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..
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.
Are you interested in owning a Wingstop franchise? Continue reading to see if the franchise is worth your investment.
The The amount of funds necessary to begin operations of a business or franchise including the first three months of operation. 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 The value of the total finished and unfinished goods and materials the business holds for future sale..
|Type of Expenditure||Amount||Method of payment||When due||The whom payment is to be made|
|Each in Lump Sum|
Development Fee: Signing of Development Agreement
Franchise Fee: Signing of Franchise Agreement
|Rent||Refer to note 5 below||Refer to note 5 below||Refer to note 5 below||Refer to note 5 below|
|Security Deposits||$0 – $10,000||Lump Sum||Per Lease/ Utility Company Requeriments||Landlord/ Utilities/ Insurance Companies|
|Architectural/ Engineering Fees||$9,400 – $24,000||Per Architectural Consultant’s Professional Services Agreement||Per Architectural Consultant’s Professional Services Agreement||Architectural Professional|
|Type of expenditure||Amount||Method of payment||When due||To whom payment is to be made|
|Professional Fees||$2,500 – $7,500||As Incurred||As Incurred||Your attorney, accountant, and other professionals|
|Leasehold Improvements||$167,500 – $391,000||Negotiable||Contract Terms||General Contractor|
|Business and Operating Permits||$4,500 – $8,500||As Incurred||As Incurred||Licensing Authorities|
|Décor Package||$2,400 – $25,200||Lump Sum||Prior to Installation||Approved Independent Suppliers|
|Furniture, Fixtures, Audio/Visual System, Equipment and Small-wares||$60,700 – $140,000||Vendor’s Terms||Vendor’s Terms||Approved Independent Suppliers|
|Point-of-Sale, Back Office, Kitchen Display Software and Hardware and Related Items||$17,000 – $24,600||Vendor’s Terms||Vendor’s Terms||Suppliers|
|Signs||$4,600 – $27,300||Vendor’s Terms||Vendor’s Terms||Approved Independent Suppliers|
|Opening Inventory||$10,000 – $16,000||Vendor’s Terms||Vendor’s Terms||Approved Independent Suppliers|
|Opening Publicity and Promotions||$5,000 – $15,000||Per Contract||As Incurred||Independent Suppliers|
|Additional Funds – 3 months||$25,000 – $40,000||Cash||As Needed||Various|
|TOTALS (Excluding real estate purchase and lease costs)||$347,600 – $759,100|
Royalty Fees: 6% of Gross The total amount in dollars made in the business before expenses are deducted. See also Gross Revenue. (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.
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 sales||Estimated Profits||Time to recoup investment (including 2.5 years for scaling up)|
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 sales||Estimated Profits||Time to recoup investments|
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
$1 Million – $5 Million Net Sales
Over $5 Million Net Sales
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.
|December 26, 2020||December 28, 2019||December 29, 2018|
|Royalty revenue, franchise fees and others||$108,883||$88,291||$71,858|
|Advertising fees and related income||74,930||55,932||34,484|
|Company-owned restaurant sales||64,998||55,453||46,839|
|Cost and Expenses:|
|Cost of sales||48,583||41,105||32,063|
|Selling, general and administrative||68,985||57,295||44,579|
|Depretiation and amortization||7,518||5,484||4,313|
|Gain on sale of restaurants and other expenses, net||(3,093)||–||–|
|Total cost and expenses||191,421||156,775||114,654|
|A payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum, at a particular rate. In Vetted Biz, it is typically the additional rate of a loan a business buyer would pay off… expense, net||16,782||17,136||2,241|
|Loss on debt extinguishment and refinancing transactions||13,665||–||–|
|Income before income tax expense||26,943||25,765||36,286|
|Income tax expense||6,860||6,764||8,783|
Wingstop Holdings is the franchisor of all Wingstop restaurants and in the last three years, the company has been When the earnings in a given period of time is more than the expenses in a business. with an average net income of $22 million. Royalty revenues and franchise fees contribute majorly to Wingstop’s total revenue.
|December 26, 2020||December 28, 2019||November 14,2018 (inception) to December 29, 2018|
|Adjustments to reconcile net income to cash provide by operating activities|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||–||330||–|
|Cash provided by operating activities||115,415||91,285||9,583|
|Cash provided by (used in) investing activities||–||–||–|
|Contributions from affiliates||–||–||234|
|Distributions to affiliates||(114,485)||(91,016)||(8,427)|
|Cash used in financing activities||(114,485)||(91,016)||(8,427)|
|Net increase in restricted cash||930||269||1,390|
|Restricted cash at beginning of period||1,659||1,390||–|
|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 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.
|Outlet Type||Year||Outlets at the Start of the Year||Outlets at the End of the Year||Net Change|
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.
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.