What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-16 · 48 added, 42 removed, 123 unchanged (42% of the section changed)

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The first Wingstop opened in Garland, Texas in 1994, and we began franchising Wingstop restaurants in 1997.

Since 2015, Wingstop Inc.'s common stock has traded on the Nasdaq Global Select Market under the symbol “WING.” We are dedicated to serving the world flavor through an unparalleled guest experience and offering of classic wings, boneless wings and tenders, always cooked to order, and hand-sauced-and-tossed in 11 bold, distinctive flavors.

Since 2015, Wingstop Inc.’s common stock has traded on the Nasdaq Global Select Market under the symbol “WING.” We are dedicated to serving the world flavor through an unparalleled guest experience and offering of classic wings, boneless wings, tenders, and chicken sandwiches, always cooked to order, and hand-sauced-and-tossed in 11 bold, distinctive flavors.

The Company is primarily a franchisor, with approximately 98% of Wingstop’s restaurants currently owned and operated by independent franchisees.

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It is our mission to serve the world flavor.

We offer our guests fresh, cooked-to-order wings with bold, layered flavors that touch all of the senses, and we complement our wings with fresh-cut, seasoned fries and fresh, hand-cut carrots and celery.

We offer our guests fresh, cooked-to-order wings, tenders, and chicken sandwiches with bold, layered flavors that touch all of the senses, and we complement our wings, tenders, and chicken sandwiches with fresh-cut, seasoned fries and fresh, hand-cut carrots and celery.

We round out the flavor experience with ranch and bleu cheese dips that are made in-house daily.

We never use heat lamps or microwaves in the preparation of our food.

Our 11 flavor offerings create a differentiated experience that drives demand across multiple day parts and occasions.

Our 11 flavor offerings, along with limited time offerings of special flavors, create a differentiated experience that drives demand across multiple day parts and occasions.

Paired with our numerous order options (eat-in (to the extent available) / to go / delivery;

individual / combo meals / family packs) that allow guests to eat Wingstop during any occasion, whether it is a quick carry-out snack, a party size order for their favorite group occasion, or delivery for a family dinner, we believe this customizable unique experience drives repeat business and brand loyalty.

individual / combo meals / family packs) that allow guests to eat Wingstop during any occasion, whether it is a quick carry-out snack, a party size order for their favorite group occasion, or delivery for a family meal, we believe this customizable unique experience drives repeat business and brand loyalty.

Our vision is to become a Top 10 Global Restaurant Brand.

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– expanding our global footprint.

This approach is built upon the foundation of our investments in the people and infrastructure necessary to build our organization for the next level.

Sustaining Long-Term Same Store Sales Growth through Brand Awareness and Innovation

We believe in sustaining long-term same store sales growth through brand awareness.

The foundation of this approach is our culture, which we define as The Wingstop Way, and our investment in people as a competitive advantage necessary to build our organization for the next level.

The Wingstop Way includes a core value system of being Authentic, Entrepreneurial, Service-minded, and Fun.

The Wingstop Way extends to the brand’s environmental, social and governance platform as Wingstop seeks to provide value to all stakeholders.

Sustaining Long-Term Same Store Sales Growth

We believe in sustaining long-term same store sales growth through a combination of brand awareness, menu innovation, expansion of our delivery channels, data-driven marketing and maximizing our digital leadership position.

Our national advertising program is funded through the Wingstop Restaurants Advertising Fund (the “Ad Fund”), a consolidated not-for-profit advertising fund for which a percentage of gross sales is collected from Wingstop restaurant domestic franchisees and company-owned restaurants to be used for various forms of advertising for the Wingstop brand.

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We believe the growing popularity of the Wingstop experience and the operational simplicity of our restaurants translate into attractive economics at our franchised- and company-owned locations.

Existing franchisees accounted for approximately 93% of franchised restaurants opened in 2021 and approximately 94% of franchised restaurants opened in 2020, which we believe further underscores our restaurant model’s financial appeal.

Existing franchisees accounted for more than 90% of franchised restaurants opened in each of 2021 and 2022, which we believe further underscores our restaurant model’s financial appeal.

Upon opening, our restaurant volume generally builds year after year.

Our domestic average unit volume (“AUV”) has grown consistently, approximating $1.6 million during fiscal year 2022.

Our operating model targets a low average estimated initial investment of approximately $400,000, excluding real estate purchase or lease costs and pre-opening expenses.

Our domestic operating model targets a low average estimated initial investment of approximately $440,000, excluding real estate purchase or lease costs and pre-opening expenses.

In year two of operation, we target a franchisee unlevered cash-on-cash return of approximately 50%+.

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This includes laying the groundwork for a global supply chain to support expansion of our global footprint, as well as creating a consistent digital presence centered around our global technology strategy which includes expanding our best-in-class domestic digital platform internationally.

We believe that there is significant opportunity to expand globally, and we intend to focus our efforts on increasing our geographic penetration in both existing and new domestic markets, as well as international markets.

We believe that there is significant opportunity to continue to expand globally, and we intend to focus our efforts on increasing our geographic penetration in both existing and new domestic markets, as well as international markets.

We believe our highly-franchised model positions us for continued strong unit growth over the medium- and long-term.

We expect franchisee demand for our brand, supported by compelling unit economics, operational simplicity, low entry costs, and flexible real estate profile, to drive global restaurant growth.

We believe we can achieve our domestic restaurant potential by expanding in our existing markets where we believe we can double our current restaurant count, as well as continuing to expand into emerging markets.

We believe we can achieve our domestic restaurant potential by doubling our current footprint through expansion in both existing and emerging markets.

Our domestic market expansion strategy focuses on maximizing our brand market share and visibility in key priority markets.

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We also believe that there is a significant opportunity to grow our business internationally.

As of December 25, 2021, we had 197 international restaurants located in six countries, all of which were franchised.

In fiscal year 2021, we opened 34 international locations.

As of December 31, 2022, we had 238 international restaurants located in eight countries, all of which were franchised.

In fiscal year 2022, we opened 45 international restaurants.

We believe that our restaurant operating model translates well internationally based on our small real estate footprint, our simplicity of operations, the universal and broad appeal of chicken, and our ability to customize our wide variety of flavors to local tastes.

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Franchise Overview

Our franchisees operated a total of 1,695 restaurants in 44 states and seven countries as of December 25, 2021.

Our franchisees operated a total of 1,916 restaurants in 44 states and nine countries as of December 31, 2022.

We have rigorous qualification criteria and training programs for our franchisees and require them to adhere to strict operating standards.

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We may terminate the franchise rights of any franchisee who does not comply with our standards and requirements.

We believe that maintaining superior food quality, an inviting and energetic atmosphere, and excellent guest service are critical to the reputation and success of our concept.

We believe that

maintaining superior food quality, an inviting and energetic atmosphere, and excellent guest service are critical to the reputation and success of our concept.

Therefore, we enforce the contractual requirements of our franchise agreements.

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This increase is consistent with our strategy to grow with our existing franchisees.

As of December 25, 2021, our domestic franchise base had an average restaurant ownership of approximately six restaurants per franchisee and an average tenure of twelve years.

As of December 31, 2022, our domestic franchise base had an average restaurant ownership of approximately seven restaurants per franchisee and an average tenure of thirteen years.

Franchise Agreements

We enter into franchise agreements with U.S.

franchisees under which the franchisee is generally granted the right to operate a restaurant in a particular location, typically providing for a 10-year initial term, with an opportunity to enter into one or more renewal franchise agreements subject to certain conditions.

We enter into area development agreements with U.S.

franchisees, pursuant to which they are granted the right to develop restaurants in a defined market area.

Franchisees pay a $10,000 development fee per restaurant to-be-developed at the time a development agreement is signed, which fee is not refundable.

When a mutually agreeable site for a restaurant has been chosen, we enter into a franchise agreement with the franchisee, under which the franchisee is generally granted the right to operate a restaurant in a particular location, typically providing for a 10-year initial term, with an opportunity to enter into one or more renewal franchise agreements subject to certain conditions.

We generally update and/or revise our franchise agreement on an annual basis and, as a result, the agreements we enter into with individual franchisees may vary.

Our franchise documents currently provide that franchisees must pay a franchise fee of $20,000 for each restaurant opened.

If a franchisee has entered into an area development agreement to develop restaurants in a defined market area with us (which occurs, in most cases, even if a franchisee wants to develop only one restaurant), the aggregate initial fee is $30,000 for each restaurant, which includes a $10,000 development fee per restaurant.

The $10,000 development fee per restaurant to-be-developed is paid in full at the time a development agreement is signed for the grant of development rights and is not refundable.

Under our current standard franchise agreement, each franchisee is required to pay us a royalty of 6% of their gross sales net of discounts.

Each restaurant also contributes 4% of gross sales net of discounts to fund national marketing and advertising campaigns.

Beginning in fiscal year 2022, the contribution rate will increase to 5% of gross sales net of discounts.

Each restaurant also contributes 5% of gross sales net of discounts to the Ad Fund to fund national marketing and advertising campaigns.

The national advertising fund contribution rate increased to 5% from 4% effective the first day of the fiscal second quarter 2022.

These funds are managed by the Ad Fund and are primarily used to create advertising content and purchase digital and television advertising on a national level.

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Our franchisees are required to purchase all chicken, groceries, produce, beverages, equipment and signage, furniture, fixtures, logo-imprinted paper goods, and cleaning supplies solely from suppliers that we designate and approve.

Our supply partners are required to meet strict quality standards to ensure food safety.

Our supply partners are required to meet strict quality standards.

We regularly inspect vendors to ensure our standards are being met and that prices offered are competitive.

The principal raw materials for a Wingstop restaurant operation are bone-in and boneless chicken wings.

We also have a Global Supplier Code of Conduct that outlines the standards and business practices that we expect of all our direct and extended suppliers as we strive to meet the highest standards of business conduct.

The principal raw materials for a Wingstop restaurant operation are bone-in and boneless chicken wings, tenders, and chicken fillets.

Therefore, chicken is our largest product cost item and represented approximately 60% of all purchases for the 2022 fiscal year.

Company-owned and franchised restaurants purchase their bone-in and boneless chicken wings from suppliers that we designate and approve.

Company-owned and franchised restaurants purchase their bone-in and boneless chicken wings, chicken tenders, and chicken fillets from suppliers that we designate and approve.

Our chicken supply is diversified both geographically and with a broad range of suppliers supporting the Wingstop system.

We designate sources for potatoes to ensure that they are grown to our specifications.

We also require franchisees to use our proprietary sauces, seasonings, and spice blends and to purchase them and other proprietary products only from designated sources.

All food items and packaging goods for Wingstop restaurants are sourced through one distributor, Performance Food Group (“PFG”).

There are 16 geographically diverse PFG distribution centers, which carry all products required for a Wingstop restaurant and service all of Wingstop’s domestic restaurants.

All food items and packaging goods for Wingstop restaurants are currently sourced through one distributor, Performance Food Group (“PFG”).

Currently, there are 17 geographically diverse PFG distribution centers, which carry all products required for a Wingstop restaurant and service all of Wingstop’s domestic restaurants.

PFG is contractually obligated to deliver products to our restaurants at least twice weekly.

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We have an online ordering platform and mobile ordering applications that integrate with third party delivery providers and our POS system, which makes it easy for our guests to order-ahead, and which we believe leads to higher check averages.

We require our franchisees’ electronic information systems, including POS systems, comply with and maintain established network security standards, including applicable Payment Card Industry and data privacy standards.

We require our franchisees’ electronic information systems, including POS systems, to comply with and be maintained in accordance with established network security standards, including applicable Payment Card Industry and data privacy standards.

Human Capital Resources

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and acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce.

We are committed to fostering an environment of diversity and inclusion, including among our board of directors, and having diverse representation across all levels of our workforce.

Diversity, Equity, and Inclusion

We are committed to fostering an environment of diversity, equity, and inclusion, including among our board of directors, and having diverse representation across all levels of our workforce.

Examples of some of our recent efforts and metrics include:

• we implemented unconscious bias training for all our corporate team members;

• currently 60% of our franchisees and 50% of our board of directors classify as diverse;

• we are a member of the Women’s Foodservice Forum;

• we launched a partnership with Disability Solutions to help reach talented and qualified people with disabilities to serve on our Wingstop team;

• our Chief Executive Officer joined the CEO Action for Diversity and Inclusion.

• diversity and inclusion education training was offered to team members throughout the year;

• 60% of our franchisees and 56% of our board of directors identify as diverse;

• 86% of our team members identify as diverse;

• we are a member of the Women’s Foodservice Forum and the Multicultural Foodservice & Hospitality Alliance Group.

We are also committed to providing competitive pay to compensate and reward our team members.

All corporate management and staff and restaurant management positions, including hourly assistant managers and shift leaders, are eligible for performance-based cash incentives.

All corporate management and staff and restaurant management positions for company-owned restaurants, including hourly assistant managers and shift leaders, are eligible for performance-based cash incentives.

Our incentive plan reinforces and rewards individuals for achievement of specific company and/or restaurant business goals.

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Our core health and welfare benefits are supplemented with a variety of voluntary benefits and paid time away from work programs.

Since the onset of the COVID-19 pandemic, we have continued a strong focus on team member well-being, health and safety.

We maintain a strong focus on team member well-being, health and safety.

Another area of focus for us is investing in people and infrastructure to build the organization for the next level.

In addition to seeking to acquire new talent in the marketplace that share our values and goals, we recognize and support the growth and development of our team members and offer opportunities to participate in regular talent and development planning reviews to assist us with growing our internal restaurant teams, resulting in a majority of current managers of company-owned restaurants being promoted from within.

Government Regulation

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Fair Labor Standards Act, the U.S.

Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act, and various other federal and state laws governing matters such as minimum wage requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.

significant number of our and our franchisees’ food service personnel are paid at rates related to the applicable minimum wage, and past increases in the minimum wage have increased our and our franchisees’ labor costs, as would future increases.

Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act, and various other federal and state laws governing matters such as minimum wage

requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.

A significant number of our and our franchisees’ food service personnel are paid at rates related to the applicable minimum wage, and past increases in the minimum wage have increased our and our franchisees’ labor costs, as would future increases.

Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs for goods and services supplied to us and our franchisees.

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However, we cannot predict the effect of possible future environmental legislation or regulations.

During the 2021 fiscal year, there were no material environmental compliance-related capital expenditures.

During the 2022 fiscal year, we had no material environmental compliance-related capital expenditures.

Community Involvement

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We are committed to strengthening the communities we serve by being strong, active, corporate citizens and good neighbors.

In fiscal year 2021, more than 120 organizations and team members received grants or team member assistance.

In fiscal year 2022, more than 82 community organizations received grant funding from Wingstop Charities, and we also launched the Morrison Family Scholarship Program which provides scholarship opportunities for team members who are first-generation college students.

In fiscal year 2020, we donated $1 million to the National Restaurant Association, Educational Foundation’s Restaurant Employee Relief Fund, and in partnership with our franchisees, donated more than one million meals to frontline workers and COVID-19 first responders.

Since its inception, Wingstop Charities has donated over $1 million through local grants and team member assistance.

In addition, Wingstop Charities has donated over $1.5 million through local grants, team member assistance and scholarships since its inception.

To learn more about how Wingstop Charities is making an impact in our local communities, visit www.wingstopcharities.org.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business