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Wingstop CEO on overcoming supply chain issues: 'Use more of the chicken'

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Wingstop CEO Charlie Morrison joins Yahoo Finance Live to discuss the company's digital strategy, supply chain challenges, and high wing prices.

Video Transcript

BRIAN SOZZI: All right, welcome back to Yahoo Finance Live. Wingstop putting up a pretty savory quarter here on the back of really strong inflation in various prices, but also good response to their various menu initiatives. Let's bring in Wingstop CEO Charlie Morrison. Charlie, always great to get some time with you. Appreciate you taking the time.

Maybe you can settle this debate for us-- there's been some stories recently on a wing shortage. Are you seeing that in your business? And if so, any sign that is about to abate?

CHARLIE MORRISON: No, there's not a wing shortage. The supply has been really tight for quite some time. The prices have been really high. And a lot of that is fueled by labor shortages in a lot of the chicken plants and the suppliers that support us. But for Wingstop, we've been able to demonstrate really strong growth, continue to add wings to our business, and it hasn't presented a challenge other than the inflationary factor that's affecting so many businesses.

JULIE HYMAN: And speaking of that inflationary factor, you did talk a little bit about pricing in the release and in the conference call. And it sounds like that some of the-- explain for me please, if you would, you guys talked about that you had price increases, what, of about 10% or so year-over-year. But then it sounds like that those increases are not going to be borne out over the course of the year. In other words, if there are increases, they're definitely going to be smaller as the year goes on. Am I interpreting that right?

CHARLIE MORRISON: Yeah. Last year, we took about five points of price early in the year in anticipation and also seeing some of the commodity increases we were dealing with. Towards the back half of the year, really in the fourth quarter, we took another five points of price. That's about 10 points total for the year.

We're going to start rolling over some of that in the first quarter of this year. And then the rollover effect of that will wane as the year goes on. We don't anticipate taking significantly much more price in 2022, other than our natural cadence, which has always been about one to two points to price per year. And that'll take effect towards the back half of the year.

BRIAN SOZZI: Charlie, you continue to be one of the most resourceful companies in thinking through ways just to combat this inflation. I think you've recently came out with thigh bites, using thighs to put together something boneless and something margin favorable. What other measures are you looking at here?

CHARLIE MORRISON: Well, this is all part of a strategy of trying to utilize more of the chicken, quite frankly. We've always been great about having our wings for Wingstop-- certainly the breast meat for our boneless product. But actually, the ability to use the entire bird gives us a real advantage in supply chain and managing that. And it has to do with utilization.

We can take more control of the supply chain by doing so and start to look at ways that we can integrate our business into the chicken business more and alleviate a lot of the volatility we've seen. The thigh bites were a great example of that. It launched mid-year last year, has been a successful campaign for us. And we expect to continue to see that grow throughout not just this year, but well into the future.

BRIAN SOZZI: Full disclosure, I ordered 30 boneless wings for my Super Bowl party-- enjoyed the experience. I walk into my local Wingstop, I saw a lot of digital orders. It was packed. I mean, that's a high class problem to have.

But how large is your digital business right now as a percentage of sales? And then as you think about opening new restaurants, do you need any restaurants with seats in them?

CHARLIE MORRISON: Yeah, we have eclipsed over a billion and a half dollars of system-wide sales in digital alone. That represents a little over 60% of our total sales. And your point is valid-- we have not opened a lot of our dining rooms since we closed them in the pandemic. Some are in the right markets, but not everywhere.

We just debuted a brand new concept that has no seats in it, it's digital focused, it's already achieving over 70% of our sales as digital. We believe we can digitize every transaction at Wingstop. The next big milestone for us is ways to take care of phone orders and turn those into digital transactions.

The real benefit for Wingstop and our franchisees is that every transaction that comes through a digital channel is about a $5 higher average ticket. So it's really profitable for the business, better for the guest in terms of controlling the menu and the experience, and it's something we're going to keep working on diligently.

JULIE HYMAN: And so kind of following up on that, you all raised your target for the eventual number of stores you want to open to 4,000. I think that's 200 target this year. How are those going to look different or maybe even be designed differently, given that changing shift of how customers are ordering and eating?

CHARLIE MORRISON: Yeah. I think you'll see in the future a change in our prototype to become smaller, fewer seats, more digital-focused. We also have started working in earnest on ghost kitchens as a key part of our strategy. The best example of that is our recent introduction of the brand into Manhattan.

And we started with a ghost kitchen. We've complemented it with a couple of other street-side locations. We're going to continue to build out the borough of Manhattan over the course of the next year or two. But it's a good demonstration even of what we've seen in the UK.

The complement of both ghost kitchens and street-side locations, we think, is the best way to penetrate big markets, existing markets with Wingstop. And quite frankly, we think there's more density for us to go get by way of this strategy and thus, why we believe that 4,000 restaurants is the right number in the future.

BRIAN SOZZI: Charlie, lastly, you've got asked a little bit on the earnings call-- any new menu innovations coming up? Do you have anything coming down the pike?

CHARLIE MORRISON: You know, right now, we're focused on optimizing the supply chain. That's step one so that when we do see this inflation subside, we're going to focus on making sure that we mitigate that for the future. We recently just launched a new flavor, orange szechuan. It's been a fan favorite, like others.

Over the course of the next year or two, you'll continue to see new flavor introductions, some new ideas. But right now, our focus is on the dark meat with our thigh bites, continuing to build that business model, and then working on the supply chain.

BRIAN SOZZI: Well, I still have not tried those thigh bites. But to your point, I have spent a little more on the app. I just keep ordering extra sauces. It's a true story. Always good to see you, Wingstop CEO Charlie Morrison. We'll talk to you soon.