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Wingstop Franchise Opportunity For 2022

Written by: Collins Kibet
Last Updated: January 26, 2022
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wingstop store

Wingstop is a restaurant that serves cooked-to-order, hand-sauced and tossed chicken wings, boneless wings, tenders, and fresh-cut, seasoned fries, and beverages. It began as a small buffalo-style chicken wing restaurant in Garland, Texas in 1994 and quickly became a fan favorite.

Driven by its mission to serve the world flavor, Wingstop has opened more than 1,500 restaurants across the globe..

wing stop franchise


In 1997, Wingstop opened its first franchised location and by 2022, they had served the world one billion wings. Wingstop has over
1300 franchised locations across the United States. Charlie Morrison  is the chairman and CEO of Wingstop and has served in that position since June 2012. 

Buffalo Wings, Bojangle’s Restaurants Inc., and Zaxby’s are the top 3 competitors of Wingstop in the chicken wings’ business and you can learn more about them in our site on the provided links.

Are you interested in owning a Wingstop franchise? Continue reading to see if the franchise is worth your investment.

How much is a Wingstop Franchise?


The initial investment necessary to begin operation of a Wingstop restaurant ranges from $347,600 to $759,100, excluding real estate purchase and lease costs. This includes $30,000 that must be paid to the franchisor or affiliate. Additionally, if you want development rights for more than one restaurant, you must pay the franchisor a development fee equal to $10,000 multiplied by the number of restaurants you commit to develop.

The table below shows the breakdown of the initial investments into specific expenses like franchise fees, development fees, rent and operating inventory.

Type of ExpenditureAmountMethod of paymentWhen dueThe whom payment is to be made

Initial Fees:

Development Fee

Franchise Fee

$10,000

$20,000

Each in Lump Sum

Development Fee: Signing of Development Agreement

Franchise Fee: Signing of Franchise Agreement

 Us
RentRefer to note 5 below Refer to note 5 below Refer to note 5 below Refer to note 5 below
Security Deposits$0 – $10,000Lump SumPer Lease/ Utility Company RequerimentsLandlord/ Utilities/ Insurance Companies
Architectural/ Engineering Fees$9,400 – $24,000Per Architectural Consultant’s Professional Services AgreementPer Architectural Consultant’s Professional Services AgreementArchitectural Professional


Buy FDD

Type of expenditureAmountMethod of paymentWhen dueTo whom payment is to be made
Professional Fees$2,500 – $7,500As IncurredAs IncurredYour attorney, accountant, and other professionals
Leasehold Improvements$167,500 – $391,000NegotiableContract TermsGeneral Contractor
Business and Operating Permits$4,500 – $8,500As IncurredAs IncurredLicensing Authorities
Décor Package$2,400 – $25,200Lump SumPrior to InstallationApproved Independent Suppliers
Furniture, Fixtures, Audio/Visual System, Equipment and Small-wares$60,700 – $140,000Vendor’s TermsVendor’s TermsApproved Independent Suppliers
Point-of-Sale, Back Office, Kitchen Display Software and Hardware and Related Items$17,000 – $24,600Vendor’s TermsVendor’s TermsSuppliers
Signs$4,600 – $27,300Vendor’s TermsVendor’s TermsApproved Independent Suppliers
Opening Inventory$10,000 – $16,000Vendor’s TermsVendor’s TermsApproved Independent Suppliers
Opening Publicity and Promotions$5,000 – $15,000Per ContractAs IncurredIndependent Suppliers
Additional Funds – 3 months$25,000 – $40,000CashAs NeededVarious
TOTALS (Excluding real estate purchase and lease costs)$347,600 – $759,100   


Wingstop
Franchise Ongoing Cost and Fees

Royalty Fees: 6% of Gross Sales (Under the 2020 Incentive Program, the Royalty will be 2% of Gross Sales during the Restaurant’s first full year of operation, 4% of Gross Sales during the Restaurant’s second full year of operation, and 6% during the remaining franchise term)

Ad Fund: 4% of Gross Sales

Local advertising takes about 2% of the quarterly Gross Sales.

How much do Wingstop Franchise Owners make?

2019 Measured Period

The 2019 median annual net sales of all franchised  Wingstop restaurants was $1,892,388.

Of the 1067 franchised restaurants in 2019, 463 of them had net sales greater than the average. 

Based on the 2019 median net sales and the midpoint initial investment, the table below shows the time it will take you to recoup your initial investment with a 10%, 15%, and 20% annual profit margins.

Initial investment (Mindpoint)%Profit margin of median franchise salesEstimated ProfitsTime to recoup investment (including 2.5 years for scaling up)
$553,35010%$189,2385.5 years
$553,35015%$283,8584.5 years
$553,35020%$378,4774 years

2020 Measured Period

The 2020 median annual net sales of all franchised Wingstop restaurants was $1,359,722.

Of the 1151 franchised restaurants in 2020, 484 of them had net sales greater than the average. 

Based on the 2020 median net sales and the midpoint initial investment, the table below shows the time it will take you to recoup your initial investment with a 10%, 15%, and 20% annual profit margins.

Initial Investment (Mindpoint)%Profit margin of median franchise salesEstimated ProfitsTime to recoup investments
$553,35010%$135,9726.5 years
$553,35015%$203,9585 years
$553,35020%$271,9444.5 years


Is the
Wingstop Franchise Profit Worth the Franchise Cost?

 ganancias en wingstop


To assign a
valuation multiple for Wingstop franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for Wingstop Franchise specifically since its  transaction data was  available on the DealStats website.

Under $1 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.31

$1 Million – $5 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.34

Over $5 Million Net Sales

  • Estimated Selling Price = Net Sales * 0.86

The estimated selling price also known as the Market Value of Invested Capital (MVIC) is the total consideration paid on the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer. Based on this information, we can calculate the resale value of a Wingstop Franchise.

Based on the median multiple of 0.34 and net sales averaging $1,349,561 between 2019 and 2020, a Wingstop Franchise would sell for $458,850. The resale value is less than the midpoint investment of $553,350 by about $94,500 which is not a very significant difference.

However, since the median multiple of net sales averaging over $5 million is high at 0.86, owning multiple Wingstop franchises increases your earning potential from a resale. For example, if you own 10 Wingstop franchises, the average net sales would be about $13,495,610. With the median multiple of 0.86, the resale value of the 10-franchise system would be approximately $11,606,228. 

Comparing the resale value to the initial midpoint investment of  $5,533,500 for the 10 franchises, we see that the Wingstop makes a significant net gain of over $6 million. In addition to the lucrative proceeds, private equity firms are more interested in investing in multi-unit franchise systems than individual owned operators.

Wingstop Holdings Inc. Income Statement

 December 26, 2020December 28, 2019December 29, 2018
Revenue:
Royalty revenue, franchise fees and others$108,883$88,291$71,858
Advertising fees and related income74,93055,93234,484
Company-owned restaurant sales64,99855,45346,839
Total Revenue248,811199,676153,181
Cost and Expenses:
Cost of sales48,58341,10532,063
Advertising expenses69,42852,89133,699
Selling, general and administrative68,98557,29544,579
Depretiation and amortization7,5185,4844,313
Gain on sale of restaurants and other expenses, net(3,093)
Total cost and expenses191,421156,775114,654
Operating income57,39042,90138,527
Interest expense, net16,78217,1362,241
Loss on debt extinguishment and refinancing transactions13,665
Income before income tax expense26,94325,76536,286
Income tax expense6,8606,7648,783
Net income$20,083$19,001$25,503


Wingstop Income Statement Key Insights

Wingstop Holdings is the franchisor of all Wingstop restaurants and in the last three years, the company has been profitable with an average net income of $22 million. Royalty revenues and franchise fees contribute majorly to Wingstop’s total revenue. 

Wingstop Holdings Inc. Cash Flow Statement

 December 26, 2020December 28, 2019November 14,2018 (inception) to December 29, 2018
Operating activities
Net income$110,278$89,172$9,497
Adjustments to reconcile net income to cash provide by operating activities
Amortization$1,310$1,322169
Changes in operating assets and liabilities:
Accounts receivable629(420)(293)
Prepaid expenses and other assets330
Deferred revenue3,198881210
Cash provided by operating activities115,41591,2859,583
 
Investing activities
Cash provided by (used in) investing activities
 
Financing activities
Contributions from affiliates234
Distributions to affiliates(114,485)(91,016)(8,427)
Cash used in financing activities(114,485) (91,016)(8,427)
 
Net increase in restricted cash9302691,390
Restricted cash at beginning of period1,6591,390
Restricted cash at end of period$2,589$1,659$1,390
 
Supplemental disclosure of non-cash activities:
Contributions of net assets from affiliate$ –$ –$27,176


Wingstop
Cash Flow Key Insights

wingstop cash flow


Wingstop Holdings LLC has not spent any money in investment activities in the last three years as shown on in the cash flow statement above. Most of their cash has therefore been spent in financing and operating activities. At the end of 2020, 2019, and 2018, the company  had about
$2.5 million, $1.65 million, and $1.39 million respectively in restricted cash. The company is therefore financially healthy since it has sufficient funds to operate and it reported net profits on its income statement for the periods ended in 2020, 2019, and 2018.

How many Wingstop units have opened and closed?

Outlet TypeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
Franchised

2018

2019

2020

1,004

1,095

1,199

1,095

1,199

1,320

+91

+104

+121

Company-Owned

2018

2019

2020

23

29

31

29

31

32

+6

+2

+1

Total Outlets

2018

2019

2020

1,027

1,124

1,230

1,124

1,230

1,352

+97

+106

+122


There were a total of
1320 franchised Wingstop units at the end of 2020 which was 121 more than the previous year. Franchised units have continued to increase from 2018 to 2020 with no record of franchises closing down. This consistent growth indicates the success that Wingstop franchisees have been experiencing over the last few years. As a potential Wingstop franchisee, you may want to speak to a few of these franchised outlets to help you inform your decision.

Is it worth investing in a Wingstop Franchise?

The consistent growth of Wingstop franchise units and the net income reported by Wingstop Holdings LLC (the franchisor) over the last three years are indicative of the company’s success in the franchise business. Owning a Wingstop franchise is a worthy investment as you are reasonably assured of recouping your initial investment in less than 6 years of operation with a profit margin of 10% or more of your median net sales.

We recommend speaking to at least 5 Wingstop franchisees to better understand their business models and financials.

Think you are interested in owning a Wingstop franchise or another franchise in the Food and Beverage industry? Check out our listings page on the Vetted Biz website for much more information about franchise opportunities.

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