Quarter 1
Q2 2026 Earnings Call — July 29, 2026
Analyst David Tarantino (Baird): Hi. Good morning. My question is on the value strategy that you mentioned related to the new approach on the marketing. So I guess two parts to the question. One is could you just elaborate on how you're planning to approach this? You know, a discount versus what you already offer. Are you just highlighting the value of what you offer today? And then secondly, I was hoping you could share maybe some anecdotes on whether you have some test results or proof points that might give us confidence that this strategy will indeed work to stabilize the sales trend.
Executive Name (Title): David, good morning. Thank you for the question. I think it's important to understand and maybe take a little bit of a step back and we'll talk about what we saw in the second quarter. And if you recall, we talked about the need to really protect our core consumer. And so what you saw us do in the second quarter was really bring forward value messaging. And we tested a handful of ways to present value. We also tested ways to really deconstruct inherent value on our menu to both kind of create single eater entry price points or even a price per person for group occasions. And I think a great example I would point to and what we really learned in Q2 was when we put forward 30 wings for $30 and what we saw with that promotion, David, was guests were building their own bundles with attachments and ultimately driving a higher average check well above that $30 price point. ==And so that really told us that it's not just price point.
They saw compelling value in building their own bundles and then knowing that the value they were getting on the wings.== And so it tells us, David, that quality, flavor, abundance and the value per person are key to winning more occasions for us. We also saw it's increased the frequency of flavor innovation. And we see measurable increases in the rate of repeat visits within the first 90 days when we bring flavor innovation forward. So another key indicator of how we can protect our core consumer. And we have a strong pipeline of flavor innovation in the back half of the year that we're really excited about. So when we think about both flavor and value, we know that we can do a better job executing with our creative and messaging to include a call to action that shows not only quality and flavor but also breaks through with that value per person that exists on our menu today.
As we take a step back and look at the last five years and how we've scaled brand awareness, we see a real opportunity for us to evolve and really focus on consideration and value per person messaging as well as flavor innovation are both things that's going to help us drive consideration, which we know will drive purchase. And so you'll see us evolve our marketing in the second half to really more heavily focus on driving consideration and taking those learnings that we have from Q2.
Analyst David Tarantino (Baird): And maybe just to follow up on the second part of my question, is that I guess were you seeing signs that this strategy is working under the surface? I only ask because the result for Q2 came in a bit below your expectations. So just trying to reconcile those two points where it seems like you've unlocked some concepts on value that could work. But I guess, you know, did you see it working under the surface and giving you confidence for the second half?
Executive Name (Title): Yeah, David, we did see certain elements that we put forward show some really positive signs. I would say taking a step back and just looking at it at a higher level, we did see an improvement in trend as it relates to transactions. We gave a little bit of that back on ticket, but did see some improvement in transactions. And we also saw that drive engagement with that core guest and some of those trade areas that we referenced in our prepared remarks that are under more pressure. We saw improvement in trends within those trade areas as we leaned in and demonstrated some of these value offerings that are inherent in our menu today.
Analyst Sarah Senator (Bank of America): Thank you. There's a question and a follow-up. I guess maybe if you could talk about marketing perhaps a little bit. You talked about call to action. I think one of the things that we have seen is that social digital marketing has been really powerful for some brands around relevance to the cultural conversation. Have you done anything, stood up social listening or changed anything about your strategy? I know you've talked about shifting a little bit more perhaps to that from linear television, but the examples you cited of really strong performance were around live sports, which I think has historically been your strong suit. I guess any update on kind of a pivot that makes you a little bit more visible on social, digital media, and then I have a quick follow-up.
Executive Name (Title): Hey, Sarah. Good morning. I do think kind of reiterating back to some of our prepared remarks and then my response to David earlier, you will see us get much more tighter, I think, around the execution, both creative and messaging, that does include that call to action but it's balancing what we've historically been really heavy in quality and flavor but also balancing that value message and it's really about that value per person that you can get in our menu today and really finding ways to present that that includes again that call to action and so one of the things we've acknowledged kind of in the first half of the year and in second quarter is continuing to drive execution as it relates to the creative and the messaging. And so you'll see us continue to lean in and improve kind of the consistency and I would say a little bit of the focus around that messaging in the back half of the year.
Executive Name (Title): And Sarah, this is Alex. Just to add to Michael's response, we also, alongside of our launch of Club Wingstop, we invested behind our personalization engine through CRM, through Club Wingstop that allows us to really hyper-personalize that message to the guests. So some of our core consumers that are feeling more pressure could see a more value-centric message. Some could see something centered around flavor to elevate, to show that elevated quality that we can deliver. And then alongside of that, we now have Club Link Stop as a platform to further strengthen our value proposition through various challenges and rewarding those members with more points, more access to Wingstop. So I think the combination of that plus what Michael mentioned is something we're now able to unlock.
Analyst John Tower (Citi): Hey, thanks for taking the question. Maybe just a couple ones real quick. Obviously, you spoke quite a bit on innovation around flavor, and that's kind of been your battle to look for a long while. I'm curious if there's any other innovation we should be thinking of on your menu, taking into consideration your make line that's very basic and very low SKU count, but also the idea of new product news maybe driving more customers to the stores. The follow-up question is around the store acquisition that you made outside of Dallas, 13 stores, but I think you alluded to the idea of 25 more potentially in the pipeline. Is it your intention to build those out yourself from a company portfolio, or is the idea that you will own this and then potentially re-franchise that chunk at some point down the line?
Executive Name (Title): Hey John, good morning. I'll take the first question and I'll let Alex take the second question you asked, but you know what I would say is, you know, I'll point to, and we referenced this on our prepared remarks, but we saw these kind of key moments in the quarter and even after the quarter, and it's kind of, you know, the World Cup and in certain key matchups, we saw these moments that it just reminds us of how special this brand is. We saw our core guests engage with our brand in a big way. On certain team match-up days, we saw double-digit growth. And it shows us that the brand is still relevant. The brand is still top of mind. We just have a core guest that's under pressure. But it was that guest who has pulled back and saw these moments around, whether it was NBA finals or certain World Cup matchups where when they did choose to dine out, Wingstop was top of mind and their top choice. And so as we think about our core guests, what they come to Wingstop for, it is obviously quality. It's the hand sauce and toss, but it is our flavor.
And so we know and history has told us that when we continue to bring flavor innovation that only Wingstop can bring forward, it drives engagement with our core guests. It brings that guest back, gives them another reason. And it also presents us in a way of kind of that continued cadence of innovation to bring in new guests and drive new trial with the brand. And so you'll see us as it relates to innovation continuing to lean into our proven playbook around flavor innovation.
Executive Name (Title): And then I'll let Alex answer your second question.
Executive Name (Title): Hey, John. Regarding the corporate acquisition, to be clear, this is not a departure from our strategy to maintain an asset-light, highly franchised model. But as we see deals throughout the years coming through the system, we saw this market an opportunity for us to step into that was a way for us to further enhance shareholder returns. And we do anticipate retaining this market. So in addition to the 13 restaurants, we see another potential 25 restaurants for us to build over time.
Analyst Brian Harbor (Morgan Stanley): Yeah, thanks. Good morning, guys. When you spoke about the more challenged areas, I guess those are the lower income markets. I don't know if you can measure this, but do you think that you're losing share there to some extent, and is messaging value kind of meant to regain some of that, or do you think this is sort of a problem across these markets?
Executive Name (Title): Hey Brian, good morning. I would say obviously what we indicated in our prepared remarks in those markets where we do have a heavier presence with the lower income consumer, we did see a pullback in frequency. For us, when we look at the data, I don't know if they're necessarily going somewhere else or just generally pulling back in this environment as we try to navigate the economic situation that they're put in. I'd tie back to a comment we mentioned earlier about what we saw with the World Cup. It really was a strong signal that our core guest is still there. Wingstop is still top of mind. As we think about what we saw and learned in that situation, it supports how important our plan is for the second half of presenting value with our quality and flavor in a way that we believe will position us to win more occasions with that core guest.
Analyst Brian Harbor (Morgan Stanley): Okay. And how did third-party delivery do in the second quarter? I guess, you know, I might think that that's actually holding up better based on the customer base, but I was curious if you've seen that and also, you know, as you've kind of been working on – the service time in that channel, have you continued to see improvement there? Is that resonating at all?
Executive Name (Title): Yeah, Brian. As it relates to the third-party delivery platforms, one of the things we learned as we continued to progress through the second quarter is not necessarily seeing the lift we maybe initially would have expected just from the improvements in speed alone. And what we did in the second quarter is really tested our way through understanding better on kind of how those algorithms work and how important conversion is as it fuels those algorithms. And so based on what we learned in Q2 and the plan that we have in front of us for the back half of the year, we think we've got a strategy in place that will fuel those algorithms that will put Wingstop into more of the consideration set and position us to take advantage of the improvements we've made in speed.
Analyst Jim Solera (Stevens): You guys, good morning. Thanks for taking our question. I wanted to ask about the new unit opening splits. Michael, you highlighted this 55% that are in these markets that are experiencing a little bit more pressure. Can you give us a sense, given the new unit opening at such a strong cadence, the split of the new units and if you have maybe a glide path of where you expect that to be longer term, that mix between these higher income areas that are doing better and then maybe the more legacy units?
Executive Name (Title): Hey Jim, great question and good morning. You know, what I would say is our kind of existing restaurants that we are opening and a little bit of what's in our pipeline today, I would say generally speaking is probably a decent representation of our footprint today as we execute those development playbooks. But one of the things we've talked about before is kind of that core demand space that we have and have a huge opportunity where we're only winning call it two to three percent of that demand space today and benchmarks suggest we should be winning close to twenty percent of that demand space. And as you deconstruct that demand space the majority of the spend in that demand space is represented by households that have an income level of above a hundred thousand dollars. And so as you think about mapping out our continued growth in the U.S. you would expect our footprint to evolve a little bit that positions us to win more of those occasions in that demand space over time.
Analyst Jim Solera (Stevens): If we think about the demand drivers, again, you called out a lot of the engagement in the lower income is around specific events, primarily sporting events. Is that different at all with the higher income groups? Do you see any sort of callouts or anything that's different on a kind of demand basis, or is it just they have more disposable income and so the frequency around the events is higher?
Executive Name (Title): Jim, I'd say that this is Alex. The distinction was just more of our core consumer coming back in an outsized way during some of those key events. I think that was the factor. And we saw certainly engagement during some of those, you know, more consistently in those other areas, higher income. I think we even mentioned in our prepared remarks about them, higher income areas outperforming those trade areas that are more concentrated low income. But the other interesting element that I'd point to is within Club Wingstop, we're very focused on enrollment levels in this early phase of the launch. The characteristics of the typical guest that has enrolled in Wingstop is our core consumer, that lower income, younger consumer demographic. And they're showing a strong engagement. So we're encouraged by that and we talked about the element how Club Wingstop can strengthen that value proposition. We've got a lot more of opportunity to showcase that in the coming months.
Analyst Zach Vadim (Wells Fargo): Hi, good morning. I know you don't typically talk about all the levers you've pulled around Club Wingstop and value. Maybe you could walk us through monthly comp performance in a little bit more detail and any changes you saw as these factors evolved and whether there's a specific message around early Q3 and your expectations around the shape of the back half of the year.
Executive Name (Title): Hey Zach, good morning. This is Michael. On our last call I think you heard us signal a little bit to what we saw in the first month of the quarter and then obviously in May we saw gas prices kind of hit their recent peak and obviously based on the result we posted for the quarter that the impact of those elevated gas prices had a pretty pronounced impact on our core gas and so I think that should give you an indication of kind of what we saw as we progress through the quarter. You know, as we think about our guide and the balance of the year, I think our approach is pretty consistent with what we've done historically looking at trends in the business and obviously acknowledging the recent inflation, again, we've seen in gas prices.
But what I would really point you to is as we think about these strategies that we're executing against that we've outlined here today, whether it's continuing to strengthen the execution around creative and messaging to really make sure we're driving through quality flavor and then that value per person that you can get with Wingstop. Whether it's Club Wingstop, which we're really excited about the early days and see that as a really encouraging and exciting long-term driver for our business. And then we talked about Smart Kitchen. The progress we're making there is really encouraging, but continuing to execute from an operations perspective to help deliver that overall guest experience where they can ultimately say when they come to Wingstop, man, that was really worth it. And so as we think about continuing to execute against these in the back half of the year, you know, I would basically kind of point you to or encourage you to kind of think about a rateable improvement in the trend as we progress through the back half of the year.
Analyst Zach Vadim (Wells Fargo): Got it. And then we have a favorable environment for wing prices right now, and I'm curious to what extent you think value efforts can sustain considering the profit dynamics and then separate question around your EBITDA for the year and to what extent you think double digit growth could still be on the table.
Executive Name (Title): Hey, Zach. Yeah, regarding the favorable market dynamics, you kind of saw that play out in the second quarter with our food costs. But we do see that, and we've been transparent with our brand partners about an opportunity to invest behind our value strategies. And so I think we can take advantage of the market with the market backdrop on wings and allow that to help us invest behind our bundles and the flavor strategies, quality that we're going to deliver across the board. And I think with regards to our growth for the balance of the year, it still can imply a double-digit rate on adjusted EBITDA versus the prior year based on the shape of our guidance.
Analyst Danilo Gargiulo (Bernstein): Thank you. Michael, historically, when SIMS or SILAs decline in the industry, typically franchisees respond by reducing labor in their store. And I wonder whether you've seen that trend also across franchisees and therefore you're expecting that their forward economics might be largely unaffected this year.
Executive Name (Title): Hey Danilo, thank you for the question. You know, I think as it relates to labor, particularly in our restaurants, we've run a highly efficient labor model within our restaurants and so there's not a lot of labor in there to begin with, and as you think about recent sales, I wouldn't necessarily point to margin benefit or anything like that, but what I would point you to is just the reality of the strength of our model, the AUV growth we've seen over the past four or five years as we sit here today and pair that with the supply chain strategy that we're executing against that Alex just referenced. The unit economics for our Wingstops today are still really strong and I think one of the biggest and most supportive statements to really back that up is if you look at our unit guide this year, which we reiterated to 15 to 16% unit growth and then obviously we referenced it in our prepared remarks, but to have a development pipeline that's sitting at a record level today as well really shows the level of commitment and excitement our brand partners have to continue to invest in Wingstop.
Analyst Danilo Gargiulo (Bernstein): And then exactly to this point, you pointed out as well that the franchisee economics really dictate their willingness to be opening stores. Today, you're sitting still at $1.9 million average unit volume, which is significantly above your historical level. And I'm wondering, at what point of same-store sales growth do you expect them to start to feel their conviction on the long term and potentially reduce the net unit growth from the 15% plus that we're seeing today?
Executive Name (Title): I think Danilo, as we indicated with our guide for the balance of the year and these strategies that we're executing against, it clearly implies a pretty meaningful inflection in the trend that we have in our business today. We're more focused on executing against that and continuing to work our way towards growth and continuing to work towards expanding AUVs, which we know will only continue to fuel one of the strongest development pipelines in the industry.
Analyst Gregory Frankfurt (Guggenheim Securities): Thanks, Michael. Just to follow up on Daniel's question, I think you guys have had or suggested that the cannibalization is not that material to your system. I guess we just look at the down high single digit comps and can you maybe help us understand what you're seeing or give us maybe some data points that would support that there's no reason necessarily for franchisees or you guys to start pulling back unit growth?
Executive Name (Title): Yeah, Greg, as it relates to cannibalization, we referenced in Q1 that we actually saw that impact retract to kind of below historical levels and we measure it obviously every quarter and Q2 actually it got a little bit lower than that even and so what I would really point to as it relates to the pipeline and unit growth is that really tied back to a lot of the conversations I've been having with our brand partners out in market and their level of excitement with the strategies that we're executing, what they're seeing from Smart Kitchen, what they're seeing in the early days of Club Wingstop. And then obviously, you know, when they experience those moments that I referenced that we saw, whether it's around NBA Finals or World Cup, it's a reminder of how special this brand is. And so our brand partners are bought in. And that's really what I would point you to around the continued pace of growth in front of us.
Analyst Brian Vaccaro (Raymond James): Hi, thank you. Back to the need just for more value. I'm curious what led you to conclude that beyond just sort of your softer comp trends and maybe some of the macro things you're seeing in the markets you highlighted. And one dynamic that I wanted to ask about specifically was around product mix. And I'm curious if sales for chicken sandwich or other boneless products have been softer than bone-in wings, which may reflect some of the more intense, you know, value competition from QSR competitors. Just curious on that or any other dynamics as you sort of looked to be under the hood to learn more about kind of what this value opportunity might look like.
Executive Name (Title): Hey, Brian, good morning. You know, what I would really point to and I think what you heard us say earlier was when we saw the conflict in the Middle East and what happened with gas prices and just that incremental pressure on our core guests. We saw that as clearly the need and kind of the catalyst for us to really lean in and protect our core guests and make sure that we're presenting them with value. And as we mentioned, we tried several different tactics on ways to deliver value and the messaging around it and it really laddered back to our core occasion, that group occasion and making sure that we're messaging in a breakthrough way that value per person that we can deliver at Wingstop. It's been $8 per person for several years now and that's a pretty compelling value when you match that against the quality, the flavor that our guests enjoy and get from Wingstop and pair that with the experience they now get in the restaurant supported by Wingstop Smart Kitchen and the team's execution there around speed and consistency. All of those are really what give us a lot of encouragement and give us a little bit of confidence in what we see in the back half of the year as we execute against a plan that's really centered around continuing to tighten the execution around creative, around messaging and making sure it's breakthrough with that value per person.
Executive Name (Title): And I would say as it relates to menu mix, I think it has a little bit to do with our core guests and obviously bone-in wings are our kind of halo product and our hero product, if you will. When we saw these core guests re-engage, they came back to Wingstop for what they love about Wingstop and a lot of that is centered around our bone-in wing product. As we saw with some of the tests that we demonstrated in Q2, I referenced 30 for 30 where we saw it engage with our core guests and then they built their own bundle in a way that ultimately drove ticket for us on those occasions. I think I look at that as really positive and something that we can continue to lean in as we protect that core guest of ours in the back half of the year and win more occasions with them.
Analyst Brian Vaccaro (Raymond James): Okay, that's helpful. And I guess the follow-up within that, you talk about the 30 for 30 bundle and we've seen other bundles even last year, things like the game time promotion at $35, 20 for 20 in the middle part of last year, those types of things. I guess I'm thinking you referenced it as sort of the single eater price points and the importance of being in that $10 or lower range. And I know you've been testing some of these things in recent months. Can you talk about the performance of, say, dollar wings in that 10 for 10 band, the flavor combos for 10, or even some of the early learnings on the $5 and under tastings menu that I think you're testing in three or four different cities. Can you talk about the importance of that sort of $10 and under versus the bundle and just sort of re-communicating that, yeah, 35 bucks you can eat for eight if you have a big group, that single eater. Can you provide more color on that opportunity?
Executive Name (Title): Hey, Brian, this is Alex. You know, I think the simple way to think about it is we're deconstructing this inherent value in our menu to showcase a lower entry price point for consumers. There's still this opportunity for us to educate guests on how to navigate our menu, and that's some of the learnings we're extracting from Q2. I think that flavors under five is a good example of that.
Executive Name (Title): Thank you. This concludes our question and answer session and Wingstop Inc.'s fiscal second quarter 2026 earnings conference call. Thank you for attending today's presentation. You may now disconnect.
Quarter 2
Q1 2026 Earnings Call — April 29, 2026
Analyst: It to the first quarter and maybe what you're seeing in April. and whether or not a concern at all related to the return to positive in the second half. And it does seem like, not necessarily are compares getting a lot easier, so presumably you're talking about some initiatives within your control, maybe the loyalty program, maybe what kind of assumption you're assuming for that loyalty program. But April and then kind of your confidence in turning back to positive in the back half of the year, kind of the biggest drivers. And then I had one follow up.
Executive: Hey Jeff, good morning. Yes, we did see an improvement in the trend to start Q2. You know, and it tied back a little bit to my previous comment around a little bit of that more pronounced near-term reaction to fuel prices, and that does normalize pretty quickly. But we saw an improvement, and I think as we updated our full-year outlook, we obviously took into consideration our actual results for Q1, but we did adjust down our expectations for Q2, which are somewhat related to our expectation of some near-term pressure on the consumer with elevated gas prices. Obviously, it's extremely difficult for anyone to predict this macro environment that we're in, but what we're really focused on, Jeff, is we are seeing some really positive signals in our business, whether it's as it relates to Smart Kitchen. We talked about That Friday and Saturday night day part that we're focused on, we saw a 16 percentage point improvement in the number of restaurants that are delivering on that 10 minute speed of service on Friday and Saturday night.
Our bottom quartile of restaurants, we saw a three minute improvement in overall speed within those, and we're measuring significant progress and improvements within guest satisfaction scores. All strong signals that give us a lot of excitement and confidence about the impact that Wingstop Smart Kitchen will have on our business over time. I mentioned the marketing. We feel like our marketing is resonating. We're seeing reactivation of labs. We're seeing that fastest-growing cohort, that 5,200K. We're seeing improvements in awareness and conversion, all really strong signals that it's resonating. And we have some exciting things coming within our pipeline as it relates to innovation that we're really excited about that we know based on the research that we've done is what is one of the number one drivers for this target that we're targeting within our demand space. And one of the number one drivers is really around innovation. And so we think that's going to position us well. And then Club Wingstop, it's a big one for us. We're excited about it. Our pilot results continue to strengthen.
We're seeing improvements in retention, in reactivation, in frequency. All really strong signals, and again, without the support of our national advertising and without really leveraging that platform at scale. And so the combination of those things do give us confidence in the early signals that we're seeing in the business. We expect over time to return to growth in the second half of the year.
Executive: Yeah, and Jeff, this is Alex. I could help translate a little bit on what we anticipate on the shape of the year. You know, with what we're seeing in the April trends and kind of knowing that this is at a little bit of hopefully the peak on, you know, fuel prices that the consumer is seeing, we're anticipating somewhere in the mid single-digit decline range for comps in the second quarter, followed by a gradual improvement into that low to mid single-digit positive range for the second half as these strategies come together and what Michael mentioned. And I think these are informed by just some ways that we've been able to see results in top performing restaurants on Smart Kitchen and what they're seeing in their business comp performance. Also what we're seeing in our pilot market, again, with very limited features and marketing behind it and seeing a measurable comp impact. So that's how we got to the shape of the outlook. Very similar to what we said last quarter, we anticipate a return to growth in the second half. Near term, we have brought forward a little bit of that inflation challenge that we're seeing from the war that took place at the start of March. But we have a high degree of confidence in this outlook and, in fact, are working to exceed it.
Analyst: Understood. And then my follow-up, Michael, franchisees, just based on your commentary, seem very happy. Obviously, the comp growth isn't where they want it to be, but the past couple of years, sales growth, the 70% type returns, they're generating all that supports the outside unit growth. But clearly, the current macro is challenge. I'm wondering if you could talk a little bit about the recent conversations with franchisees, what they're most focused on, and whether it ever becomes a discussion internally about considering maybe tempering unit growth. Clearly, you're running well above the 10% long-term algo with your 15% to 16% growth this year. Maybe there's some risk that it's cannibalizing. Maybe it makes sense to try and control or limit the outsized unit growth. Any thoughts there would be great. Thank you.
Executive: Yeah, Jeff, we mentioned this in our prepared remarks, but I think it's really important to say it again. And we actually saw our brand partner margins and profitability improve in the first quarter. And we talked about that's us making really intentional and strategic decisions about what's right for the business long term. And obviously continued progress with our supply chain strategy and continuing to protect and in some cases, enhance those industry-leading returns in unit economics. And they remain strong. The sentiment and the conversations with our brand partners, it's really a lot about acknowledgement that, you know, over the last few years, our AUVs have grown close to $500,000. And that combined with just continued focus and execution against protecting profitability has been pretty positive. But then when you layer on top of that, us working with them and talking to them about these strategies that we're executing and what's in front of us, there's a pretty high level of excitement around Wingsop and to continue to grow and to continue to expand. We feel like we're growing at the right pace.
We're obviously executing against our market level playbooks, which are very intentional and very clearly defined around where we open restaurants and at what pace and when we open those restaurants. But we mentioned it as well in our prepared remarks, our pipeline sits at a record level, which I think showcases the demand and excitement for growth. And based on the visibility we have in the pipeline today, we're able to reiterate our outlook this year, which is another industry-leading year of unit growth at 15% to 16%.
Analyst:
The next question comes from Andy Barish with Jefferies. Please go ahead.
Analyst: Hey, guys. Just wondering on kind of thoughts as you look out in terms of, you know, becoming a more mainstream brand, do you think kind of marketing has to – evolve as we look out maybe to 27, particularly given the, you know, the size and scale of your spend to more, you know, kind of traditional windows and, you know, promotions that are laid out. And then kind of also wondering just on the move to $3 million AUVs, if you could kind of frame up how much of that is maybe related to incremental you know chicken sandwich and tenders occasions just given how strong your you know your share is in the traditional wings business thanks.
Executive: Andy, I think that's a great question and if you go back, you know, four or five years we were able to be a little bit more of what I would characterize as a marketing strategy that was almost a one-size-fits-all. And as we look at how our business has grown and scaled and diversified to some degree, we are 100% aligned with the question you asked, and that is we have to be very targeted. Messages need to be different based on audience, based on channel, and I think that can go from linear TV all the way down to social platforms. And that's exactly the playbook that we're executing, is making sure our message is tailored specifically to the targeted audience that we're trying to reach. And I think you'll see more of that come to life as we talked about some of the next phase or next chapter of Wingstop is here. You're going to see a little bit more variation in the messages that we're putting in front of consumers, a little bit more targeted messaging as it relates to calls to action. But that's exactly the playbook that we're executing.
As we think about our path to $3 million AUVs, we do think there are a ton of chicken sandwich occasions that we are positioned to win, and we will win, and tenders are the same. But we also think there's a lot of group occasions. our Halo product, bone and chicken wings, that we're going to win as well as we educate more of these consumers who don't know about us or maybe don't consider Wingstop today. And that's what we're excited about as it relates to our Q1 results is we're seeing early signals in the business that we're making progress against all of those initiatives. And, Andy, I'd add, too, that, you know, we've historically anchored as an example on social media and as an area like TikTok, we now are diversifying more messaging and personalizing content to those channels across Meta, you know, Instagram, X, other areas where we can really speak to that new guest we're looking to acquire. So we think the timing is right to start to move more into those various social channels alongside the level of content we're able to produce and the relevance we can drive at the messaging in those channels. And congrats on number 500 internationally.
Analyst:
Thank you.
The next question comes from Chris O'Call with Stiefel. Please go ahead.
Analyst: Yeah, good morning, guys. I had a couple of follow-up questions from earlier ones. And, Michael, has the company – the company is guided to, I think, 15%, 16% unit growth this year, which continues to pace well ahead of the 10% long-term algo. But to what extent is this growth being driven by brand partners voluntarily developing ahead of their contractual mandates? And if franchisees reverted to the minimum requirements of their development agreements, what would that base unit growth rate look like?
Executive: Hey, Chris. Good morning. You know, I wouldn't say there's anything to call out as it relates to brand partners developing ahead of their schedule. In fact, I would say it goes back to these market-level playbooks, and that informs how we write these agreements. And we're writing these development agreements in a very targeted and intentional way that we believe is kind of really helping us have our hand on the dial and manage the pace of development. And so I would almost go so far as to say we discourage brand partners from developing ahead of that contractual commitment because we've been very intentional with how we've designed these agreements. And we believe we've got a strategy that we're executing against.
Analyst: Okay, that's helpful. And then we've noticed the sub-$10 combos, which you mentioned earlier, being pulsed through social and CRM channels. But what is the reluctance to pivot linear TV towards these offers since it would seem to be a better medium to drive new and lapsed users than maybe targeting some of the existing users to increase frequency?
Executive: Yeah, Chris, that's a little bit of what I hit on earlier. I think you're going to see that come to life as we progress through the year. And, you know, while Linear's obviously continues to be an efficient platform, you're going to see us leaning a lot more into OTT and streaming, which allows us to be very targeted because some people, the relevant message that we're targeting might be this new group pack bundle where we've pre-configured a bundle at a compelling value to serve three or four people and we've pre-selected the flavors highlighting convenience highlighting ease but obviously the flavor and quality associated with Wingstop and they can order that with one click and so that could be the right message that we highlight in a targeted way or it could be someone who's more value sensitive and in that case we can target them with the message that profiles this lunchtime offer that we have that is pretty compelling value to get our cook to order hand sauce and toss sandwich or tender combos for under $10. So that's exactly something we're leaning into.
Analyst:
The next question comes from Sarah Senador with Bank of America. Please go ahead.
Analyst: Oh, thank you. Just I guess maybe one quick follow up and then one quick question. You mentioned the lower income consumer. I think in the past you've said that's roughly a quarter of your sales, but that maybe has been trending down. So if you could update on what that mix is, because I do think that's obviously much higher than I think what some of you have seen from others. So that's just a data point. But
the question is on value. You mentioned value for the money, which I think is obviously clearly embedded in your menu, but some of what we're seeing that is very successful, especially for lower income consumers, is very low price point value. And I think in the past, in 2023, relative value was a big part of what you were able to offer because wing prices were down so much. Is there, I know your emphasis on visibility in terms of wing prices as opposed to kind of maximizing the benefit from the recent decline, but is there an opportunity to do more price point value below that $10 or is it the margin structure just really doesn't support that? We have seen some other, you know, higher ticket concepts maybe do things on the app only to really kind of introduce people to the brand at very accessible price points just as budgets are really constrained. So just trying to understand if there is that opportunity either through the app or through your loyalty because these sort of entry-level price points do seem to be working very well right now.
Executive: Hi, Sarah. This is Alex. I can jump in first. The low-income percent still has been about that mix of about 25% within our database, and we still are acquiring low-income guests. What we have seen in their behaviors is more They're actually trading up into larger bundles. We've seen the ticket increase, but the items that they're attaching per ticket has changed. That's come down a little bit. So they're almost kind of looking for that abundance quality that we can deliver that inherent value. And I think we've said this in prior calls, too, that that consumer is still telling us we're doing the right things in terms of messaging value, delivering quality. We really think about that overall value proposition that we deliver to guests beyond just the price point. We're focused on some areas that showcase our menu differently, flavor, elicits value as well, and then loyalty is a way for us, we believe we can strengthen the value proposition. One difference that we're seeing among low-income consumers is in our market where we're testing loyalty. Their engagement, their frequency has been sustaining. We're not quite seeing what we're seeing in the rest of the U.S., and we think we've brought some areas and examples forward for them that's really showcasing that value proposition, how loyalty can come into play there.
Analyst: Great, thank you. And just, is it the 7% increase, is that roughly the same that you've been seeing in these sort of loyalty frequency as in the past?
Executive: Yeah, actually, loyalty members are outperforming non-loyalty members in terms across a number of metrics, including frequency, new guest retention. We're also seeing reactivation of lapsed users come back in at a rate of 2x non-loyalty members in there. So there's a variety of metrics which has given us that confidence in the path to growth in the second half based on this data we're seeing. But yeah, it continues to be more elevated in the pilot market.
Analyst:
The next question comes from Brian Harbor with Morgan Stanley. Please go ahead.
Analyst: Yeah, morning, guys. Could you comment on how your two biggest markets, California and Texas, are doing relative to the rest of the country?
Executive: Hey, good morning, Brian. I would say, obviously, California, I wouldn't say the trend has really improved as inflation, kind of the consumer macro backdrop has remained pretty consistent there. I would say as it relates to the Texas market, we have obviously a lot of corporate restaurants there. And so our corporate results give you a little bit of an indication. But as we look at DFW as an example, or even broader Texas, where we have had more tenure with the Smart Kitchen, those markets are performing a little bit better than the rest of the country. But I would say it's really something that we pointed to in our prepared remarks, which has to do with those restaurants that are consistently delivering on our 10-minute speed of service target, and I think that applies outside of Texas, where those restaurants that are doing that, we continue to see higher new guest retention rates, better frequency, higher guest satisfaction scores, and ultimately better same-store sales.
Analyst: Okay. So, and on Smart Kitchen... You know, I mean, it is fully rolled out at this point, right? So I guess the question is, you know, like for the earliest adopters, are you still seeing a same-store sales gap consistent with what you've talked about before? Or, you know, I guess I might conclude at a high level that customers don't really care about this yet. Like I think we understand the operational benefit in theory, but, you know, is it necessarily showing up for customers in, you know, faster delivery times, or are you seeing kind of more like walk-up business in response to this? I mean, at what point do you think it actually is more of a mover for customers?
Executive: Yeah, Brian, I would say, and we mentioned this in our prepared remarks, but, you know, we can see it in the data and, you know, we know what good looks like. And when it is delivered and we are delivering on that 10-minute speed of service, you can measure it in the results and in the data. You know, one of the things we highlighted in our prepared remarks was the kind of bottom quartile restaurants where, you know, we've really been focused on execution there and we've reduced speed by three minutes and seen some pretty meaningful improvements in guest satisfaction scores. So the guests are noticing and giving us credit for that. I would say one of the areas where the most noticeable improvement was in delivery times and guest satisfaction within the delivery channels, where we measured a 17 percentage point improvement in guest satisfaction scores in the delivery channel and that channel outperformed versus the rest of the system.
And so those are some really strong signals that we're seeing in the business and the progress we're making. But I think it's important just to highlight that this is a really big operational change and maybe bigger than we even anticipated. And one of the things we've learned as we're continuing to focus and drive execution is we have to also guard against being too fast. We're updating, you know, we talked earlier this year about the new ops scorecard that we rolled out. We're actually updating our scorecard just to make sure we're measuring performance against, you know, our targeted speed of service at 10 minutes, but we're also not rewarding the wrong behavior. But progress is being made across the board. We are getting credit from the consumer, and the opportunity in front of us, and I think the long-term impact here continues to be really big.
Analyst:
The next question comes from Danilo Gargiulio with Berenstain. Please go ahead.
Analyst: Thank you. Michael, first of all, I'd like to expand on the comment you just made on this being an operational lift of high magnitude. I guess I'm trying to understand what is the impediment for all the stores to deliver within 10 minutes, even during peak times of Friday and Saturdays? You're updating the scorecard. But I think for most operators, you know, the smart kitchen is translating into better operations. So what's the impediment on the ground for a better adherence to the high standards?
Executive: Yeah, I mean, I think Danilo, if you take a step back and think about and just remember, particularly with these more tenured restaurants and tenured team members, the change is pretty drastic to go from an operating model that relied on paper kitchen tickets and a lot of voice commands to now leveraging a technology platform interaction with the screens and ultimately relying on and leveraging an AI-enabled demands forecast bespoke to every single restaurant that's being delivered in 15-minute increments. It's a fundamental change, and I agree with your statement that it is a better team member experience, and it does result in overall improvement in operations, but it is still a big change, particularly when you think about, you know, we often reference our standard quote time of 20 minutes on average. But when you think about Friday and Saturday night when restaurants are experiencing high volume, those tickets, those speed times could be on average 45 minutes. And we've taken that down significantly. And in some cases, we're not at that 10 minute yet, but we're materially faster than we used to be.
And so it's a balance of ensuring we're executing and delivering on the speed that consumers expect, but also making sure we're not rewarding the wrong behavior or driving the wrong behavior. That could translate to some unintended consequences around being too fast. And so it is a balance and it's something we're focused on and the team is executing against a plan. And we're confident based on the data that we see and the progress that we're making that we will get the entire system to deliver on a consistent 10-minute speed of service. But it is taking time. It is taking focus. It's taking some revisions to our scorecard that I mentioned. But the progress is clear in the data that we see.
Analyst: Thank you. And, Alex, if I may, with increased uncertainty on macro, geopolitical, and even the demand environment, why is the best option to continue to do share repurchases versus maybe driving down the leverage three to four times over time in anticipation of high volatility of rates?
Executive: I think, Danelle, great question. I think as we've shared in the past, we want to demonstrate our commitment to our buyback strategy because we believe in the long-term value creation it has for shareholders. And I think what you'll see as we manage through this is not accessing near-term outside capital to support the strategy, leverage this free cash flow generation that we have in our business, and a combination of seeing some deleverage. But we do see ourselves in a place that's closer to that, you know, four times leverage range as opposed to where we've been historically in five to seven times.
Analyst:
The next question comes from Sharon Zakfia with William Blair. Please go ahead.
Analyst: Hi. I guess I wanted to delve into speed. I think you meant point in speed or execution. Maybe I messed up. Saturday nights, but can you just give us kind of broadly speaking what percent of the system is hitting the 10-minute speeds? And then I think secondarily, you had talked last quarter about some challenges with the delivery providers getting under 30 minutes. Can you talk about kind of what percent are now consistently under 30 minutes? How progress is moving? Kind of move that towards the goal line.
Executive: Hey, Sharon. You bet. You were breaking up a little bit, but I think I caught the gist of your question. As it relates to the Friday, Saturday night dinner day part, I think one of the things is obviously it's important to highlight those are two of our busiest or peak day parts within the week. But it's also the day parts where about 50% of our new guests visit the brand for the first time. And so obviously extremely important as we think about the marketing strategies that we're executing and broadening the top of the funnel and bringing in new guests that we deliver on their expectations and retain them. And so that's a big focus for us. And when we entered this year, about 30% of the restaurants were delivering on that targeted 10 minute speed of service within the Friday and Saturday dinner day part. And we've made meaningful progress on execution within our restaurants. And it's due to the incredible work of our ops team, of our brand partners, of their teams in the restaurants. And so kudos to them. But we've seen a 16 percentage point improvement just in one quarter in the number of restaurants that are delivering. And so that's meaningful progress. That's super encouraging. And we're going to continue to chip away at it. And I'm confident that we'll get the entire system there over time.
Analyst: And then I think the other part of your question Could you repeat that part again for me? I lost you at the very end of it.
Analyst: Yeah, sure. Sorry about the cell phone. On the delivery providers, I think there are some challenges getting them under 30 minutes, even when you are at 10 minutes. Can you talk about kind of where you stand at the 30-minute threshold system-wide and all those discussions and how that progress is going?
Executive: Yeah, we're really encouraged with how our partners on the third party have leaned in. We obviously have had some meetings with their leadership team. Their teams have leaned in with our teams. We've implemented a few things that are helping send the right signals to their drivers at the right time to make sure they're getting there to the restaurant when the order's ready. And we mentioned it, but we're seeing a meaningful improvement in the performance there. And we actually highlighted this within, you know, that bottom quartile of restaurants, just the improvement within the delivery channel that we're seeing there is pretty meaningful, and I think it speaks to the opportunity we have within that channel. But to see a 17 percentage point improvement in guest satisfaction within the delivery channel is pretty pronounced, and so we're encouraged by the progress we're making.
Analyst:
The next question comes from John Tower with Citi. Please go ahead.
Analyst: Great. Thanks for taking the question. I know you mentioned that protecting and growing franchisee profits and cash flows is, frankly, a priority for the company. And kind of following up to Sarah's question earlier around value, in your conversations with them, are they reluctant to move down on price points on the menu over time? I'm just curious if that's been pushback from that community specifically.
Executive: Hi, John. This is Alex. No, I think we're lockstep with our brand partners in terms of, you know, really even in this environment, protecting the unit economics. And we don't believe it's, you know, a little bit more of our perception that training a guest to come to you for a $3 menu item, as an example, is not who Wingstop is, our demand space target, that group occasion. Again, our guests have given us feedback that we're doing all the right things on overall satisfaction. We've improved quality 6% versus last year. Consideration is up 4% versus last year. And even that low-income consumer isn't saying that we have a value issue with us. So we're focused on that and really building that top of the funnel, attracting those new guests, and keeping our brand partners focused on that long-term value opportunity for Wingstop to build towards 6,000 plus restaurants in the U.S.
Analyst: Got it. And I know, Michael, you were earlier in the conversation, you had mentioned that innovation is kind of top of mind for most guests in terms of what they want to see from the brand. It sounds like you're focused primarily on flavor. I mean, any form factor changes that you're thinking about going forward?
Executive: Hey, John. Yeah, you know, it's super clear to us when we studied this, our demand space, the consumer, and who we're going after who really doesn't engage with our brand today but represents a huge opportunity for us. And, you know, our brand hits on the top emotional and functional needs of that guest and is best positioned to win. It's really about just driving awareness and then making Wingstop top of mind and relevant to them. But the number one driver for these guests we are targeting to bring into the brand is innovation and it's innovation through flavor. And this is a proven playbook for us. We go back to 2024 when we launched Hot Honey, but we launched Hot Honey when everyone else was doing it as a wet sauce. We did it the way that only Wingstop can do and did it as a dry rub. And that is a great example of how we can lean into innovation, lean into flavor and drive relevance and bring new guests into the brand. In Q1, we launched a hot honey trio, three ways to hot honey. That actually performed a lot better than we anticipated. In fact, we sold out of two of the flavors within about two weeks.
Another example I will point to is our current LTO flavor, Citrus Mojo. A lot of guests have kind of said it's a play on our iconic lemon pepper, where it's a fresh garlic herb, a bright splash of citrus. But what we're seeing with the performance of Citrus Mojo is it's over-indexing to the reactivation of lapsed guests. It's bringing in new guests. And so we have an innovation pipeline built out for the rest of the year that we're super excited about. This includes a lot of really unique flavors that only Wingstop can do, but it also includes some unique dips as well. And so we're excited about this innovation pipeline and how that's going to drive relevance and I think continue to really bring in these new guests that we're targeting.
Executive: This concludes our question and answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.