide an update on our international operations as with most global restaurant brands of the impact of the pandemic has had on international operations is greater than what we've seen in the U S, particularly since a majority of our international restaurants had a higher concentration of dining room sales.
However, we are encouraged by how our brand partners have been able to weather the storm the past year, and we will continue to support them as they emerge from this difficult operating environment.
Despite the challenging circumstances, we still opened 25 net new restaurants across five countries and had only one closure.
And amazing results indeed.
We believe our international partners will emerge from this pandemic in a position of strength as we continue to invest in our international business and execute against our global strategy.
While 2020 was a record year for Wingstop on so many fronts I am really moved by the resiliency and momentum in the brand as we continue to build wingstop into a top 10 global brand. We will continue to make the necessary investments in people technology, and our restaurants to grow the brand and Mac.
Semi is shareholder value.
We remain confident on our strategic plans that will continue to reward our shareholders brand partners and team members and with that I'll turn the call over to Michael.
Thank you Charlie as Charlie mentioned 2020 of demonstrated the strength and resiliency of our model and positions us well for 2021 end beyond 2020 marked a year of record top line growth for the brand domestic same store sales grew by 18, 2% in the fourth quarter and 21, 4% for the full.
A year, which is at 32, 5% comp growth on a two year basis.
Record same store sales growth combined with a 153 net new restaurants resulted in approximately $2 billion in system sales for 2020 up 28, 8% from $1 5 billion in 2019.
The 153 net new restaurant openings, which includes 59 net new restaurants in the fourth quarter a record quarter for us resulted in a global footprint of 1538 restaurants, we.
We are excited by our brand partners strong interest to build and operate more wingstop restaurants, and believe we have the right foundation and drivers to execute against our long term target of 6000, plus global restaurants.
Royalties franchise fees and other revenue increased $4 1 million to $28 million for the fourth quarter from $23 9 million in the prior year. The increase was primarily due to domestic same store sales growth of 18, 2% as well as 152 net franchise restaurant.
Openings since December 28, 2019, partially offset by a decrease in contributions received for our brand partner convention in the fourth quarter of 2019, we did not hold a convention in 2020.
In the fourth quarter, our company owned restaurant sales increased $1 8 million to $15 9 million from $14 1 million a year ago, mainly driven by same store sales growth of 10, 4%.
Cost of sales as a percentage of company owned restaurant sales increased by 250 basis points compared to the fourth quarter last year, primarily driven by a 27% year over year increase in the earn of Berry cost of bone in wings.
Our wing price mitigation strategy is in place with our largest poultry suppliers. During this near term pressure and has effectively lowered the cost of wings relative to full implied market value of.
The increase in cost of goods was partially offset by the leverage gained on labor and other operating expenses due to the growth in average unit volumes. While this is of short term pressure on cost of goods. We are pleased with the improvements we saw in labor and other operating expenses underscoring our efficient restaurant operation.
And our ability to secure competitive rates for delivery.
At Q4 margins, we believe our brand partners benefit from best in class cash on cash returns of north of 50%.
Reported selling general and administrative expenses increased $3 1 million to $21 million.
From $17 $8 million on the fiscal.
Fiscal fourth quarter of the prior year due to $1 4 million and higher professional fees, primarily related to opportunistic investments in technology and international projects to advance our global strategies $1 $3 million of expenses related to COVID-19, and continued support provided.
At two international brand partners as certain markets reinstated restrictions as they work to contain the spread of the virus.
$2 $1 million and investments in people related expenses associated with higher variable based compensation expense inclusive of additional stock based compensation expense due to the company's results and 2020.
These increases were partially offset by a decrease of $1 $8 million related to the brand partner Convention, we held in the fourth quarter of 2019.
Reported SG&A was $69 million for the year, which excludes the gain on sale of $3 2 million from the Refranchising of seven company owned restaurants due to its materiality of this gain was recorded in its own line in the P&L and is not included in SG&A.
Adjusted for this re class or prior SG&A guidance would have been 66, 7% to $67 $7 million.
Full year SG&A as reported was $1 $3 million above this adjusted guidance as we made opportunistic investments in technology and international as we continue to advance our long term growth strategy. We believe these investments support the long term growth of the brand and achieving our goal of 6000 plus.
<unk> global restaurant.
Adjusted EBITDA, a non-GAAP measure was $16 2 million for the fourth quarter, representing a 14, 7% increase versus the fourth quarter of 2019 at.
As we had previously communicated we completed the refinancing of our securitized financing facility in the fourth quarter and recorded a loss on debt extinguishment of $13 $7 million as a reminder of the nonrecurring loss on debt extinguishment is excluded from our adjusted EBITDA adjusted net income and adjust.
At EPS calculations despite.
Despite the transaction closing late in the year, an increase in our total indebtedness by $153 $8 million versus the third fiscal quarter of 2020, we.
We saw lower interest expense in the fiscal year 2020 versus 2019, thanks to the more favorable debt terms of this facility, which carries an interest rate of 284% compared to the prior rate of 497% and will translate to approximately $2 million of annual interest expense savings.
As a result of $13 $8 million of expense associated with the refinancing of our debt and related payment of the special dividend in the fourth quarter, we reported a net loss of $6 4 million or a loss of 21 per diluted share.
Adjusted net income and adjusted earnings per diluted share. Both non-GAAP measures were $5 $3 million and <unk> 18 per diluted share up, 23% and 29% respectively compared to the prior year fiscal fourth quarter reconciliations between non-GAAP and their most comparable GAAP measures are included.
<unk> in our earnings release.
We ended the year with $434 3 million of net debt and a leverage ratio of six times.
A level of we are comfortable with given our asset light highly franchised business model and our ability to quickly delever based on our EBITDA growth and strong cash flow generation.
We are consistently evaluating the best use of capital and believe the return of capital is an important part of our commitment to our shareholders. In addition to our regular quarterly dividend, we paid a special dividend of $5 per share for a total dividend of $5 14 per share in the fourth quarter.
Day, our board of Directors announced a quarterly dividend of <unk> 14 per share of common stock payable to stockholders of record as of March five 2021, this dividend totaling approximately $4 $2 million will be paid on March 26 2021.
Since our IPO, we have returned an approximate half of $1 billion to shareholders and this return of capital of demonstrates our confidence in our long term outlook for our business.
We will continue making the appropriate investments for the long term growth of the brand and remain confident in our three to five year outlook as noted in the release. This morning, we are reaffirming our target of mid single digit domestic same store sales growth and 10% plus unit growth as for 2021.
We estimate reported SG&A to be between 76 and $78 5 million.
This includes the following estimates for 2021 brand partner convention of $2 million, which has an equal and offsetting amount recorded in revenue.
Compensation expense of $9 seven to $10 2 million and expenses associated with national advertising of nine 2% to $9 7 million, which also have an equal and offsetting amount recorded in revenue adjusting for these items, we estimate adjusted SG&A of non-GAAP measures.
<unk> to be between 55, 1% at $56 $6 million in 2021 compared to $59 million in 2020.
I'd like to close by expressing my gratitude to all of our team members our brand partners and supplier partners for their entrepreneurial spirit and service mindedness is we continue to navigate this challenging time our.
Our brand has demonstrated its strength and resiliency and we look forward to continuing to execute against our growth strategies and deliver on our vision to become a top 10 global restaurant brand with that we're happy to take your questions. Operator, Please open the lines for questions.
Thank you and we will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Once again that at Star then one to ask a question at this time, we will pause momentarily to assemble the roster.
And your first question today will come from Jeffrey Bernstein with Barclays. Please go ahead.
Great. Thank you very much and hope you guys are doing well down in Texas. These days.
I had one question on one follow up.
A question with regards to the <unk>.
Comps as we go through 2021, I know you Didnt give specific guidance to 21 alone but.
Needless to say Youre lapping at 25% to 30% comp on the middle of 'twenty. One. So I think you made reference to confidence in sustaining.
Positive comp growth off of those compares I'm wondering whether you think that's reasonable as you move through the middle of the year.
And obviously, if you don't know of any specific color, perhaps the the drivers of the continued growth you mentioned, whether you could prioritize the national ads versus digital versus customer data or I think where the three kind of primary areas. You mentioned and then I had one follow up.
Good morning, Jeff and thank you for the.
For the question as well as for your sentiment on what we're going through a down here in Texas at as cold.
We we.
We did give the same guidance that we gave last year as you may recall, which is a long term outlook of three or a mid single digit same store sales growth over the next three to five years.
We still feel very comfortable with that as well as a 10% plus unit growth target. So reaffirming those those metrics as we think about 2021.
Yes couple of things we are.
On a seasonal basis or quarterly basis, we certainly have some tougher compares.
In quarter two of quarter three than we do on one end for however, I think on a two year basis, that's probably the best way to think about what we're seeing in the comp end, given our confidence to being able to hit those long term metric.
The metrics that we guided to at.
As for the levers yeah, I mean of couple of things that are important here number one.
Our average unit volume is now.
<unk> grown to $1 $5 million across our domestic system, which is a game changing type of AAV, which is fueling.
On the development numbers that we are seen as well as our brand partners interest in adding new restaurants to their portfolio I would also call attention to the fact that our investment cost of $400000 sales remained relatively unchanged for almost five years. So the cash on cash returns are very very good for our brand partners.
As we look to this year.
We're able to pull additional advertising dollars out of 2020 and put them into 2021 and as I mentioned on the call. We are applying those dollars in the key Timeframes, where if you will climbing that mountain is a little more difficult than the rest of the year, but we do have confidence in that and then the other thing we noted.
Having now and over 60% digital business.
Creates a lot of good information for us to leverage to interact and engage with our guests.
A lot of the growth. We saw this last year came from new guests to our system and so therefore, we're going to be leveraging the investments we've made in a robust CRM platform to engage with those guests generate those second third and fourth week.
Wingstop occasions, and so on and then convert them into heavy users in the future and we think having that lever with more than 20 million guests in that system.
US even more confidence on our ability to continue to deliver positive same store sales growth.
Over the long haul.
Got it and then my follow up was just the comment you made in your prepared remarks on the unit growth for 'twenty one.
It looks like of delivered 11% growth of 20 very difficult year.
And you talked about the pipeline growing so I think you mentioned you're confident in slightly above the 10% long term target.
I'm, just wondering whether there's any franchise pushback because otherwise it would seem like right at this opportunity to it.
C at that 10% by a fair amount considering the real estate availability of that less competition I'm. Just wondering just wanted to clarify your comment around 2021 unit growth on what might limit that growth from being stronger.
Yes, I appreciate that question Jeff.
Couple of comments on that number one the name of this game is about unit growth too often we get hung up on same store sales when we look at sequential comps quarter to quarter.
We think about how that impacts the unit economic model and as I mentioned on ours is really strong.
And in a great position and that is fueling our brand partners' demands for additional restaurants to add to their portfolios and grow their overall value.
That that has been that manifested itself in the largest pipeline we've seen.
As a brand and it also has manifested itself in an extraordinary fourth quarter development number and as you know early in the year during the March and April timeframe even into June.
Had almost of stoppage of development a lot of that pipeline is pushing forward. So if you add the new demand for new restaurant development plus what was in the pipeline plus what's in the pipeline going into this year.
We did feel confident in stating that 10% plus of certainly our long term algorithm, but if you look at what consensus estimates were for the year I also commented on that as being a real decent.
Benchmark for where where we think our development potential of this.
Great. Thank you.
Okay.
And our next question will come from David Tarantino with Baird. Please go ahead.
Hi, good morning, how of your boat.
They're doing well.
My question, Charlie I think you mentioned several of same store sales drivers for this year.
But you didn't talk about your dining rooms reopening so I wanted to ask about.
Your approach there on on when the dining rooms might reopen and and if you've actually reopened any dining rooms, and what you've seen since you've done that.
Good morning, David.
The the reason we didn't put that in there is not because we don't think it has some impact it has more to do with trying to figure out when that would actually happen.
I think at the end of the day a lot of our dine end customers are also now carryout customers with our brand they've converted nicely to off premise.
And I think if you think of Wingstop as compared to perhaps any other brand in.
In the space are digital infrastructure allowed that conversion to be done with relatively little impact to our business if anything it helped us grow right and so.
We are being thoughtful about our approach we certainly we will prioritize and continue to prioritize the health and safety of our team members as well as our guests.
But as we see.
The impact of the pandemic starting to subside, we would expect to open up those dining rooms, but.
I would not put it at the top of the list of what we think of the material impacts to our top line has more to do with continuing to generate strong advertising messages that caused people to consider wingstop. Those people. We're targeting again, just as a reminder tend to be those heavy <unk> customers.
That we have not really had in our brand for a long time, and we're adding more and more of those with the with the levers we've pulled around delivery digital and our advertising and we will continue to do that throughout the year and then once they come in they are new guests we want to re.
Reengage them immediately and bring them back for that next occasion. So everything we can do to ensure our quality of occasion for either delivery or Carryout is paramount and then of reengagement opportunity to bring them back hopefully within the next month.
Our objective.
Got it and then one follow up just a clarification of 20 million people.
People you have on your database.
An impressive number given the scale of your brand does that Inc.
They include.
Customers ordering through the third party App and I guess, Charlie can talk a little bit about kind.
Kind of how you how you reach the customers that are coming in through the third party app.
As opposed to the Wingstop app.
Yes, that's of Great question. Thank you.
The answer is no that database does not consist of people coming through the third party App and <unk>.
Which is door dash just to be clear.
Our partnership with door dash affords us the opportunity to clearly understand who those guests are in terms of.
How they shop, who they are we don't have specific information that would allow us to put them in their date of our database to market directly to them, but indirectly.
Who they are has a lot to do with how we fashion our advertising approach and how we go market to them directly either in the digital space space or through some of our national advertising. So.
We believe that yes. This is a really nice database at large.
And it is adding new guests at a very high pace right now given what we've experienced through the pandemic. So again why it's important for us to engage quickly.
Inefficiently with those guests to bring them back in for that next occasion.
Great. Thank you very much.
And our next question will come from John Glass with Morgan Stanley. Please go ahead.
Thanks, Good morning at all.
I also wanted to follow up just on the AD spend and how you think about that is there a way Charles you can quantify the incremental spend I think you said multimillion dollars of maybe if you could express at TRP is or whatever you want to think about.
AD spend increase versus 21 of you don't want to do dollars maybe from some other metric and does that plan include like advertising funded by door Dash. For example are you, including or excluding or do you have agreements with them as they think about promoting the brand on their own.
As a way to also drive incremental sales.
Hi, John Good morning.
The best way to characterize it as <unk>.
More weeks and more Trp's, yes.
We're not providing specifics on each of those but you can you can rest assured there are more weeks of more trp's from that spin I think the other way I would characterize it as quality of which I mentioned in my comments.
Given the fact that theres not a lot of new content and programming out there yet we do believe that will come along the one place. We know people are living is in live sports and so we have moved a lot of our inventory into places, where we believe people will be consuming TV, which will be more of <unk>.
Sports premium sports of that so that's another indication of how we're utilizing those incremental dollars effectively.
As it relates to our partnerships no. There is no money coming into the AD fund associated with.
Our partnership with door Dash.
We may choose to invest in another free delivery program or they may do that with us as they've done before that's up in the air at this point.
But again.
One $5 million average unit volumes $400000 investment steel unit development, which is really where our focus remains in terms of the health and strength of the business.
So maybe then I could just follow up on that of the pipeline. You've got now can you just review number of new franchisees of entered the system this past year versus the existing of legacy.
Percentage at our new markets versus existing markets and are you thinking post COVID-19 now about of format shift or as you think about how that evolved or you're going to see new formats in 'twenty, one that sort of focus on adult digital footprint of that you've talked about that in the past, but if theres been any evolution of that thinking.
Yes, the the <unk>.
Numbers remain consistent with prior years and that 80% to 90% of our total pipeline over those years has been from existing franchisees and that remains consistent with what is going on last year. We've added very few.
Net new franchisees to the system.
On our existing brand partners are growing in size and scale.
And they are able to.
Take the strong cash returns they are generating and reinvest that back into the business and so we expect that to continue.
As it relates to format, let me, let me address first markets sorry.
Very strong in our fortress markets very consistent with what we've talked about in the past we have about 25 key markets in the U S. That we are working very diligently to establish a strong presence in fortress of them and that's working very well so that usually makes up more than 75% of our total development.
And then lastly, as it relates to new formats, we are up to 13.
Ghost kitchens across the planet.
For Wingstop, we're expanding them in the U S and key markets.
Very early stages, but we like what they provide for US right now it comes down to the same comment I made in prior quarters, we really want to understand the unit economic model, we want to understand whether it's a partner or build strategy and we're taking our careful.
And thoughtful.
Consideration into each of those decisions as we move forward, but expect us to continue to expand that footprint as well.
Great. Thank you so much.
Okay.
And our next question will come from Andrew Charles with Cowen. Please go ahead.
Great. Thanks, and hope you guys are staying safe in Dallas.
One clarification on one question.
Clarifications at somewhat of a year ago, you provided of three to five year outlook for mid single digit comps of 10% plus store growth can you just remind us at this as an average over the three to five year timeframe or an annual range that you guys hold yourself accountable to and specifically I totally get obviously at the.
All of that obviously same store sales are likely to grow next year, but can you talk about your level of confidence in delivering mid single digit comps in 2021.
Okay.
Good morning, Andrew and thank you for the well wishes, all as well lacking power and water, but will be fine.
It's a good question because.
If it were on average I would say all we got to do is deliver flat for the next few years, we'll hit the number and I don't think Thats, what anybody is expecting of Wingstop and it's not what we're expecting for ourselves we.
We do believe the brand has the potential over the three to five year timeframe of delivering mid single digit comps.
And hence why we.
Reinforced that message this year much as we did last year.
So yes, I mean does it have the potential absolutely.
We have to be diligent and thoughtful and pulling the levers, but again I'd go back to the fact that this brand was so well positioned.
With our investments that we made in digital and delivery to prepare ourselves for this we've only effectively been delivering food to our guests nationwide for a full year now.
We believe there's growth opportunity there we believe there is growth opportunity by way of our advertising and expanding that.
Not only did we pull money on from last year, but we grew our sales by 30%, which fuels a lot of dollars on the AD fund to really up our game dramatically.
So there are there are plenty of levers there to be pulled to help continue the growth and noting of course, we're rolling over of big number, but we've done that many times in our 17 year history of positive same store sales growth.
Thanks for that Charlie and then a Michael question for you heard of the bone in wing pricing mechanism impactful at your results. We inflation was about 17, 7% on gross margins were down about 270 basis points can you say what the gross margin would have been without the pricing mechanism and then looking ahead what are your vendors, saying about the outlook for bone in wing prices.
Look across 2021.
Yeah Andrew.
It's a fair question I appreciate it I think we did point out in our prepared remarks that the underlying earn of Barry was up 27% and if you think about our bone in wing mix of our Cogs, representing about 60% of mix. You can you can kind of worked at math too to get to a much lesser impact.
One thing that's really important too to point out is the discipline, we've had as a brand around.
Taking strategic pricing.
Twice a year and if you look back to 2017, where we saw similar inflationary numbers in and bone in wings, and you can compare and our corporate store P&L as a proxy.
Q4 at back then in 2017 compared to Q4, and 2020, and we're running a much lower food costs. So that's the combination of discipline around menu pricing as well as the pricing mechanism, we have with our suppliers but.
Let's see that's one piece of it but we've also been focused on making sure. We're taking care of our team members in the restaurant as well and making investments there and so that's been a big priority for US for 2020 end remains it remains of that way for us as we go into 2021.
As far as the outlook there is clearly a fair amount of of uncertainty around reopening.
And how overall supply will force for the entire bird will play out.
We've got a lot of.
A lot of.
Mismatch if you will on the demand for the bird demand is really soft for the back half and you've got some soft demand low prices for breast meat right now and that's obviously impacting the overall supply and production levels at poultry suppliers. In addition to their challenges they have as they as they manage the impact of Covid on there.
Plant production levels, but you know.
I think we're anticipating an inflationary year, obviously compared to 2020 as it relates to wings, but nothing we don't think we are well positioned to navigate through as a brand of.
Obviously, Charlie called out the <unk> that we're running right now for this system of $1 5 million, which provides a nice amount of leverage.
On the P&L on even as you think about the inflationary prices, we're seeing in wings right now the profit dollars that our brand partners are enjoying are up year over year, which is really kind of you don't take percents on the P&L to the bank you take dollars and so that's what we're focused on when we when we look at the economics and the overall rich.
<unk>.
That's helpful stay safe guys.
Thank you.
And our next question will come from Andy Barish with Jefferies. Please go ahead.
Hey, guys. Good morning, I'm glad you're trying to keep warm down there and safe.
I'm surprised no one's asked about the virtual concepts yet can you just kind of frame up how you're thinking about you know all of the it's just wings and now of cosmic wings at at and 1300, Applebee's and so on and so forth.
Well good morning, Andy Thank you for that question.
I was surprised as well.
Let me give you an answer to that I think Michael just talked about the demand for chicken wings and it's interesting that.
We've arrived at the point that we believe that selling chicken wings of the answer to same store sales growth, which.
We would argue.
If youre wingstop, we understand that but.
We believe that having a robust digital infrastructure already in place at proper delivery partner.
Have more to do with the strength of this business on the strength of the brand than anything else, we love selling chicken wings, but all we think thats doing is impacting the commodity costs switch.
As we've seen over the many years we've been doing this.
Horizon fall with what I would call competitive intrusion and so we wanted to first say thank you to our suppliers as Michael mentioned, they have been with us knowing that we will be of wing buyer in this market for the long haul and have supported us and I think that's really important to Rex.
Recognize that day.
Is the relationships, we have with our supplier partners really demonstrates the strength of Wingstop and the fact that we have not had any issues with supply even given the demands for the product in the market.
I think our same store sales performance and our confidence in our performance in 2021 are demonstrating the fact that this really isn't impacting the wingstop business all other than.
Just putting pressure on supply, but again as Michael very clearly articulated cash profits.
For our brand partners remains strong.
We've got the right right mechanisms in place to navigate yet.
Yet another difficult wing environment, but overall margin performance even as.
Stronger stronger than it was in 2017, when we experience this so.
I think we're in I think we're in great shape not of concern.
Thanks for that and just one quick follow up if you could on the 50 plus domestic openings.
How much of that is.
You think is.
Some of the delays from earlier in the year, particularly as you mentioned development, obviously stopping in kind of March April may.
Yeah.
And does this sort of catch you up from some of those earlier openings in 'twenty that may have occurred.
Yes, we entered 2020.
Expecting to have a very strong development year and of course, we did with the 153 net new openings is exceptional performance given the challenge of the pandemic.
That that fourth quarter number really is not indicative of the push in the pipeline as much as it is the demand for new restaurant openings, our brand partners at and perhaps even an acceleration in performance usually our pipeline has about a nine month window in front of it and so.
If anything any push would be a first quarter.
Type of phenomenon, but I think I would call more attention to the seven 700 restaurants that are in the pipeline.
For potential development being at roughly 100 more than it was a year ago and those stagger out over three years to four years is a better indication of just what we think of the strengthen the pipeline going into 2021.
Thanks Charles.
And our next question will come from Christopher <unk> with Stifel. Please go ahead.
Thanks, Good morning, guys.
I believe the company is initial G&A guidance for 'twenty was for it to grow roughly 10%, but it increased by over twice that rate, even excluding the COVID-19 related expenses.
For 'twenty, one it looks like you're growing roughly 15% excluding the same costs I'm just wondering Charlie how are you determining whether you're spending at the appropriate levels and Michael what level of Covid related expenses are you assuming in 'twenty one.
Okay.
Good morning, Thank you.
You know.
Any time, you experience the kind of growth that wingstop has experienced.
And I would note obviously this year growing your revenue your system wide sales by 30%.
Presents an opportunity for.
For the company to evaluate investments, we can make to further of that performance into future years and as you know this brand has already grown to about $2 billion in system wide revenue now.
Think that there is a necessity to make sure that we have the right infrastructure.
Systems and people in place to catapult us well beyond this level, we think the $2 billion is a bit of an inflection point and I've commented on that many times in the past with with both investors as well as the analyst community.
Even though we grew our G&A costs during the year I would point to the fact that we did a few things we thought were the right thing to do for our business number one we protected our international brand partners and their businesses they've had a tough year end with the strength we saw on.
The domestic business. It was our decision on choice to make sure that we do everything we can to insulate them from the impacts of the pandemic and prepare them for a strong emergence and I have noted that we only closed one net restaurant in our international business and I think thats indicative of the of the money we've put into Geo.
To support them.
Two.
We also want to make sure we're protecting our technology investments and it goes without saying that the investments we've made over the past five years have been fantastic for the brand.
They were made with the partnership of a lot of a number of players who have supported us through that timeframe, but now that our business is more than 60% digital it's time again to make sure that we're protecting that investment in contemplating what that looks like for the future. So we did make some investments on the fourth quarter to evaluate and study.
What that future looks like we're not prepared yet to talk about what the impact of that would be but suffice it to say that we're going to do everything we can to protect that 62%.
Digital business and grow at well into the future.
And so I think it's important to recognize that we saw this as an opportunity to step on the gas with this brand. We certainly could have flowed a lot of those dollars to the bottom line, but we're not going to apologize for of 26% adjusted EBITDA growth for the year either.
That's fantastic performance that I think any long shareholder would be very pleased with our performance on as we looked at 2021.
We're going to continue to invest.
We want to make sure we have the right people in place to support the business and what we believe is strong growth coming out of this difficult time that we've all experienced we do actually have a convention in 2021 plant, which is not in 2020, so that does impact the SG&A number.
And then we will continue to expand on technology and our international expansion a lot of that comes on the form of leveraging third parties that can help us prepare the platform for the future and so we expect those investments to continue as well as making sure that our international partners in 2021 are still as well insulated as they can.
Can be from the effects of the pandemic I would only say that we see in the virus slowing down in the U S. We see the vaccine performance, but if you look out across the world. It is not at the same story and so we're cautious of that and making sure that we do everything we can to help them.
That's helpful.
And then just a follow up we've heard a lot of brands that seek out class eight sites say that they haven't really seen a break in rents or any kind of.
Improvements in location opportunities given that your model differ somewhat im curious if youre seeing a greater level of opportunity in class b sites than you've typically seen.
Well I think we've always seen a great opportunity in the class B sites, which are class a for us. So I think our our landlords across the country for providing of such opportunities to grow.
I do think that the market is going to continue to free up.
I don't know that were seeing substantially different rent rates overall, but we certainly have not seen them increase.
We would have otherwise same if we didn't have the pandemic in front of us or behind us. So.
I think it's pretty much stayed the course.
No real change there other than we've always had ample access to real estate.
Great. Thank you.
And our next question will come from Jared Garber with Goldman Sachs. Please go ahead.
Hi, Thanks for taking the question.
Many of mine have been asked.
Thanks for all of the color on today, but wanted to round up on the third party delivery versus your white label App.
Digital ecosystem can you give any kind of breakdown on how that has trended throughout the maybe the fourth quarter at the breakdown of those two different channels and what youre seeing in terms of consumer behavior, maybe similarities or differences on those channels.
Yeah, there's really not much I would call attention to is to the.
On the mix between Wingstop Dot com.
Occasions, and those from our third party delivery partner door at Ash <unk>.
Run about with the exception of Q2 last year, which was a bit of an anomaly.
They've been running at about a 60 40 split to the.
To door at ashes marketplace over Wingstop, but again I'll, just remind ourselves we're agnostic as to the platform. They come from other than the information that we get about our guests, which I addressed in an earlier comment.
Thanks, and just a follow up there curious if youre seeing progress free delivery promotions that you that you offer in the fourth quarter are you seeing new customer sign up.
Or engage with the brand on the back of those.
Or if you can tell based on the on the consumer data or is that more of the back of of core consumer.
Yes, I think regardless of the promotion, we believe that delivery represents for the most part a new incremental customer to Wingstop, who has not tried us before.
And hence my comment about really growing the size of our database that's indicative of the performance of delivery.
Yeah.
And our next question will come from Jeff Farmer with Gordon Haskett. Please go ahead.
Hello, Your line may be muted.
Hopefully you can hear me now.
You did talk about the importance of wondering on marketing as a sales driver in 2021, but I am curious where you are right now with this strategy, meaning did you actively reach out to day to buy database of customers in 2020, and if you did how did you go about engaging with those guests.
Yeah. The answer is yes, we have been reaching out to those guests, but I think the key message here is that that database is built rather rapidly given the performance of the brand and the acceleration on our digital business in the last year.
We've always leveraged our CRM platform to engage with them one to one.
Into preferences that they have.
Been working to append.
Information about these guests to the database to help us understand them, even better as to their preferences. So that we can in the future and going into this next year spend.
Spend more time really engaging them at.
Around events that they prefer with products that they love.
In a timely manner and think that that's really fundamental at the core of what a good CRM platform should do.
That's helpful and just as a delivery of follow up.
I think youre delivering mix as you mentioned was roughly in that 25% range. It sounds like you have confidence in your ability to potentially take that mix higher end 2021.
I'm, assuming that's the case what does give you confidence that you can continue to move that 25% delivering mix higher.
Yeah, well first and foremost it's only our first year of really operating under a full delivery platform.
So.
I think there is confidence we can grow that platform much larger than what it is today, we've always felt that way if anything we might be a year or two ahead of where we thought the goal would be for the brand.
But.
Yeah.
I think.
All of a number of Jeff to give you as to what I think at ultimately could mix at <unk>.
But I do think youre starting to see Wingstop emerge is.
More like some of the large pizza players in terms of our mix of digital and our mix of delivery sales overall and so if you use that as a benchmark for potential we've got quite a ways to go.
Thank you.
And our next question will come from Jon Tower with Wells Fargo. Please go ahead.
Great. Thanks.
A few for you.
Would you be willing to quantify how much spend you've been so.
So far using to support at the international franchisees, whether in 2020 or plan for 2021.
Yes, so in 2020 alone.
Roughly two to $2 5 million of our EBITDA impact was associated with that spin.
Great in 2021 of you been able to parse that out yet.
We havent provided at its.
Anything anticipated.
Already incorporated into our SG&A guidance.
Okay, and then just one quick clarification of the convention is that kind of hit in the fourth quarter again or is it kind of be at a different kind of a year then.
On top of that.
It sounds like at least historically the company has shied away from the ICU.
On a loyalty program, but you've got digital mix north of 60% $20 million 20 million members in our database.
And we've got launches across quick service landscape as well as some of the fast casual landscape some of which recently have been very successful. So have your thoughts evolved around the loyalty program are you still sticking with the staying away from it.
We're sticking with it.
What I would give you as a response to that as a number.
Number one our same store sales were up over 21% last year without it.
Number two and more importantly, we do have this large database of guests and the key is engaging with them productively theres no pressure to have to provide a discounted base loyalty type platform in order to do that and number three we believe we are in a category of all by ourselves and of category.
On one we don't have a direct competitor that we feel we have to engage in a price war as most of <unk> players would do so I think all of those protect us from having to feel.
A loyalty type platform would be necessary and then let me answer of your convention question. It is scheduled and I really really hope we get to pull it off.
In the first couple of weeks of October this year, so that will be fourth quarter.
Alright, Thank you stay safe.
And our next question will come from Dennis Geiger with UBS. Please go ahead.
Good morning, Thanks for the question and glad you're all safe just wanted to circle back on the international development opportunity Charlie I know you talked about how the international partners will emerge well positioned from the pandemic, but just wondering if you could provide an update on kind of where some of those partners are now in thinking about at the trajectory of development.
Going forward.
Specifically, maybe if you could also just touch on China, if theres any kind of new development.
How you're thinking about that opportunity from from the last update.
Yes, thanks for the question much appreciated.
Yes look it's tough of a lot of our international markets rely on dining rooms, notably, Mexico, which is our largest partner.
In the world and so not having full capacity or use of the dining room has been a big drag on their business much as we've seen for for instance, other casual dining players here in the U S. It's very similar circumstance the challenge day.
Deal with is the pandemic itself the management of the vaccine and the controls that are in place and it's just difficult for us to see sort of of light at the end of the tunnel. There that said we did open 25 net new restaurants overseas last year. During this time frame and so I think there's still a desire for our brand partners to continue to.
<unk> and build restaurants.
And hence why we've made the conscious decisions to support their businesses. During this timeframe to keep that development pipeline alive.
Call attention to.
The U K.
We opened a number of restaurants this year.
A mix of both St.
Street side as well as dark kitchens, and they are all performing very well and we have adapted our business to more of of delivery and takeout model heavy digital like we're seeing in the U S and thats working other markets like.
Of our partners in the Emirates end.
In Asia, Singapore have all done quite well this year and have added new restaurants to their portfolio. So we're very happy with where we stand there I think the future is bright as we start to emerge from this pandemic and then you asked about China, Yes, one of the comments I made earlier was that we did at.
Additional studies on international expansion of one of those was specific to China, and we completed that in the fourth quarter still a ways out in terms of our ability to really enter that market in a meaningful way as I've noted before we expected it to be.
One five to two year process before we got there. However, we believe the potential for a market like that represents as many of the 1000 restaurants or more for Wingstop. So it's well worth our time and investment right now to prepare ourselves for that opportunity and not wait down the road.
It's great color on just one unrelated follow up if I could just as far as size if anything to share there how that's gone on anything on expectations et cetera. Thank you.
Yes, I mean, we came out of test learning a lot more about the size of Michael mentioned other parts of the burden of important in order to help mitigate wing prices.
<unk> had a good test we're going to take that now that learning expand upon at this year, there's not a specific commitment to roll that out yet in our pipeline, but we do have enough learning to be able to support.
What we believe is going to be.
On a product for the future for the brand dark meat in general becomes a great opportunity as well so.
More to come.
But right now we're going to focus on making sure. We connect with these new guests bring them in the building. We don't think that necessarily of new product is going to be the answer and as Michael mentioned we.
Have put in some really solid mitigating.
Practices in place to help support on.
Lower food costs for our brand partners.
Great stay safe and warm thank you.
And our next question will come from Michael from US with Oppenheimer and company. Please go ahead.
Alright, thanks glad everyone's hanging in there I just wanted to follow up on the forecasting strategy in the U S. On those 25 key markets do you think there's an opportunity longer term to maybe add more markets from what youre, saying beyond those 25, you talked about your really strong unit economics, and so I was wondering if there's any hurdles that would get you over.
That could get you over that and get you to more of the 25 markets. Thanks.
Well I mean, we certainly do develop in markets outside of those fortress markets, but we think it's important to prioritize them because they create a lot of benefits of the brand number one is just.
Having that concentration in those 25 markets and being able to leverage that for advertising efficiencies on a local basis as well as supply chain efficiencies and so on.
That said.
We're we're all across the United States and in many many markets. So opportunistically, where we have of stronghold already that might not be on those 25 markets. We will continue to develop those.
And let our brand partners do that but this is our focus point.
I'd also say that those 25 markets and the potential in those markets alone would catapult us all the way to our 3000 restaurant potential in the U S. So and at.
The 3000, plus I would say that.
Because we think theres more opportunity, but that that strategy really is our game plan for how we get to 3000.
Awesome. Thanks at the time.
And our next question will come from mix at young with Wedbush Securities. Please go ahead.
Thank you.
You guys.
Obviously.
<unk> talked about your expectation of.
On the wing cost headwind being a transient near term phenomenon.
But at the same time, obviously, there is a little bit of a different dynamic in terms of the competitive encroachments.
What if it doesn't end up being of near term transient sort of phenomena on what's plan b.
Well I think Nick too.
Look for a plan B would assume.
It's a it's a catastrophic challenge for the brand, which just isn't the case.
Our food cost is running at levels that are below where they were in 2017.
Even at much higher wing prices and so.
The way, we solve that is hard work with our suppliers.
And <unk>.
Continuing to work with them on ways, we can use other parts of the bird to help mitigate some of the mix our boneless wing mix, which is typically a breast meat white meat product.
Is that at the highest mix ever so we do use.
Product bundling as a way to mitigate the impact as well, but I think if you go back to Michael's comment.
$1 $5 million, even with the unit economic challenges of high wing prices still deliver exceptional cash on cash returns.
No.
We don't we don't we don't think that we need to get into a position.
Material changes in doing that I think we're I think we're fine right now and we do believe it will remain transient it's proven that itself in the past.
Other competitors are pricing at very low levels to generate volume. We know that's not sustainable we still believe we have pricing power within our within our top line and so we're going to continue forging ahead on our strategy.
And.
I mean, you guys did talk about at Investor day in terms of.
The longer term.
Expectation of maybe being able to.
Get the full of bird I mean, what is at the timeline for that is that still a strategy in the background that you were working towards.
Absolutely.
Any time, we can utilize more of the bird at gives us that opportunity to buy the whole bird.
On the market dynamics fluctuate as we've seen this year theres almost no demand for what we call the back half of the bird, but that would be the lag in the Si on the back.
On a portion of the bird and Thats the struggle right now.
For us than anybody in this business and breast meat demand is down too. So this is this is of pandemic thing more so than anything and I think as we start to retreat back to some normalcy and we pray that we do.
Brands like Chili's will put their fryers to use to take care of the dining room.
We won't be seen chicken wings flowing through that's our guests.
Other of these brands that are emerging we understand.
I've said many times, we support what they're doing to try and keep their restaurants capacity up it's a smart move but do we believe at sustainable probably not and so we're going to we're going to continue to work on ways, we can use dark meat and our products.
<unk> are a great example of that and the tests that we did and we have a lot of good learning there that allows us to pull that lever when we need it at.
We can look at other products that we are always constantly evaluating to see what makes the most sense, but right now the.
We are sitting I think we're in good shape on the P&L.
We could always be obviously be in better shape, but keep in mind that our labor and our four wall rent costs are substantially lower than most brands and so a lot of times, we get we get to talking about food cost and forget about those.
Really what fuels our P&L.
Thank you very much.
And our next question will come from Andrew <unk> with BMO. Please go ahead.
Alright, Thanks for taking my question I actually wanted to ask you about labor and I was hoping you could share your perspective on the current excuse me of labor environment and with the conversation around minimum wage potentially going up how you would think about with your franchisees managing through that environment should it come to pass on.
I was also of hoping just to follow up on the.
The conversation around the $2 billion kind of threshold that you guys of fit from a system sales perspective, you mentioned the implications for unit growth and some advertising stuff or are there any other kind of structural benefits of opportunities that sort of passing that threshold do you think kind of opens up from the brand. Thank you.
Well, let me let me say this first.
It's.
It's not really a good time and our economy, given what's going on especially in the restaurant industry to be talking about minimum wage legislation when what we're really talking about is trying to get.
Especially smaller independent operators back on their feet and growing their business.
It's a hell of a heavy demand that we're placing on them in at.
I really wish we werent talking about at right now.
We do as if I think about Wingstop and the perspective there.
We already operate in a lot of states that have enacted minimum wage legislation that's been developing over the past gosh four of five years at least.
So there are many markets, where we're already up at that level on a chain wide basis, our restaurants on average pay our employees somewhere between 11 and $12 an hour on average thats been consistent year end of year out so even at a market like Texas, where the minimum wage may be sub.
$8, it's still not the wage we pay and I think we lose sight of that.
So the wages would have to graduate up to those levels before it would really impact the business I mentioned as well, we do have pricing power in our P&L.
And that's how we've addressed minimum wage legislation over the past few years end markets, where we've seen at grow.
It's challenging but I think.
Right now is not a good time to be even contemplating of minimum wage increase what we should be doing is everything we can to stimulate the economy get people back on their feet gives small businesses the relief they need.
Let me let me let.
Let me, let me address the $2 billion I'm, sorry about that yeah. So.
There is a little bit of science to the $2 billion threshold, but.
Some demonstration in the past of company instead of hit that milestone.
<unk>.
What we believe at Michael and I have spent a lot of time thinking about this is.
When you hit that threshold the scale opportunities become pretty significant in terms of just a small amount of growth creates a lot of opportunity in the business and so what we want to do is make sure that we're building. This business. So that we can sort of hit that <unk>.
<unk> momentum run rate that a lot of companies have seen in this industry when they've cleared that $2 billion, Mark and that means you've got to make sure you have the right infrastructure in place to support at that means systems financial systems store level systems above the four wall systems for digital.
Performance you also need to have the right people in place and so investing in.
Our talent base growing the talent base to make sure that we're scaling with at those are critical to the success of companies as they sort of hit this inflection point and we're right at it right now we're being proactive in our approach to make sure that we're getting ahead of it at.
And at the board level of talking a lot about this because I think it's very important that we not lose sight of the fact that we have got a long way to go and although we can rests on the fact, we've had great success in what we've invested in so far those investments on what got us to where we are now we need to continue to look at those for the future.
Great. Thank you very much.
And our next question will come from Brian Vaccaro with Raymond James. Please go ahead.
Good morning, and I'm glad you are of well I had a question then of clarification, Charlie historically, you've highlighted the GAAP in awareness and consideration compared to other brands as a substantial long term opportunity and you've also talked about even today the growth in delivery. During Covid. That's included a lot of new customers I was wondering can you further.
Frame or quantify how much you've narrowed that gap in 2020.
I sure can.
Not by a lot believe it or not.
We've had great performance, but narrowing the gap on consideration.
A small amount can yield a substantial impact to revenue and I think it's worth noting.
We noted this before but our brand in the U S is a little over 1500 restaurants.
Some of the competitors that we compare against can have five to 10000 or more restaurants in the U S. So it's a substantial GAAP and just the penetration of the brand.
We also are a brand that sort of lives virtually in a weird way, but our locations are not on the street corner of a giant golden arches on instead they are.
At hidden back in strip centers and what we've determined. This today is be real estate. So it's a little harder for us to really generate that consideration of the same way others do that being said I think we've done an exceptional job at showcasing itself on the topline growth and as we continue to invest in point, our advertising muscle towards those.
People that really don't know much about wingstop or may be aware, but haven't considered on occasion, which are those heavy <unk> users. There is there is a huge huge base of customers out there for us to go after and share some occasions, where some of those other competitors. So we have a long way to go I would say the GAAP is in the mid tier.
In terms of percentage points from where we need to be or where we desire to be long term, but again like everything else at the long term outlook for us and we will just keep chipping away at it and I think again I can't reinforcement of that is showcased by the performance we've seen in the business.
Yeah. Okay. Thank you that's helpful. And then also could you at the clarification could you clarify the comments on your on your 'twenty One unit growth through 2021 unit growth. Just so we're on the same page there's different aggregators of consensus estimates that are out there are sources would suggest the consensus was modeling around 170 <unk>.
Net new units in 2021, just wanted to confirm that's consistent with the consensus that you are referring to.
I would say youre, not youre not materially off that number but.
We go by the aggregate of all of the folks that follow us and so that's the number we were pointing towards.
Alright, Thanks, I'll pass it along.
Yeah.
And our next question will come from Jake Bartlett with true Securities. Please go ahead.
Great. Thanks for taking the question Charlie I am still a little uncertain as to kind of as to what you're.
The guidance is for same store sales in 'twenty one it seems that you have endorsed this.
Yes, we don't have an explicit guide for 2021, we simply reinforced our three to five year outlook for mid single digit same store sales growth.
Okay and end.
Maybe another another way to get there as well.
Past, you've talked about kind of some color on current trends I think last year, you talked about how the Super Bowl was very was very strong and you had a strong structure of the year could you give us any color on what youre seeing year to date, maybe it would help us gauge.
Kind of gauge the ongoing momentum in the business.
Yeah Jake.
No, but I would just reinforce that what we had mentioned last quarter is I think we.
We need to avoid the sequential quarter to quarter discussions and quarter to date discussions on focus on the long term algorithm for this brand what I will say is with confidence or average.
<unk> unit volume for 2020 was $1 $5 million on an investment of $400000 that hasnt moved over a number of years, yielding exceptional cash on cash returns fueling development.
Got it and then I'm going to just take one last thing at all and I'll pass it on which as you know.
Earlier in the script earlier in your in the Q&A session you talked about thinking about same store sales on a two year basis.
We see that two year basis, it's been moving around a lot.
But is that how we should think about in terms of of two year on 'twenty experienced in 'twenty and kind of move that forward, maybe just give us some clarity on what you meant about kind of thinking about it on a two year basis.
Yes look I appreciate the triangulation Jake.
Towards the answer but.
We have at two year trend.
It's been pretty consistent in terms of its pattern.
I wouldnt rely on that.
For your estimates, but I did mentioned that.
The more it demonstrates.
Stability if anything in the comp.
At what we arent going to do is provide.
Any specific indication we are long term focused.
Got it I appreciate that and thank you very much.
And our next question will come from Joshua long with Piper Sandler. Please go ahead.
Great. Thank you for taking my question.
All of different.
Follow ups, we've talked about the investments in the brand and the people and how important that is to the Wingstop story and so I was just curious if you might be able to talk about how you coordinate the kind of the brand power of those investments and how you build the culture aspect of it across your domestic and international pieces of the brand as well knowing that that's going to be an important piece of the overall long term.
Growth story.
Okay.
Yes, well I appreciate that question.
Certainly the <unk>.
Sure of this company and the culture of our brand or I believe at the foundation of our success, it's our people.
And.
We've invested a lot over the past two years to really build and strengthen the culture of this organization.
Have noted over the past year that.
Aside from investments in technology, we've made over the past few years.
It's our people who have made the difference in wingstop as compared to anybody else in performance and.
I can't thank them enough for what they've done and I think that culture that is inherent not only in our corporate entity not only with our brand partners, but in the restaurants.
What makes this brand so special.
And we will do everything to protect that and that is part of our outlook for the long term and achieving our vision is that we maintain our entrepreneurial roots. We maintain the authenticity that this brand is all about.
We continue to be service minded.
And we continue to have fun.
Nothing wrong with having fun.
Doing what we do food is fund wings are fun food people love that about our brand when we get to serious is probably at a point where.
We're going to have struggled so.
Rest assured we're going to keep pushing to make sure of that that becomes end remains foundational for our business.
Great. Thank you.
And our next question will come from James Sanderson with Northcoast Research. Please go ahead.
Hey, Thanks for the question I just wanted to follow up to the discussion on international development of wondering based on your recent studies, if you've reconsidered potentially any type of master franchisee relationship with international development groups to really take advantage of some of the reductions.
Restaurants, we see in Europe, and potentially in China, and if that would come at some sort of differ.
A different royalty rate.
Compared to what we see today.
Can you I'm going to ask you to clarify that question. If you would James I'm not I'm, not following where you're going I want to make sure of hydrocarbons.
No understood I'm, referring to an example of that dominance is currently has with a number of larger international groups, where they have master franchisee relationships and I believe at the royalty rate is at a discount to what others domestically pay but but they do have an opportunity to accelerate unit growth in those markets I think.
<unk> brands in China, as an example of that and I'm wondering if wingstop is considering a similar type of relationship to accelerate unit growth in international markets you haven't really entered.
<unk> entered into yet.
Okay.
Okay. Thank you.
We would refer to that as of sub franchising opportunity, meaning the master would have rights to also become a franchise or in those countries.
We do have some experience with that I would not suggest that that is a growth path opportunity for wingstop.
Conversely.
We believe that having a solid well capitalized real.
Our real estate savvy partner in any market is going to be the best choice for us each market is different.
But I think you'll probably see more.
Indication of Wingstop, making investments in markets, where we believe there is great opportunity to scale and grow rather than go into sub franchise route and part of the reason for that is it creates a lot more complexity.
While it does create a discount if you will for the master franchisee they have to have an operating infrastructure that can support those.
Of those sub franchisees, that's difficult for them to execute consistently and it puts the brand to us in a position of having to support those so I'm not sure that all of the.
Previous experience on that is necessarily indicative of of.
Of long term success at May create some short term upside, but that's about it. So we're going on we're going to stay the course on our approach to large master developers in our markets for today.
Alright, a quick follow up I was wondering if you at any feedback on some of the strategies that we had seen in the past.
Might be able to reduce the cost of labor in stores. The example, I'm thinking of or locker systems that expedite the pickup of delivery orders of things like that that we might see in 2021.
Might be used to improve labor productivity.
Yes, I mean, we obviously by shutting down our dining rooms for almost a year now we have put all those things on the back burner as it relates to what happens inside the four walls.
I would only call attention to wingstop being a very unique brand and that the roster size for our restaurants is rather small compared to most and the number of people you can physically put in the kitchen starts to get fixed very quickly, especially at these higher average unit volumes that we're seeing so.
Aside from pandemic related expenses in labor that is really about retention during this timeframe.
You should be able to see is as the volumes grow exceptional leverage on the P&L, which is.
The underlying.
Under current if you will on our P&L today so.
While those are important opportunities for us I think growing the topline as our key priority, making sure that we keep our restaurants.
Very efficient and keeping our model is simple.
Will yield better labor outcomes than some of the other tactics that we've talked about in the past.
Alright, thank you.
And our next question will come from Peter.
With BTG. Please go ahead.
Great. Thanks for taking my question.
I wanted to ask you don't have store.
As you mentioned several times on the call on the brand has lived and be of real estate, but as you think out of the next several years, maybe five years or so are you considering peppering in some of some of them.
Better a real estate as we've seen with maybe some of the other competitors in that space.
Well, we don't we don't believe we have a competitor in the space. So I'll start with that so we don't look at what Theyre doing as a guide to what we would do.
What I will say to this Peter is.
If anything we're going to continue with.
Our our quote unquote b locations as our primary objective. They just work for US we don't need that in in cap prominence in a strip center, nor do we need of stand alone building in order to generate the kind of performance we've seen.
Separately, if anything we might go to CS and DS by way of incorporating ghost kitchens into our mix, we think those have.
More prominent opportunity and if anything maybe reducing seats and dining rooms over time as we continue to drive our digital mix north.
Those are probably the more likely outcomes and our real estate strategy.
Great very helpful. Can we just come back to the conversation around delivery given that's about a quarter of your of your business.
Can you just talk a little bit about how the delivery customer and maybe different than your traditional customer I think you said deliveries Brittany.
Yes.
So maybe just talk about the characteristics of how they may be different than your traditional guest.
Yeah, I mean, we've noted even years back that.
The traditional pizza concepts that offer delivery have a distinctly different guests that uses deliveries end uses carryout wingstop has always been a carryout takeout brand a little bit of dine in as well and so we knew that that delivery customer was unique and that that was their preference and they just don't want to carry out so we've been able to pick them up in what we have said over the years at.
They tend to be more.
More of that heavy <unk> user, which represents a much broader mix of the marketplace than perhaps our core customer.
Who typically is in the urban core of markets end.
Is more likely to eat bone in chicken, the chicken wings than others.
What we're doing is expanding that out and broadening the play of the playing field and inviting in those give us our customers that just didn't know us before and that is helping fuel our growth. So generally speaking a little less diverse and perhaps more income in this new consumer base, that's using us for <unk>.
Livery and growing with us in the digital platform.
Very helpful. Thank you very much.
And this will conclude our question and answer session as well as today's conference call. Thank you for attending today's presentation. At this time you may now disconnect your lines.
Okay.
Yeah.
[music].
Sure.
Okay.
[music].
Yes.
Okay.
[music].
Okay.
Okay.
Yes.
Yes.
<unk>.
Yeah.
Okay.
[music].
Ooh.
[music].
We do.
[music].
Sure.
[music].
Okay.
[music].
Okay.
Yeah.
Okay.
[music].
Okay.
Sure.
[music] Covid.
Okay.
Okay.
Okay.
Okay.
Yes.
Yeah.
[music].
Yeah.
Yeah.
Yes.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
[music].
Okay.
Okay.
[music].
Yes.
Okay.
Okay.
Yes.
Okay.
Okay.
[music].
Okay.
Yeah.
Yeah.
Yes.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Yes.
[music].