Wingstop Inc. (WING) Earnings Call Transcript & Summary

Good morning. Welcome to Wingstop's Investor Day. It is great to see everybody. A special welcome to everyone who's joining us via the webcast. And obviously, a welcome to all of you who are here with us at our global support center in the investment community. We're happy to have you here, and it's good to see everyone. And a special welcome as well to our GSE team members who are joining in on our presentation today. It's an exciting time to be at Wingstop, and we're excited to share our strategy and our story with you today. Our presentation today will include forward-looking statements as well as non-GAAP measures. Included on Slide 3 is a description on how those will be used today in our conversation. There are really 4 key objectives that we want to accomplish today. The first is to take a deep dive on our strategy and make sure everyone is anchored on our strategic path forward. I also want to provide an opportunity to get to know the Wingstop leadership team, as well as experience some innovative ideas that we believe will ensure successful delivery of our strategy. And lastly, take a deep dive on our international business and the outlook there, a business that has emerged from these last 2 years in a position of strength, and we believe is supercharged for growth. And so we're excited to talk about that. We want to start with our mission and our vision. Our mission is to serve the world flavor, and I want to unpack that a little bit. When we think about serve, that includes not only delivering a world-class guest experience, it also means providing the Wingstop family with opportunities to grow and prosper. It means to provide best-in-class returns, and it means to serve those in our communities. And when we think of the world, that includes, obviously, our guests. It includes our GSE team members here today. It includes our brand partner community or our franchisees. It also includes our supplier partners as well as our shareholders and those that live in the communities in which we operate. And then flavor, we really think of that in 2 ways. Obviously, flavor in food and then as well as flavor of life. And we believe this mission really supports the long-term potential we have for our brand, which is our vision to build Wingstop into a top 10 global restaurant brand. When you combine our AUV growth with the unit potential opportunity we have of over 7,000 units, we believe that puts us squarely within a top 10 global restaurant brand. Wingstop, it's hard to believe, but next month will mark 7 years since our IPO, and we have demonstrated a proven track record over those 7 years. We've scaled this brand into a $2.3 billion system sales brand. Our AUVs today are at $1.6 million, and we've scaled our database to over 28 million users strong that's built on a digital business that represents 62% of our sales mix. We're almost 1,800 restaurants today and we're in 7 global markets and counting. And we have a proven growth algorithm. If we just look at the past 5 years, we've grown system sales at a CAGR of 19.3%. If you look at our domestic same-store sales stacked over that same time period, they've grown almost 50%. And then we've opened almost 800 restaurants in that same time period, which translates to a unit development CAGR of 11.6%. And we're executing all this growth in a highly franchised asset-light model which has yielded an adjusted EBITDA CAGR over that same time period of almost 22%. Truly remarkable results. And in fact, we believe when you stack it up to other top 10 brands out there, Wingstop's results are industry leading and something we're proud of. I want to take a minute and talk a little bit about 2021. This is a year where we believe that really showcased the resiliency of our model. 2021 was a year where we posted same-store sales growth of 8%. That's on top of 20% in 2020. We opened a record number of restaurants, 193 net new units, in 2021. We exited the year with the strongest pipeline ever of over 1,100 restaurant commitments. And of course, that flowed through in our asset-light efficient model to 23% EBITDA growth. But I want to talk about the backdrop in which we delivered another record year for Wingstop. Our business in 2021 experienced inflation in the spot market on the Urner Barry of over 70%. There is not another brand out there that can weather those kind of -- that kind of inflation and yet deliver another record year, have the support and momentum behind it from its brand partners. And so I believe it really showcases the strength of our model. And one of those things that we point to that has really enhanced, almost fortified the unit economics of a Wingstop restaurant, is how we've exploded our AUV growth over this time period. As I mentioned today, we're at $1.6 million, and that level of annual unit volume is just strengthening the returns that our brand partners enjoy. This next chart is one of my favorite charts to share about Wingstop and it really highlights a unique attribute about our brand. And what we've done here is we've lined up our 2009 vintage all the way to 2020 vintage. And the unique thing about Wingstop is our restaurants start strong but then build from there. And so what you can see on this chart is every vintage moving up and to the right, just showing that all vintages are growing as we continue to expand our brand, drive awareness and execute our strategy. But I really want to highlight how you can see every new vintage kept moving up a little bit, starting a little bit higher, and I'd like to specifically call out our 2020 vintage, which came in at $1.3 million on average. Again, truly strengthening the returns for our brand partners. And as we sit here today, I can remember back to just a few short years ago where we were sitting in front of this same group, our AUVs were about $1.1 million, and we had a clear line of sight. We knew what levers to pull to get to what we described a game-changing level of $1.5 million. And we sit here today, and we have as many levers to pull, if not more. I believe we're as confident, if not more confident today and the impact that, that can drive on our business. And you're going to hear from the team unpack each one of these levers today. But we sit here today in front of you and have a clear line of sight in taking our AUVs from $1.6 million to over $2 million. And we know that while our unit economics are pretty incredible today, where our unit volume is $1.6 million. And our average investment, our brand partners are enjoying a less than 2-year payback. And so as we continue to drive that top line growth and continue to drive AUVs, we know those economics only become further enhanced and those returns will just get that much stronger for our brand partner community. And you don't have to listen to it from me or the team, I think it shows up in the numbers and the excitement from our brand partners. You can see we're continuing to scale our footprint and grow, as I mentioned, closing in on 1,800 restaurants today. But then you see the pipeline, the demand for growth from our brand partners. The majority of it is coming from existing brand partners reinvesting. And so we sit here today with one of the strongest pipelines we've ever had. And it gives us confidence in our ability to execute against our long-term potential. You combine the top line growth and what we believe we can do with AUVs, the strong unit economics and then the demand from our brand partners, and it gives us a high degree of confidence in building and scaling Wingstop to its potential of over 7,000 global restaurants. We view that as over 4,000 in the U.S. and then 3,000 outside of the U.S. And as we sit here today with roughly 1,800 restaurants, a ton of wide space in front of us, so we're really excited about it. And we believe we have the strategy in place to execute on that long-term potential in front of us. And this strategy, it's fundamentally the same since our IPO. It starts in the foundation with preserving our culture and living the Wingstop way, as we describe it, and investing in our people, a lot of whom are in this room with us today, which really create what we believe a competitive advantage out there. But then on top of that, it's sustaining same-store sales growth. It's maintaining those best-in-class unit economics and returns for our brand partners, which we believe those 2 will translate to accelerated growth and ladder up to that vision of becoming a top 10 global restaurant brand. We're going to unpack each one of these in detail today for you, and I think you'll walk away with a little -- the same excitement that we share about the opportunity in front of Wingstop. As I mentioned, it all starts with people. And I am so privileged and honored to work with the best team in the industry. And you're going to hear from each one of them today. And I'm excited about how this is the team and who you're going to hear from is who's driving the business, driving the strategy day in and day out. And as it relates to people, unpacking our strategy and going deep there, there isn't a better person to take you through that than my good friend, Donnie Upshaw, our Chief People Officer.

Good morning. My name is Donnie Upshaw, and I'm the Chief People Officer here at Wingstop. I've been a team member for 4 years, and my favorite flavor is Mango Hab. I'd be remiss if I didn't thank my team. They are truly a very talented team, and I get to work with them day in and day out, and they bring these principles to life. I'd love to start with the Wingstop way. This is the anchors to our culture, and it influences our behaviors. This hasn't changed. The strength in our values and culture is what helped us navigate the most challenging time that we've seen as an organization. I'll start with the core, authentic. Of course, we have authentic experiences when we visit our Wingstop, we have authentic flavors. But the authenticity shows up in our people. We value diversity in experience and diversity in background, and we truly want people to bring their entire selves to work every single day. Entrepreneurial, this is what our brand is built on, the essence of our brand. We act with a sense of urgency. We're very decisive in our decisions, and we haven't lost that entrepreneurial spirit over the years. Next, service minded. Of course, we want to take care of our guests when they're in the store in our restaurants, but that's not where the service mind stops. Our peer-to-peer interactions and our interaction with our brand partners, we also want to be best-in-class service. And last but not least, fun. The way fun shows up at Wingstop is everybody is aligned with the mission and values of our organization. Everybody is moving in the same direction to accomplish our goals, and that is what truly what makes work fun at Wingstop. And we sell chicken wings, we don't take ourselves too seriously. I'll take you to the left of the Wingstop way, it's aspirational. These are our values that we aspire to be. We want to get better at, we're intentional about these things and we truly desire to be more disruptive, connected and agile as a brand. Accidental. These are values we don't want to show up. But everybody in this room, all of our team members, have the ability to hold each other accountable if they do show up, and we call it out. And last but not least, permission-to-play. These are table stakes, what it takes to be a team member at Wingstop and thrive. I'll jump into organizational health. We invested heavily in organizational health. We started at the very top of the organization because we know the tone of the organization is set at the top and we partner with the table group, which is built on the leadership principles of Patrick Lencioni. And then we permeate the organization with key teachings from the ideal team player and the advantage. The outcome of this is team members that feel connected and invested. What's an ideal team player? Humble, hungry and smart. Humble, of course, you put the team before yourselves, no big egos in the room. Hungry, a passion for your work, growth by learning, you want to get better every single day. And then last but not least, people smart, the ability to connect with individuals, whether it be a team member in our restaurant, a brand partner or even a Board member. And then now we have a cohesive team. We built a really strong cohesive team. It was important for us to be really clear about the expectations and provide clarity. Clarity around what our goals are and how we're going to accomplish those as a team. So we spent a lot of time reinforcing that clarity. We have significant focus on our investments in people, and we believe that's truly the success of our brand. We call it our 12th flavor, a rigorous process around how we develop and grow talent internally. And then we invested in those capabilities to enable that growth. Proactive pay benchmark and the market is really tight right now. So we spend a lot of time making sure that we got in front of the marketplace and invested in our team financially. We also made a lot of investments in leadership tools as well, and we have really high expectations of accountability and transparency around talent and performance. How we assess talent and those are reflected in our robust people processes. The payoff of these efforts are our proven results, and we believe we have the winning formula. A big investment is just building. And I know we have folks on the webcast that I won't be able to see it in person in all its glory. But this for us is truly a place where it fosters collaboration and teamwork. It's a place where we can innovate a space that we can grow into. And this for us is where our culture comes to life. One of the projects I'm really proud to have been a part of and worked on. It was definitely a team effort, but this building to me is best-in-class. So you heard about our robust performance management process. We have a truly proven track record for developing talent internally, a highly engaged team, a collaborative team. We've made key investments where it makes sense. And so we believe we're positioned to scale this brand and poised for our next phase of growth. Thank you very much for taking the time to listen today. Now I'd like to turn it over to Marisa Carona, our Chief Growth Officer, and she's going to unpack sustaining same-store sales.

Thanks, Donnie. You heard from Michael that our strategy largely hasn't changed since our IPO, and it's allowed us to continue to deliver topline sales. And hey, we have a clear line of sight into sustaining this growth. We have a track record of 18 consecutive years domestic same-store sales growth. This is a feat that few, if any, of our restaurant peers can may claim to. Our playbook has been proven throughout various macroeconomic cycles or changes in consumer sentiment. You see here, whether it was a recession of '08, '09, changes to the consumer sentiment post the 2016 election. During these times, we've been able to execute our playbook and present value to our guests, and not only persevere but thrive. As we sit here today, we believe we're at our next inflection point. Beginning Q2, we now have 1% of our local ad spend is now consolidated into our national ad fund. This brings our total ad fund contribution rate to 5%, allowing us to deliver more efficient advertising and premium media placement. As Michael mentioned, we've experienced explosive growth. AUV growth of 40% since our IPO, almost 50% same-store sales stacked since 2017. And we're just getting started. We believe we have a clear path to $2 million-plus AUVs and defined levers to achieve. We'll unpack these today. Begins with closing the gap on our brand awareness, menu innovation to drive frequency as well as open the aperture to new guests into our brand, increasing our delivery penetration. Our MarTech engine to deliver one-to-one messaging and relevant content to our guests, along with our path to deliver 100% digital transactions. Let's start with brand awareness. One of our biggest unlocks is closing the gap on brand awareness, and we've made solid progress over the years. As we sit here today, we celebrate the progress we've made. This shows 2019 to today. We have improved when it compares to national brands. We're proud of this but we have meaningful opportunity ahead that we're going to attack. And to attack it, we have the firepower to close this gap. We've seen significant growth in our ad fund through the growing AUVs we talked about; our development pipeline, which is robust; as well as the 5% consolidated national ad fund. As a reminder, 2018 was the first year of national advertising for us. Since then our ad fund has tripled. We anticipate our ad fund will exceed $120 million this year. Now this growth has translated to Wingstop as an elite advertiser, allowing us an always-on media approach, media centered around premium content, live sports. Last fall, we showed up in the NFL for the first time, and we saw great success in growth of our ad awareness with our guests. Properties like the NFL, NBA, soccer both English and Spanish work really hard for us. And as we continue our path to $2 million-plus AUVs, menu innovation is a key lever. We've been in the flavor business since '94. This is who we are. Along with our evergreen bold, distinctive flavors, we're able to pulse in opportunistically, craveable flavors into our flavor portfolio. Flavors like Orange Szechuan or our flavor mashups, which take flavor to a new level. My personal favorite is Hot Lemon. These resonate with our core guests and also drive new guests into our brand in the form of new news. A great example is our recent Blazed and Glazed flavor, it drove a 12% comp during the 4/20 holiday, which many of our guests celebrate, and 0.5 billion PR impressions on April 20. It was driven by consumer insights. We know our guests, and this revolves around a culturally relevant passion point for many of our guests. We're continually building our pantry of great flavors to add intrigue to our Sauce and Toss wings. Now we've talked about Wingstop's track record of delivering same-store sales growth regardless of the macroeconomic cycles at hand or changes in consumer sentiment. During these times, we've been able to highlight value on our menu. Value is a part of our proven playbook and allows us to showcase value across a variety of menu options. Few examples you see here are big night in bundle, our all-in bundle and then most recently, our boneless meal deal. This helps drive occasions and preserves Wingstop as an indulgent occasion for our guests. These overt value offerings bring the per person average in about the $5 to $8 range, depending how many wings you eat because we do have some flavor fans that could be in the 15 to 20 wing range on a really hungry day. Now we've experienced significant deflation with our bone-in wing. You heard about that from Michael. In many ways, we're a year ahead of other brands as our core commodity has experienced that meaningful deflation. That puts us in a unique spot. And we can lean into value and pass this value on to our guests while others in the industry are taking more price. A big component of our menu innovation is all about using the whole bird, what we refer to as our whole bird strategy. Products leveraging pieces and parts of the jumbo bird, of which our bone-in wings are sourced from. Products like juicy, flavorful thigh bites. And I'm excited to share that just yesterday, we launched a market test of a game-changing chicken sandwich. This is a premium hand sauced and tossed sandwich in your favorite Wingstop flavor. And we don't have just one there's 11. These products drive new sales layers in the form of a net new occasion. Now let's check out how the Wingstop Chicken Sandwich comes to life. [Presentation]

I don't know about you, but I'm hungry for lunch. I'm excited to share, we're actually going to be -- for those of us here at the global support, so we're going to be trying the Wingstop Chicken Sandwich for lunch today. So apologies to those on the webcast, but I'm pretty hungry. Now continuing our path to $2 million-plus AUVs, delivery is a strategic lever for us. As a reminder, we rolled out delivery in 2019. We haven't been at this very long. Our benchmark is heavy off-premise brands, Big Pizza, for example, that have been at this much longer. We've seen continued growth in this channel as well as stickiness. And as we sit here today, we celebrate delivery sales in the 20% to 30% of our sales. This is with one delivery service provider. We believe we have the levers to drive this channel, growth in this channel in addition to organic growth, if we were to add a secondary delivery service provider. Now I'd like to pass it off to my colleague and good friend of 7 years, who will share our game-changing approach to MarTech, marketing technology in the flywheel that Wingstop is creating, our Chief Digital and Technology Officer, Stacy.

Good morning. It should be no surprise to anyone in this room that our digital sales have been an area of rapid growth for this brand. But it's not just our digital sales that have grown, that's translated to growth in our customer database as well. We now have over 28 million guests in our database. And these lines between technology and marketing keep merging. So we're going to lean into that. We're going to combine our technology and our marketing capabilities to drive the business. And to do that, we're going to start operating like a platform brand. So a platform brand and a traditional restaurant brand operate a little bit differently. A traditional restaurant brand leverages promotions to drive traffic. And it's the promotional schedule that really dictates a very rigid annual marketing calendar and budget. They rely on point-in-time transactions, many of which are analog. Platform brands operate differently. The best, biggest, easiest example to pull from here is Amazon. So when I'm on Amazon's platform searching for a product, they're learning about me. So next time I log into Instagram, I might see a customized ad just for me. It may be the exact product I was looking for or it may be another product that may be as the category leader based on the highest guest reviews. They may also know that Marisa and I share a lot of the same buying behaviors. So if that ad worked for me, they might take it a step further and send that ad to Marisa. So this is a very data-driven dynamic relationship with a brand that's personalized, very different than a structured annual marketing calendar. And at Wingstop, we're learning about our guests too. So when a guest becomes a customer and transacts with us, we have a lot of information about them. We have their name, e-mail address, what they bought, if they bought for one person or maybe a family or group, if there are occasion preferences or day part preferences, protein preferences, flavor profiles but we have all the information about the transaction. But then we go and append to the data that we have with our partner to get third-party information about this guest. So we learn about their household sociodemographics. We learn about their interests, their buying patterns, their browsing patterns, right? And what's different here is that we then use data scientists to come through all of this data and define what's statistically relevant or different among these guests. And that's how we inform our personalization strategies or communication strategies, even our product and menu strategies in some cases. So this is not a marketing persona exercise, this is a data exercise. So I want to show you a video of marketing and technology coming together to build a platform that we're calling Wing ID. [Presentation]

So I hope that gives you a preview into the capabilities that we're envisioning. And although we're early in our journey, we're already starting to see progress here. The new users that we've acquired, particularly those during COVID, are starting to move up in their usage categories, so new to light, light to medium, medium to heavy. And as we look at who we've retained, we are starting to see growth in this household income area. So that's really shown here by these 2 segments called the weekenders and suburbanites. These guests represent our heavy QSR users. They're slightly more affluent than our traditional guests, slightly more suburban, slightly less ethnically diverse. And as Wingstop continues their national footprint and penetrating into the suburbs, we see these 2 segments growing with us. And we're just getting started here, but the opportunity is huge, and it doesn't take a lot to have a meaningful impact. We have a clear line of sight to $2 million AUVs by improving our retention rates with our new guests and driving frequency with our existing guests. So before I talk about our next chapter of our digital transformation, I'd like to take a step back because I think it's important to level set on how far we've come in a really short time. When I joined the brand, we found a digital business that was capped. It could not grow. And it really couldn't grow because of the technology that was at the restaurant, this foundational technology layer. The brand was operated primarily by cash registers with a couple of point-of-sale systems that had no standardization. To give you a sense, it took us 3 months to add a new item to our menu because we had to dial in through modems to each individual cash register. So although we aspired to have a digital business, the digital business couldn't grow on top of that foundation. So we started a campaign with our brand partners to encourage them to invest in their point-of-sale system and we invested in the digital capabilities. And as we sit here today, 60% of our sales come in through our digital assets and, again, clear line of sight to a 100% digital business. And digital still remains a focus area for us, not only as the easiest way and most efficient way for our brand partners to receive an order, they utilize no labor in doing so. It's also the most convenient for our guests, right? We cook fresh to order, that means there is a wait time. So our guests can order ahead for pickup or delivery. And it's a clear sales driver with that $5 higher average guest check. So in a short time, we find ourselves here with the digital leaders in our industry. And the biggest difference between them and us is just time, right? They started sooner. But we're making investments today that we believe will pass them up. We are in a really advantageous position, many of the digital leaders before us expanded internationally before their technology and capabilities were available. We're doing it in the right order. We're making technology investments today to the tune of $40 million to $50 million over the next 3 to 5 years to accomplish a few things. One, we've got to get that restaurant foundation right in our international markets just like we had to do in the U.S. in 2014. Once we do that, as we make proprietary investments here, whether that's e-commerce investments, BI investments, our Wing ID platforms, we'll be able to extend those capabilities into our international markets. Digital's helped enable this rapid growth that we've seen over the past few years. And these investments in technology will help us achieve our vision of a 100% global digital business and $2 million AUVs. Thank you. I'd like to pass it to a man who needs no introduction in this room, Alex, our CFO.

Thank you, Stacy, and good morning. As you heard today, we have a number of levers at our disposal to sustain same-store sales growth and drive towards that next benchmark of $2 million-plus AUVs. But what's unique about Wingstop is the best-in-class returns we provide and our brand partners enjoy today. And that's part of our -- that's central to our strategy, and I'm going to share more about how we're going to continue to drive that forward. As you heard, our AUVs are already at game-changing levels with $1.6 million. That's improved the returns of our brand partners. That's a change. That's a 40% increase since 2015. And this is a direct reflection of the proactive investments Wingstop has made over the years and the execution of the strategies that Michael shared have remain unchanged. Our new restaurants as well, just 3 years ago, we're opening at $945,000 in AUVs. We're now opening at a rate of $1.3 million in the first year, all by leveraging the same exact box, 1,700 square foot restaurant, with a high off-premise and digital-forward business. Our growth in restaurant sales is not a story confined to a vintage or new restaurants. All tides are rising, as you can see here with the region's performance. Our regions have grown by $400,000 over the last 4 years. And what enables our returns in addition to the productivity of the restaurants is a focused and simple operating model at that volume of $1.6 million, a restaurant can run a shift with 3 to 4 team members. When we open a restaurant, we have lean roster sizes. And we look for real estate profile that allows us to maintain a low occupancy rate. These factors then allow us to weather a highly volatile commodity with 95% of our sales from wings, fries and sides. 65% of our food cost is associated with the bone-in wing, and we can see years where we're paying $1 per pound on wings from the spot market or like last year, we saw a record level of wing inflation with prices on the spot market peaking to $3.22 a pound. But this chart paints a bit of a picture of how our brand partners view the Wingstop business. They look at Wingstop over the long term and see average food costs over a 5-year horizon. That line in this slide illustrates the change in inflation or deflation year-to-year with wing prices. Even in a year with record inflation, we opened a record number of net new units at 193. And this year, we're uniquely positioned in the industry relative to others with meaningful deflation in our core commodity. And as our guidance implies for this year, could pace to another record year with 220 restaurants. But we believe key to thirds -- our strategy of maintaining best-in-class returns is minimizing the volatility we see in our core commodity. That's a further unlock and acceleration in our growth. So we are executing a clearly defined strategy to take greater control of our supply chain. Some of this, you're familiar with today, and as Marisa shared, our strategy on whole bird. To access more parts of the bird, that enters us into different pricing strategies with our suppliers. We also could consider a co-investment or forming a joint venture to secure supply at our targeted food cost with suppliers out there. There's also scenarios that could include an acquisition of a small poultry complex or building our own poultry complex over a longer-term horizon. What we've seen from other highly franchised concepts, when they've executed a strategy like this is the formation of a purchasing co-op where brand partners would own and manage the asset going forward. In our scenario, Wingstop could help set up with the initial capitalization but then the co-op then acquire any asset from Wingstop in that scenario, which then allows us to continue to maintain our asset-light model that many of you have come to appreciate today. We've also worked with a third party to truly understand the end-to-end cost structure of a poultry complex and what it takes to run a facility from the feed to the grower out to the processing stage. And while the wing prices are highly volatile as we see, the costs at the poultry complex are much more stable. And this model helps support that our strategy that we can deliver are predictable food costs in our targeted range of $1.60 to $1.80 per pound or that mid-30% food cost. This ultimately creates the supply role for development. As Michael shared, our brand partners have enjoyed 50% cash-on-cash returns over the years. At today's food costs, and volumes of $1.6 million, they're seeing returns of 70% plus, which we feel is unparalleled in the industry. And that's from that same investment of around $400,000 over the years that's led to a less than 2-year payback for that brand partner. Our strategies of sustaining same-store sales growth and maintaining these best-in-class returns leads to that acceleration in growth for Wingstop ahead. And we're already starting to see that today. As you saw from last year, we opened 193 units, our highest ever. Our pipeline, our brand partners are reinvesting back in the Wingstop in acquiring more territory. In our domestic business, we had back-to-back years with more than 700 restaurant commitments in our pipeline. And 93% of our existing brand partners are reinvesting in opening restaurants. This pipeline is fueled by the work we're doing to plan out each market. We planned all the major DMAs in the country and developed a playbook that outlines our path to 4,000-plus restaurants. It starts with a data-driven approach to size up using predictive analytics to size up the wide space of the market. We then plot the trade areas and the growth opportunities in the market and prioritize them based on our ability to maximize brand awareness. Those trade areas and opportunities are then matched with the brand partners, either in the DMA or outside of the DMA, and we're executing. Los Angeles and Dallas are 2 great examples that just demonstrate this power of what we've done with our master development plans. In the last 4 years, our Los Angeles market has increased unit counts by 50%, while sustaining same-store sales growth at 43% on a 5-year basis, and chipping away at our awareness gap. Our most mature market, Dallas-Fort Worth, has increased restaurant counts by 26 units, still growing same-store sales at 41% on a 5-year basis. And this is a market that is closest to parity of those top QSRs and awareness levels, and we have yet to hit the ceiling. We also recently opened a new restaurant format in Dallas that brings technology fund center. It's a 100% delivery and carryout location, fully digitized payments. We have a QR code on many boards that enables conversion of that walking guest to a digital order. And we're testing AI voice ordering. As a reminder, we still have about 20% of our orders placed in Cowen. So another opportunity to improve some efficiencies in the restaurant. We're also studying back of house with an innovative design on ways to unlock further efficiencies for the restaurants. We've implemented a KDS technology solution. And we built a modular design that allows us to test different configurations that could serve as a blueprint for restaurants in the future. This format also creates optionality in our market plan. While that traditional storefront with the dining rooms will still be the majority of our footprint, a delivery-carryout only location gives us more options to develop. This gives us the confidence in our domestic business achieving 4,000-plus restaurants. But as you know about Wingstop, another big part of the story is our international business, which we believe is positioned for an acceleration towards the 3,000-plus target. And with that, I'd like to introduce Nicolas Boudet, our President of International, who will share more about the excitement we're generating for Wingstop globally.

Thank you. Thank you, Alex. Good morning. My name is Nicolas Boudet. I've been a team member at Wingstop since 2018. As you can tell, I'm not from Texas. I'm an adopted citizen, and I'm proud to be. Look, when I joined in 2018, International was in a very different place than it is today. So it is my pleasure and excitement to share with you how much the team has worked to transform that business and how excited we are to tell you of the momentum we created and what will happen in international and the contribution that the international business will have overall for Wingstop. So let's go back to -- not far back into the past and talk about our Q1 2022 performance. The table you see on the screen here shows a pretty solid same-store sales growth measured Q1 at around 23.5%. But what's interesting is also the sell-through investment ratio, which basically, as you know, measures the health of the investment metrics for our brand partner. If you were to average all this, it actually shows an investment sales to investment ratio to 3.6, which includes the U.K. with an amazing performance which I'll double hiccup on and share more about how we're doing things differently over there that shows such an amazing performance. But when you look back over the last few years, based on our system sales as well as our transaction trend, we are basically been building a very solid and healthy international business. And not only that, we also put a lot of attention with our brand partner to drive a digital sales mix, which is a very important -- as you know, and as you heard from Stacy and Michael, a very important metric for us. So very happy with this. But the reason why also, fundamentally, we have enjoyed such a strong performance and really excited towards the future, it's really the clarity and the sense of purpose as to how and why we go to market and what drives the way we unpack and the way we drive value with Wingstop elsewhere around the world. And it all has to do with our strategic principles, our strategy, if you will, which is basically anchored around our premium halo, our flavor expertise the fact that we are unique with our set of flavors, but also that we are extremely leaning both digital and tech in terms of investment in the way we go to market. All this to say, we also really play a big part in how we go to market, both on premises but also off premises. And as at the end of the day, because of our focus, we are also a very simple operating model for our brand partners to operate and to build. So it's very important. So I'm going to go take you back to a couple of slides, and we talked about the U.K. So I thought it would be important for you to understand what are we doing differently in that market that basically constitute such a great results. First, let's talk numbers. We've opened in, I would say, November 2018, fast forward 3 years, we are enjoying an amazing, amazing metrics. Let me start with the same-store sales. We have more than 30% on a 3-year stack same-store sales, which is very healthy. We also show a very healthy 4-wall margin at 22%. And obviously, we are exceeding altogether, an AUV of $2 million, which is amazing. And we see the potential in the U.K. to be not 100 stores or not 100 units, but at least 200 to 250 over the long term. Basically, the principle against our strategy, which is about being premium position which is about also deploying a diverse asset mix, which includes iconic assets, which I'll talk about a little bit more, in lines as well as ghost kitchen, but also small boxes. So a complete area of how to go to market and to capture our consumers. We also won last year, which is a big deal for us, the Top Restaurant Award from Deliveroo, which is our local DSP in the U.K., which is a big deal because we had to compete with a lot of other restaurants. So we're very proud about this. We managed over the years to also reach a very strong digital sales mix of around 50% plus. And as such, we are so enthused by what we see in that market that we've decided to make a minority investment within the local brand partners, and we're excited about this. Now all this is great, but I have to say and give credit to the local brand partner and the Wingstop international team that have managed to create a pretty incredible brand in a very short amount of time, okay? What you see on the screen here is Cambridge Circus. This is the first store we opened in that market. That store has reached iconic status, not just in terms of volume that is generated, but also the fact that it's extremely recognizable and basically my big statement in the U.K. and say, "Hey, Wingstop, we're here. And we mean business." So very proud of that asset. We also flexed around our innovation as well as value muscle. You're about to taste the chicken sandwich here. Well, we've launched it last year. And I can tell you, very proud of the sales mix it achieves but also being extremely accretive to our gross profit overall. So very, very good product innovation that we launched there. And as I said in a short amount of time, our brand partner created a really authentic fun engaging conversation with our fans, with our consumers in the U.K. So it's one thing for me to tell you about this, but I thought it would be better to actually play a video that gives you a sense on how core, we are now authentic we are in connecting with our consumers in the U.K. So let's have a look at that video. [Presentation]

We're excited. The U.K. has validated our model. The U.K. is the model that we want to replicate, and we will replicate elsewhere. Now when you look at our growth over time, 203 stores is not a big deal. But it shows a massive, massive growth over time. Not only that, but when you project yourself into the future, we've also not only managed in these very difficult times to redevelopment from our existing brand partners, but also sign new markets. What you see on that screen is actually an increase of almost 65% over time in terms of development commitment. So I'm really pleased to say also that we've managed to navigate the crisis and the tough times in international, but also in the meantime, managed to actually go-to-market in new markets that we feel are very consistent with our strategy. And as such, probably shortly before Canadian Independence Day, we will be launching Canada in Toronto on Bloor Street. We're very excited about this. Again, anchored around our strategy of being premium positioned launching on the basis of what we've learned in the U.K. with a diverse asset mix. This store is a flagship. We have also already a strong pipeline for 2022 and beyond, not only including in lines, but also ghost kitchen. We also learned that to stack our chances, we're going to launch with multiple DSP from the get-go. So we feel pretty strong about this. First Canada will be the first international market that would leverage entirely the U.S. tech stack, which is a big deal for us and will enable further integration into what we do from the Tech-savvy perspective. And we've partnered with a well like-minded individual or group that has a great experience in Canada itself. And as you probably heard yesterday, we've also signed our newest market, which we'll launch early in 2023, which is Korea. Excited to go into Korea. This is a $53 million marketplace with a high urbanization rate in Seoul. The same as we did in Canada, we will partner with a like-minded individuals and group that has a lot of experience in that market. We also feel very strongly that the learnings that we have in the U.K. will be replicated and also rolled out for a successful launch in Korea. The same principle around the diverse asset mix as well as the fact that the Korean consumer already is very prone to consume restaurant brand not only on-premise, but also off-premise. We feel we have a very strong solution there as well as being Tech-savvy. The Korean consumer have a high digital penetration compared to the Western world. So very interested here to actually improve our tech stack and being able to talk to the consumer. And we also believe like Canada and many other markets we will enter that, that market has a potential to at least 200 to 250 stores over time. We are very resolute in the way we go to market. And frankly, this doesn't change since the last time we talked back in January 2020, our approach is 3-pronged. First, we're going to continue growth with our existing market, as you saw displayed in terms of development commitment that we've managed to sign with our existing brand partners enter a new market, but also starting to seed out of the market that we feel played a big role in your overall deployment of international. I would be remiss not to mention China. And in fact, we did our homework. We partnered with BCG and basically work on how to go to market in China specifically. And I think we've been pretty intentional with our timing. And I think the new cycle valid is the reason why we've taking our time. And we feel that China is a long play. And as such, I wanted to unpack a little bit more of what we've learned and share with you how we think about that market specifically, which, as you know, plays a big role in our overall growth algorithm. But first, when we exposed Wingstop to a sizable consumer group, the brand was extremely well received and really indexing pretty high around social and group occasion as well as individual occasion. So very pleased about this. We also felt that the menu, as presented to the Chinese consumer, what actually well received as well and only would require minor tweaks to be able to be more relevant in that marketplace. Like I would say many consumers around the world, they would want to enjoy the brand as much on-premise as much as off-premise. So therefore, we would learn and deploy our learnings from the U.K. to carefully select key assets that are visible and establish the brand in a big way as well as deploying in lines and small box. And we've done some more work in terms of where to go and why with having a preliminary market development plan in Shanghai. And we also feel comfortable that our offering would be actually, if not at par, but slightly indexing higher compared to the Western QSR that are currently present. So China is important, and so are other markets. I'd be remiss to say that the last few years, I really clearly held us back for the reason that you all know. But I'm also pretty excited to say that we've created significant momentum that we're in the process of materializing, which will bring Wingstop international contribution to the overall Wingstop over time to be a much bigger contributor not only from a unit standpoint, but also from a revenue standpoint. This is our 10-year outlook. I feel comfortable to say that within 10 years, we'll be able to reach it. But when you look at our 10-year plus outlook of reaching your 3,000 stores, we're clear as to where we're going to get that growth from. That map shows where and specifically how we're going to get to. And I'm really excited to say that Wingstop International has not only done very well during COVID and during the challenges that we all face, but is ready for more and will achieve more. With that being said, I'd like to bring back Marisa Carona to talk about our corporate responsibility. Thank you.

Thanks, Nicolas. So Nicolas talked about growth being supercharged. So as we grow, we want to ensure that we're doing so sustainably and responsibly. So that's what we're here to talk about today. I'd like to share how we're thinking about our ESG platform. It's a very focused approach, and we continue to make progress on these fronts. We approached our ESG platform based on a materiality assessment. So these are the focus areas that are most important to Wingstop and our stakeholders. And it all starts with diversity, equity and inclusion. We're very proud of our diverse team. DEI is an organic part of who we are, and it's been a part of our culture since the start. This all begins at the top with 50% of our Board classifying as diverse, almost half of the Wingstop senior leadership team that you see here today. 60% of our brand partner community is diverse, and we also celebrate 69% of our total global support center being diverse, very reflective of who we are as well as the guest of Wingstop. Another key focus area for us is, again, as we grow, minimizing our carbon footprint as we expand across the world. You heard from Alex that the footprint of our restaurant is already very efficient. However, we're continually looking at how to optimize that footprint and minimize our carbon footprint across the globe. Excited to share we recently launched a new uniform program that actually leverages recycled water bottles. So the water bottles that you see here today, those of you in the GSE with us, leveraging those water bottles to create new uniforms for our crew members. We have oil recycling in our restaurants, which is then processed into biofuel, very circular. And here at the GSE, we're sitting in this building that is 100% powered by local wind. And finally, having a positive impact in the communities in which we serve is crucial to Wingstop. And we have a great track record here, whether supporting our team members in times of need through the work of the Wingstop Foundation, which is funded for team members by team members, or the work of Wingstop Charities to amplify the efforts of our brand partners and the great work that they're already doing to serve their communities. We've given back over $2 million in these funds, and we're just getting started. As we grow to 7,000-plus restaurants across the globe, we'll continue to amplify our ESG efforts. And now I'd like to pass it back to Michael.

The strategy is clear. We've got the team in place and it revolves around continuing to invest in that team and that culture. We shared the levers we have to pull, our line of sight to continue to deliver same-store sales growth, that AUV target of $2 million plus. You heard about the unit economics. Today, less than a 2-year payback when you factor in AUV growth, they only get stronger, which is just going to fuel the demand for this brand and feed that unit growth opportunity we have in front of us. And then you heard Nicolas talk about international, what an exciting time, what an opportunity, our strategy has been validated with what we've executed. The team has executed in the U.K. And we know which markets look exactly like the U.K. that we can replicate that playbook. And we feel extremely confident and the opportunity to deliver on that long-term outlook we have for international over 3,000 restaurants. And all of this ladders up to our confidence around building Wingstop into a top 10 global restaurant brand. But I cannot think of another brand that is more exciting to be a part of right now that has this kind of wide space in front of it, the kind of growth that we have in front of us. And I think we have credibility to stand here today in front of you and reiterate that vision we have of 7,000-plus restaurants, to reiterate and really unpack our strategy. And I think we've proven that over the years. And we've executed it through a proven financial model. We've talked a lot about topline sales growth. If you just look back at 2019, our system sales have grown 54%. Alex talked about our simple streamlined operating model. When you layer $1.6 million of volume on top of that, it really continues to further enhance those best-in-class unit economics. And then obviously, brand partners, they're pretty happy right now, particularly when they're seeing cash-on-cash returns in excess of 70%, less than a 2-year payback on their investment. And we're executing this growth in a very disciplined way making sure that we're making the right strategic investments and the right use of our cash that position us well for that next phase of growth. And then obviously, we're going to continue to lean into a highly franchised asset-light model that delivers a very predictable financial performance. And I think that can be showcased in delivering a 5-year CAGR on adjusted EBITDA of almost 22%. And then lastly, we're going to remain relentless and focused on driving shareholder returns. Since our IPO, we've returned $645 million in capital to shareholders. And we've returned and delivered a TSR of approximately 430%. And we believe we have the strategy in place that allows us to lean in and really talk about our 3- to 5-year targets of sustaining growth well into the future by delivering a mid-single digit same-store sales growth as well as delivering a 10% plus unit growth. And it gives us confidence to be able to say that we believe we're going to be able to maximize free cash flow and at the same time, deliver best-in-class shareholder returns. Again, we're pretty excited about the opportunity in front of us. You heard from the team talk about how it feels like we're just getting started. We have so much runway in front of us, so many levers to pull. We're really excited about what's in front of us. We're excited about the team we've built, the culture we have here today. And I hope you share that excitement with us. So I want to say thank you for your interest in Wingstop for your time this morning, and that concludes our prepared remarks. We are going to move to a short break, and then we'll come back in a few minutes and have some live Q&A. So again, thank you very much. [Break]

Okay. Welcome back. We have, I believe, 2 microphones that are floating around. So please raise your hand if you have any questions.

Great. Awesome. And I guess for Michael, I'm curious if you could just run through the comp leverage? You obviously outlined quite a few but maybe either rack and stack, how you think those will contribute to the U.S. growth over the next several years, that mid-single-digit target? Yes, I guess that's -- and then how you would rank those in terms of relative importance for customer acquisition versus frequency?

Yes. It's a good question, John. And I don't know that we've spent a ton of time stack ranking them. And I would reflect back to the levers we had when we were at $1.1 million and that we were able to pull to grow the business to $1.6 million today AVUs. I think they work in tandem. Obviously, as we continue to grow awareness and put more consumers into the top of the funnel, then we can lean into some of our digital properties or whether it's access to the brand through delivery. I think they all work in concert, quite frankly. But I think it demonstrates the number of levers we have to pull that we believe, if you do some math on what the opportunities are all work together to support the confidence that we have in a $2 million AUV.

Andrew Charles from Cowen. You guys presented a very thorough plan to help support medium-term guidance of mid-single-digit same-store sales. And I also appreciate the resiliency of the Wingstop brand and a positive track record of positive same-store sales for the last 18 consecutive years. But maybe you can help me connect the 2 and just help me map out the 2022 catalyst path to improving comps from what you guys saw in April to achieving low single digits for this year before accelerating to mid-single digits in 2023 and beyond?

Yes. I think, Andrew, obviously, this year is a pretty interesting environment that we're all operating in, still trying to figure out inflation, how that's going to be controlled, the implications on the consumer, I don't think we're here today to necessarily reiterate our outlook for 2022. But I think what we've demonstrated is the quantity of levers that we have to pull and the power of those levers that give us confidence in that 3- to 5-year outlook that we shared earlier of mid-single digits.

Jake Bartlett from Truist Securities. My question was around on the chicken sandwich. Chicken sandwiches have been the range in QSR over the last few years. It's obviously something you could have done long ago. So my question is, what were the reasons for not doing it before, some of the obstacles? And just what makes you more comfortable doing it now? And then also within that, maybe the experience in the U.K. or some sort of framework as to how much it could contribute to sales?

Yes, sure. I think we've demonstrated intentionality and almost a level of being opportunistic around levers that we pull to continue to drive the business and drive our top line growth. And so you're right, we could have pulled that chicken sandwich lever earlier. But as we continue to advance our whole bird strategy, we saw an opportunity to really lean in, in a way to be a little bit differentiated. Maybe not in the middle of a very crowded room, if you will, when everyone else was promoting chicken sandwich. And lean in now and use more of the bird and do it in a very unique way that I think we'll differentiate our chicken sandwich with our bold and distinctive flavors. I love our positioning of -- it's not -- we're not just launching 1 chicken sandwich, we're launching 11. And so we think it's going to not only be a topline driver with existing guests, but we think it's also going to bring in new guests as well. So a really interesting opportunity. I think as a data point in the U.K. that flavor burger, as they refer to it, mixes at about 8%. We'll see we just launched our market test yesterday here in the U.S., and we'll see how it mixes here in the U.S., but we're really excited about the opportunity we have there.

Jeff Bernstein from Barclays. A question related to the resilience of the franchisees in terms of unit growth, I mean a lot of attention goes towards comps. But in the end, it seems like this is a long-term unit growth story. So the slide you put up earlier that showed the last economic slowdown, it seemed like the unit growth was still there. Then you showed a slide that should wing inflation last year and the unit growth was still there. So I'm just wondering what's the conversation like with franchisees? If you're running a flat to negative comp, does that change the trajectory, you think, for the unit growth? And more recently, obviously, because of the inflation. And then you alluded to that $150 million as it relates to inflation. Is that still something that's up in the air as to how that's going to be spent? Or is there any more clarity you can share on that front?

Yes. Thanks for the question, Jeff. I think you said it well that we've demonstrated the resiliency over the years of our business through multiple economic cycles through inflation that we saw in 2021 and continue to see growth. And I've spent a lot of time out in the market here recently, having conversations with our brand partners. And there's a sense of calm, if you will, with the topline sales, obviously, they're looking at their business from a much more longer-term perspective and acknowledge the fact that volumes are up $400,000 in their restaurants from just a few short years ago. What they're excited about right now and what they're talking about is food costs and the cash flows, the strength of the cash flows. And every one of my conversations with brand partners ends with a question around growth. Where can they get more access to territory? How can they grow more with Wingstop? And I think that has a lot to do with the confidence we have in the brand today and obviously supported the outlook we have for 2022 of another record year of development of over 220 net new restaurants. As it relates to our supply chain strategy, we're pretty excited about where we stand. We've done a lot of work with -- we've leveraged third-party experts. As Alex mentioned earlier, we've built a very detailed working model that takes all the various inputs that are involved in growing and harvesting a bird as well as all the feed and input costs and the financials, implications of operate in a poultry complex. And we feel that though our strategy has been validated by these third-party experts. And we did leave a little bit of excess cash on the balance sheet to be in a position to where we can be opportunistic, should an opportunity present itself to be disruptive, take more control and go all the way to bright with a vertically integrated strategy. We have a shortlist that we've worked on of potential targets that we're actively working, but there's nothing really at this time to point to you around specifics as far as the timing but it's something that we're actively working against and we remain committed to and confident because we know that if we can minimize the volatility that our brand partners see in food costs that the pace of development will only accelerate. But as we sit here in 2022, as you mentioned, Jeff, we're in a really unique spot where -- I think Marisa mentioned it earlier in her comments, we were almost a year ahead of most other brands. We went through our inflation last year, much more than what most brands are facing today. Our brand partners took the necessary level of pricing to ensure that they protected their unit economics, protected their P&L, and we sit here today with meaningful deflation. The impact of going from $3.22 a pound on the spot market to $1.63 a pound where we sit today is meaningful. And so we're in a really unique spot where a lot of other brands are going to be out there trying to manage their margins to be in an environment where that the consumer is feeling pressure from inflation, but they're going to have to take price. And we're in a really unique spot where we don't necessarily have to take price. And as Marisa alluded to, we can actually have the opportunity to potentially give back some of that deflation to the consumer in the form of value to continue to drive our business if we see the consumer behavior shift as we navigate through 2022. So a really unique spot for us as a brand.

It's Chris O'Cull with Stifel. My question is for Marisa. Wingstop has made quite a bit of progress over the last few years, obviously, building brand awareness. I'm just curious how much opportunity you think you have left to build top-of-mind awareness with consumers. And then I had a question for Nicolas. Given all your international experience, I'm just wondering what support do you think -- what are the priorities for providing international franchisees with support at this size because you have a lot of countries with 50 or fewer units. Franchisees are pretty small. So where are the priorities right now? And what are you looking for -- or do you look at KPIs often to kind of measure the success of those franchisees?

Thanks, Chris, for the question. So as we sit here today, I believe the opportunity is meaningful. And you saw it here today, we've seen really good progress over the last few years that we focused on growing our brand awareness. In some ways, it's a bit of a moving target as we enter a new market as an example where a particular market may not have had exposure historically to Wingstop in the physical sense. With national advertising, of course, that helps. But we've seen progress and the benefits of that growing brand awareness over the last few years. But I think you saw illustratively, there's still quite a bit of runway ahead. So something that will intentionally work at. And the growth of our ad fund has put us in a position of strength where we can begin to tackle that. And assets that resonate really well with our guests. The -- not only national media in the form of TV or OTT, but also the one-to-one marketing engine that Stacy spoke about. So we believe we're in a really strong position to begin to tackle that gap, but quite a bit of runway ahead.

I love this 2-part question, especially I'm on the second part of it. So it gives me time to think about, but this is a very good question. Look, it all depends, it varies really on the level of the maturity of where Wingstop is. And second of all, the quality or the level of certification that a brand partner has to tackle some of the challenges they are faced with. But I could say the way we tackle and address those is by staffing regionally by having Wingstop team members to be there pretty -- within reach to be able to navigate and help the brand partner to navigate and tackle the challenge that they're faced with. So depending on the country, we have sometimes over-indexing around tech support. And when I say it takes more digital, more CRM, more consumer-facing type of tech that we are deploying. But also on the development side, we bring collective experience and collective knowledge within Wingstop International from a development standpoint, which is pretty rich. So we help them figure out the market development plan, the asset mix and so on and so forth. And sometimes, they ask our help in terms of negotiation with a supplier or with a landlord and whatnot. So it really varies. And we are basically a bit of adjusting that level support depending on what they need. But I would say 50 stores or 100 stores is primarily driven into their position within the maturity curve as what they are today, but also the type of organization they've put together to be able to tackle this challenge. So it varies quite greatly.

And I think just to build on Nicolas' comment in January of 2020, our last Investor Day, we unveiled a lot of detail around our international growth strategy, but that also accompanied investments we needed to make in our infrastructure to support that growth. And while it was a challenging couple of years, as our international business navigated the pandemic, Nicolas and his team was steadfast in those investments. So you heard us talk over the quarters about G&A, the investments we're making. And I think they've done a beautiful job in positioning us for this next phase of growth. And so we've made a lot of those investments that put us in a position to provide that right level of support and be able to start to scale that international business.

It's Brian Mullan from Deutsche Bank. Just keeping on that international team, you're just talking about -- this morning, you talked about being prepared to enter China when the time is right. Maybe could you elaborate on what the time is right or when the time is right means to you in that market? Putting aside COVID disruptions over -- the near term, what do you need to see such that you would think that maybe it is right there? And could you give us a sense of if you're in discussions with any partners there? Or should investors be thinking entrance here is still likely several years away?

Happy to expand. Look, the timing is really dictated upon the macro elements that China is going through as a country today. But I can tell you this, the amount of work that we've done with BCG helps us refine the way and how we're going to get to market, not just specifically on how we are going to put together our consumer proposition, but also our business model. We spend a lot of time around our unit level economics and our business model itself. And I can safely say today without naming them that we are in active conversation with pretty serious group that are already in China. But timing is TBD based on the country itself and the challenges that they face today.

And I think to Nicolas' point, you can only get so far in the business development cycle with this current environment in China that it limits us -- progressing it much further down the road. But -- yes, as he mentioned, we have some really good conversations started.

Todd Brooks from the Benchmark Company. One for Nicolas and one for Stacy, if I may. Nicolas, as far as China at the last Investor Day, it seemed like the international rollout was a very staged process kind of proof in the U.K. than maybe entering Asia through Japan and South Korea, which you just announced, proving those out, and then entering China. Has the success in the U.K. unlocked maybe opening markets in a more parallel fashion versus serial fashion? And then Stacy, the question for you on personalization. Where are we in that journey as far as are we seeing anything tangible that you can share with us that it's driving greater frequency? And if it is, where within the funnel, are you seeing the most frequency gains from the personalization efforts?

Yes, absolutely, the success in the U.K. has really influenced the way we go to market and which country we are selecting to go first. And I think it's a good thing. It's a good thing because we have a tangible proof as to how our strategy works. And that helps not only materialize the question that some of the investors have when it comes to deciding to go to Korea, as an example, or to go to Canada. So it played a big role and it continues to play we grow in how we go to market. But I would bring you back to the singular focus on how and why we go to a certain market and not any market that comes to our attention. It goes back to our strategy. We feel that for us being global, really comes back to be present where it matters the most. And we have in mind the assets or the unit maximization in terms of new account, but also the revenue and royalty maximization. So I think that focus is not really changing. It's much more what comes first and whether or not we will and we believe that market needs to be entered at that stage of our growth. So -- yes, the U.K., going back to your question, it's played a very, very important role and a very good role.

Yes. And in terms of the guests and frequency versus acquisition, we are very early on what we've been working on in this last year starting to build our platforms is really just kicking off in terms of being highly automated and sophisticated. But we've been working at looking at our acquisition targets and making sure that we're acquiring the right guests, making sure that we're using our first-party data in all of those channels. That's actually a lot of technology lift to get to where we can have that first-party data available across all the channels where we might buy advertising. In terms of where the most potential is, I think it's in this light user. So done a good job of looking at our acquisitions once we get them in, trying to migrate them up in frequency. And for me, the light users are our largest group of frequency groups. And it just represents potential, right, because it's so hard to bring a new guest in. But once you have them in, trying to build that habit find new ways to engage with them, remind them of every occasion is a great Wingstop occasion, that is an excellent challenge that we're all up for.

Mike Tamas here from Oppenheimer. You talked about the simplicity of your model, in particular on the labor side. So can you talk about the LTOs and the menu innovation, like the chicken sandwich we're going to try? How do you balance those new items, but keeping your operational model [indiscernible]?

Yes. The operating model is something that I would say we hold sacred. And as we evaluate product innovation, we first and foremost, we'll look at whether or not it impacts our operations because that's something that we know is critical and key to the efficiencies that we enjoy within the box and obviously facilitates those best-in-class unit economics. Adding a sauce, that's pretty easy and not disruptive to the flow. Take our chicken sandwich as an example, it has the same cook time as our other boneless products. We are adding a conveyor toaster in the restaurant that fits on the make table and allows efficiency. We did an operation stress test here in our Dallas market to just see -- we tried to break it, to be honest and the model was able to absorb the operations were still efficient, and so we're excited about how that plays a role. So staying committed to the efficient operating model is something that we're very focused on as it relates to product innovation.

Good. Follow-up on that one related to operational simplicity. Just wondering where the conversations are either here internally or with your franchisees on automation. It seems like you have a business that is probably pretty ripe for some automation and some incremental technology in the back of the house. So wondering how you guys are thinking about that and then what the conversations are like with the operators.

Yes. I think if you look at the back of house for our restaurant, and I think Alex mentioned this, he's over there, in his remarks earlier that at that $1.6 million volume, you can operate that restaurant with 3 to 4 members. And so there's not a lot of labor to take out. And that doesn't stop us from coming up with solutions, whether it's an automated potato cutter or exploring any other areas of innovation like that. But the opportunity isn't nearly as big as perhaps other brands that it require 25 team members to run a shift. Where we're focusing more of our innovation is really on above the restaurant, whether it's the AI ordering opportunity to take that team member off the phone, let them focus on serving the guest at that front counter, that's an area where we think we can innovate. And so if there's other ways to be more efficient above the restaurant, I think that's where you'll primarily see us focus on innovation. But the Lovers Lane location that Alex referenced, we're deploying a KDS to see if we can drive efficiencies and flow and the net modular layout we have in the back of the house as well. Can we move some things around and create efficiencies there, but it's already an extremely efficient box. Obviously, with the returns that we referenced earlier of north of 70% and a less than 2-year payback, we're going to continue to protect that. But our innovation will probably be focused more around above restaurant than in restaurant.

Peter Saleh, BTIG. Just wanted to come back to the conversation around supply chain. Is there one of these strategies that you're leaning more towards than another? And also, when we think about the investment that you're going to make, is it just to support the U.S. business? Or do you feel like at some point, you'll have to make some sort of investment? Similarly, international, I'm trying to understand the volatility on wing prices internationally as well.

Sure. It's a great question. I would say it's not just one of those alternatives or solutions we have in front of us. When we think about the strategy long term, we actually think it's a combination of all of them. Right now, because of the knowledge we've gained and how much we understand around the cost that goes into growing and harvesting the bird. It's really changed the dynamic of the conversation with a lot of our suppliers. And so we're already leaning into some of the pricing structures and conversations there and getting a more favorable and predictable pricing model. But as it relates to that, the obviously next evolution around there is to see if there's an opportunity for us to co-invest. And that could be a much quicker timeline, but yet come up with some sort of joint venture approach that would allow us to advance this strategy and then ultimately deliver on more predictable food cost. And then the next one, if you move around, is an acquisition. And obviously, that's difficult to predict the timing about, but it's something we're actively working against. And then longer term could be building our own facility. But I think it will be over time, a combination of all of those. But keep in mind, this strategy and how we're thinking about deploying it over the next few years, is really one that's -- if you think of one poultry complex, could provide about 20% of our overall wing buy. So we still have a significant portion of our wing buy that's with our existing supplier partners and continues to be some element of market-based pricing in there as well as anything else we can negotiate. But not only does this strategy help us deliver a more predictable food cost to the restaurant and minimize volatility, it also helps us deliver assured supply so that we have adequate supply for our long-term growth. Outside of the U.S., there's a lot of poultry production outside of the U.S. And so it's a little bit of a different situation. And how I would describe a lot of the markets that we look at and outside of the U.S. is a little bit like the brand was 25, 30 years ago, where wings are a fall-off product. No one's serving wings as a center of the plate. And so there's a little bit of a different landscape and a little bit of a different opportunity from a supply chain perspective outside of the U.S.

Jim Sanderson, Northcoast Research. I wanted to talk a little bit more about the chicken sandwich and the new product testing process you'll be using in the U.S. to roll it out. And maybe touch on the pricing strategy, it seems to me its positioned at a premium, and how that should contribute to profitability.

Yes. Happy to take that, Jim. So Michael had a nod to the rigorous testing that we've already conducted on that product. However, we want to be very mindful of our operations. So a checkpoint for us is the market tests that we launched yesterday. So -- we'll learn how that product resonates with our guests. We have a pretty strong hypothesis, and we'll get to see the product here shortly, but also a double check on operations as well. So a variety of parameters that we're looking at with that test, but we'll continue to monitor and track progress before we evaluate next steps there. Yes. So -- and can you -- yes. Pricing and a sandwich?

Price?

And -- so yes, we believe the pricing is pretty competitive on the chicken sandwich. And I think in terms of our menu, when you look at our combo pricing as an example, and you all know that Wingstop is a premium brand, high-quality, great products. The chicken sandwich actually affords a bit of a value for our guests. So really excited about that, particularly when you think about the chicken sandwich as perhaps a new occasion for our guests, so opening up, whether it be a frequency driver or perhaps opening up that lunch occasion, very excited about the potential.

Profit contribution.

Profit contribution?

Contribution on profit?

Yes. So again, in support of our whole bird strategy. So certainly mindful of delivering an overall blended food cost that works for our brand partners. And we believe this is a great sweet spot to fit into our portfolio of offerings.

Nick Setyan from Wedbush. A couple of questions. Just on the longer-term CapEx outlook. Before 2019, I think the CapEx was like $2 million to $3 million a year. Now we're in the mid-20s. How should we think about that sort of not just -- I mean we know what the next couple of years looks like, but what does it look like in 5 years or even a longer-term CapEx level?

Yes. Nick, I would think about it in that mid-20s range because a big part of the step-up that we've had is related to what Stacy shared on our tech infrastructure or digital transformation work that has a run rate of about $10 million more a year coupled with our Manhattan build-out as well. So somewhere in that mid-20s range is probably a good benchmark.

So even once like demand build-out is done, there's no drop down in CapEx?

Yes. We'll continue to be opportunistic with investments whether it's with international or domestic business. So as those come our way, we'll look at opportunities to invest.

And just second question, around the $1.60 to $1.80 target in terms of the food costs, understanding that it's very difficult to give us like an exact time frame. But are you thinking about like bigger picture in the next couple of years? Or are you thinking about it like as a target for the next 3 to 5 years?

Yes. I think, as I mentioned earlier, there are some elements of that strategy that we're already executing against. That's allowing us to have a very different dialogue with our poultry providers, suppliers today. But it's hard to predict the timing around finding the right acquisition target and how quickly that would close, but we're being very intentional and smart about it. We're looking at geography. Obviously, there's size of bird. There's the labor pool that it operates in, whether or not a complex includes feed mill that allows us to kind of have it all in one spot versus -- perhaps a complex that doesn't is buying feed out on the market. That's something we probably want to avoid to help control more of the input cost dynamic. And so there are a lot of nuances that go into targeting the right opportunity for us to execute. And so it's simply more about us finding that right opportunity because we've got the dry powder on our balance sheet to be opportunistic and move whenever we find that. And so it really -- it's tough to predict, but we based on effort and focus, we would expect it to be more of that 2- to 3-year time frame.

Jon Tower with Citi. Just a couple more. One is a clarification and the other is the question. I'll start with the question, third-party delivery, potentially moving to another platform. Curious to know, one, timing around it in terms of your expectations. And maybe if you can even quantify what you think today you might be missing in the marketplace by just having one sole provider versus going into other platforms? And then the clarification side is on the long-term low single-digit same-store sales growth. Does that include the international side because it doesn't seem like -- I mean those markets seem to be humming along quite well. So it doesn't look like it includes that in the guidance.

Right. On the delivery front, I think I would point you to other brands who have diversified before us. And we simply know that's an opportunity that we have down the road at this time to say timing, it would be speculative on my part. But we simply are acknowledging that we know that's an opportunity that we have in front of us to continue to drive that channel mix because there appears to be distinct users based on the platforms. And so there's another user group out there that's largely untapped for us today.

[indiscernible] switch within a week or several weeks, you can get it on?

It can move relatively quick, yes. And then as far as our long-term targets, yes, that low single-digit number is our domestic business. Yes.

From our webcast, from David Tarantino with Baird. What level of annual EBITDA growth is possible over the next 3 to 5 years if you deliver on your annual development and comp targets?

Thank you, David. I think we've demonstrated a very predictable model, and we know that delivering on those top line metrics of mid-single-digit same-store sales growth as well as a 10% plus unit growth will deliver really strong and highly predictable performance. I think everybody has their models pretty tight and should be able to arrive at that flow through, having executed this growth in an asset-light, highly franchised model.

Yes. We have another follow-up from David. Can you share metrics on brand awareness today versus the last few years? Do we have any historical case studies in markets that show what happens to AUVs as brand awareness builds towards more mature levels? Anything that you could -- that could serve as a leading indicator?

Yes. I think Marisa answered this question earlier when it was asked in that -- it's a little bit of a moving target as we move into new markets. But -- we did show a couple of proof points, if you will, within Los Angeles DMA as well as the Dallas DMA. And you can see that we continue to penetrate those markets from a unit count perspective, as well as continue to grow same-store sales. And those AUVs in those markets are above that system average, which I think demonstrates the benefits and opportunity behind -- us scaling brand awareness.

Jeff Bernstein from Barclays. Two follow-ups. One, just on the international. The rate of growth that we should assume going forward, I know you had a nice 10-year chart, but it would seem like the domestic pipeline is stronger than it was before. And the international pipeline, we're seeing lots of hundreds all over the place in terms of potential opportunity. So how should we think about the mix of domestic versus international within what sounds like the reiteration of the 10% unit growth, which hopefully can stay elevated north of that 10%? And then one follow-up.

Yes. We're pretty excited about the international business. I think we used the term earlier of feeling like we're at a tipping point. Obviously, newer markets that we announced, which we're excited about, Canada, South Korea, it will take some time for them to contribute. But what we've said is that we expect international to become a more meaningful part of that unit growth story overtime. And obviously, as part of the confidence we have in delivering on that mid-single -- or 3- to 5-year outlook of 10% plus unit growth, one of the things we did share on our last earnings call was for our guidance for 2022 of over 220 restaurants, we are expecting this to be a record year for our international business. And so we're excited about that.

And then just in relation to that international business, I know domestically, you work with a lot of smaller franchisees. Seemingly international, it's more master franchisees who would take over the country or the market. I'm just wondering, what's the differences when you're working with local mom-and-pop franchisees domestically versus master franchisees? I mean, I'm assuming the economics are very similar, but just trying to get a color for how you run those businesses differently.

First of all, we go back to the simplicity of running a country, actually growing a brand presence in the country through one group as opposed to multiple groups. It's much seamless and much better for the brand but also for the brand partner we choose to do business with. You'll be surprised, but we do usually do not master franchise. We carefully select when we master franchise upon certain market condition that dictates and that would enable a faster growth. But most of the time, we don't. And therefore, we -- again, we carefully choose what market would dictate a certain master franchise or not. But I would say, generally, we don't.

And you'll usually find outside of the U.S. It's an extremely well-capitalized partner. They likely are operating another concept, noncompeting concept. So they have F&B experience. They have familiarity with real estate. They have an infrastructure in place that helps position the brand for growth and scale out of the gate whereas in the U.S., a lot of our existing brand partners are only franchisees of Wingstop. I mean, I don't know why they would franchise anything else with these returns. But it's a little bit of a different profile, and they're scaling their organizations as they grow with Wingstop, whereas a lot -- the profile of a partner outside of the U.S. is a little bit different and more mature.

[indiscernible].

You saw our playbook in the U.K. that's delivering 22% 4-wall EBITDA. I think that's a strong case that would demonstrate very similar unit economics.

It's Chris O'Cull with Stifel. I have a follow-up question regarding the co-op idea. Michael, I'm trying to understand how this strategy is consistent with the asset-light model given the size of investment the company may need to make. So maybe if you could talk about -- I think you mentioned something about selling some of the assets to the franchisees or the system. Help me understand how you recoup that investment.

Sure. The -- I guess the simple way to put it is we know that to move quickly and move on an opportunity that we identify, we're going to have to fund that initial capitalization. But what we would do is form a franchisee-owned purchasing co-op. We would then put that asset within that co-op and put some sort of debt, obviously, the cash flows of that poultry processing complex would largely be guaranteed by our existing franchisees and then use that to pay ourselves back. So there could be some sort of near-term impact on our balance sheet, but we would move quickly to move that off of our balance sheet, return the capital that we've invested and maintain that asset-light position.

[indiscernible].

That's right.

Jake Bartlett from Truist Securities. I have 2 questions. One on international. You mentioned a minority investment you're planning on making in the U.K. If you could maybe expand on that? And just bigger picture, given the returns that you're seeing in the U.K., for instance, there's some excess kind of rent that you could -- by investing, you could kind of gain the benefits of. Is that something you look at in other markets in terms of maybe doing JVs or participating in some way to kind of get some of those excess returns? And then the question on -- in the U.S., you mentioned leaning into value that you can do that because of the wing prices coming down so sharply here. But I'm wondering what the appetite on the perspective from the franchisees. Obviously, there's a push and pull between wanting the topline to grow and then wanting their bottom line to grow. So maybe a little detail about what are more value-oriented promotional strategy does to margins for the franchisees? And really just how much of an appetite they have for that.

I'll start, you guys can jump in. As it relates to the U.K., we actually opportunistically, Jake, made that investment last year. We saw an opportunity to invest capital in that partner and really accelerate growth. As Nicolas mentioned, we're at 20 restaurants there today, and we have what we see as a pipeline and a near-term opportunity to almost double that footprint. So we're excited about that, and so it was an opportunity for us to lean in. And I think that demonstrates -- we've talked about in our strategy around accelerating growth, how we're open to leveraging our balance sheet and being opportunistic to drive growth. A great example in the U.K., and it's something we would be open to doing in other markets. I think as we think about value and how we lean in, you take the boneless mill deal for an example, 20 boneless wings, 4 flavors, 2 dips, large fry, all for $15.99, while it comes across to the guest as value, it's actually at a food cost that's favorable. And so we're -- it showcases our menu and the way we're able to position these bundles in a way that really demonstrates value to the consumer. But obviously, you take chicken sandwich as an example, another value opportunity for us coming down the pipe we believe, whether it's the a la carte at $5.49 and then the combo with fries and a drink at $7.99 is compelling value to the consumer, but yet it still delivers on food costs that makes our model work. And so Marisa and her team are in constant conversation with our brand partners around how we position value, how we drive frequency with our guests and retention. And so it's a collaborative conversation for sure.

Greg Francfort from Guggenheim. I had 2 questions. Michael, the first one for you is just -- maybe it's a follow-up with John's. But is your mix of delivery still like [ 19/8 ] third-party versus your own platform? And as you look to your customers that are going through the DoorDash platform, how much overlap do you think there would be between that and another aggregator? Do you think it would be a high overlap or do you think it will be pretty unique to the specific platforms?

That channel mix still exists today and sustains there. And we don't see a -- we don't believe there is a big overlap between that wingstop.com user. Stacy talked about the digital ordering experience, how efficient that is. Not to mention, it's a little bit of a cheaper occasion as well for guests. And so we don't believe there's much, if you will, tray it or spill over to another delivery provider.

And then Marisa, you put up a slide where I thought it was fascinating about the new light, medium and heavy user. And as I looked at it, it looked like 2 years ago, you converted a lot of -- you brought in a lot of new customers, and then last year was about converting to light customers. Can you give maybe a little bit of an understanding of what the profile of those look like in terms of frequency, just so we understand the path to getting to a medium customer?

Yes. So our light customer is typically about once a quarter. And our medium customers about 2 to 3 a quarter and heavy is more than that.

And we saw -- what you saw in that curve was obviously an incredible explosion in the acquisition of new when the pandemic hit. But if you -- and then you see it come down and normalize. But if you were to draw a linear line, you can see we're still bringing in new guests, but every line is moving up to the right as we continue to leverage that first-party data and move them up the usage case for Wingstop, which is, as Stacy mentioned earlier, a really exciting opportunity for us.

And we're almost maniacal about that first 90-day window we had on the slide also just our opportunity and retention of that guest in the first 90 days. And so that's where we work multiple levers in that window to move them into that frequency curve.

It's Andrew Charles. Two last ones for me. Just first, Canada is going to be leveraging the U.S. tech stack. And I believe in exchange, they're going to pay a tech fee. And so I was curious what needs to happen for you guys to start contemplating tech fee from U.S. stores as you guys were somewhere in early to middle innings of building up the tech stack as franchisees shift payment over to technology vendors, perhaps there's an opportunity for you guys to collect that payment to recoup some of your investments in the project. Then second question on China. Nicolas, do you believe that China is better -- apologies, it's already addressed, but do you live China is better off as bringing multiple franchise partners or as a JV rather than the traditional master franchise model that you utilized just given the size of the prize there?

I think as it relates to the tech fee discussion, as you mentioned, Andrew, a lot of the cost for technology today is sitting on the P&L for our brand partners. And as we continue to make these investments that Stacy referenced over the next few years, I think we'll look at what that eliminates at the restaurant level and how we can structure some sort of fee arrangement to pay for and probably not the initial investment, but more around the ongoing maintenance and cost to operate and support that. But I think it's a little bit early to really talk about it, specifically what that would look like. Nicolas, do you want to hit China?

Yes. Yes, it's a very good question. Actually, as a matter of fact, there's been a big consideration in our process when we looked at China. And such a big marketplace that -- and with very distinct and defined regional strength. And on the basis of what the others have done and learned in the process, we feel that starting with the region specifically and see how it goes and then decide what would be the next course of action is probably the safest way for us to consider our entry into China rather than to go and sign a complete country, I would say, agreement. So -- yes, there was a heavily debated, heavily researched, debated internally and we feel that's the best way to do to approach it.

It's Mike Tamas with Oppenheimer again. Can you talk about what percentage of your restaurants today have an AUV of that $2 million goal you have or you don't have enough there? Maybe how you bucket it in your highest AUV units? What the differences are between those units and maybe your lower AUV units? Just so we can kind of understand capacity in the system to get up to that level.

That is one of my favorite questions. We have not found that maturity level yet. We have restaurants here in the U.S. in a very similar kitchen footprint that are doing well above that $2 million level. In fact, the original Wingstop that's still open today in East Dallas, I'm proud to say it's company-owned, is doing north of $3.5 million in sales. And we have restaurants in the system that are well above that. So there is not a throughput issue, particularly when we think about the opportunity to get from $1.6 million in AUVs to $2 million, there's plenty of capacity within the existing kitchen. Well, I want to thank everyone for the great questions, for your time. As you can tell from the team, we're pretty excited about the days in front of Wingstop and the opportunity we have. So thank you again. And we're excited that, as it was alluded to earlier by Marisa, we're going to be able to go up to the third floor and you are going to enjoy not one, but multiple chicken sandwiches, so I hope you came hungry. Thank you again.