Wingstop added 76 restaurants in the third quarter while U.S. same-store sales fell 5.4% and average unit volume slid to $1.85 million. It now expects a full-year comp decline of 6.5% to 7%.
Wingstop's average U.S. restaurant now rings up about $1.85 million a year. A year ago it was $2.06 million. That is a drop of roughly 10% in the number a prospective franchisee looks at first when deciding whether a new store will pay back.
The Dallas-based chicken wing franchisor reported third-quarter results on Oct. 28. Domestic same-store sales fell 5.4%, which the company tied to lower transaction volumes and "continued pressure on consumer spending." It now expects domestic same-store sales to decline approximately 6.5% to 7% for the full year. Earlier this year the company had guided to a decline of 4% to 6%, according to an earnings preview from String Research.
Development has not slowed. Wingstop opened 76 net new restaurants in the quarter and ended it with 3,331 worldwide, up from 2,932 a year earlier, a gain of about 13.6%. It still expects 440 to 450 global net new units this year, or 14.4% to 14.7% unit growth, and system-wide sales rose 6.0% to $1.4 billion.
For the franchisor, new stores are covering for weaker ones. Royalty revenue, franchise fees and other revenue rose $5.1 million, according to the release: net new development added $8.6 million, and the same-store decline took away $3.6 million.
For franchisees, the math looks different. The 5.4% decline is a system figure, and company-owned U.S. restaurants did better, down 2.7%. Franchisees own 2,716 of the 2,787 U.S. restaurants, about 97%, so their stores, taken together, fell further than the headline number.
Franchisee margins are not disclosed, but the company's own stores show where costs are heading. Cost of sales at company-owned restaurants rose to 78.2% of sales from 74.8%, driven by higher food, beverage and packaging costs tied to fries and packaging, higher rent and maintenance, labor at acquired stores, and fixed costs spread over lower sales.
"While we are not satisfied with our third quarter results and the improvement in sales performance is taking time, we are encouraged by the early indicators from the changes we’ve made and remain focused on returning to sustained sales growth," CEO Michael Skipworth said in the release. He pointed to marketing execution, restaurant operations and the Club Wingstop loyalty program as the levers.
Digital orders made up 73.7% of system-wide sales, a reminder of how much of this brand runs through software, a theme we took up in our column on the AI Wingstop built for itself. Wingstop is not alone in the squeeze: Domino's cut its U.S. store outlook earlier this month as franchisee profits slipped.
The question now is how long 14% unit growth can outrun a 10% slide in what each unit sells, and whether the operators signing development deals keep signing at that pace.
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