Wingstop is a restaurant that serves cooked-to-order, hand-sauced, and tossed chicken wings, boneless wings, tenders, fresh-cut, seasoned fries, and beverages. It began as a small buffalo-style chicken wing restaurant in Garland, Texas in 1994 and quickly became a fan favorite.
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00:00 Introduction
00:54 Locations & Competition
01:11 Investment Range & Franchise Fee
01:24 Ongoing Cost and Fees
01:47 Median Annual Net Sales & Net Income
02:32 Time to Recoup Investment
03:10 Conclusion
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In 1997, Wingstop opened its first franchised location and by 2022, they had served the world one billion wings. Wingstop has over 1300 franchised locations across the United States. Charlie Morrison is the chairman and CEO of Wingstop and has served in that position since June 2012.
Buffalo Wings, Bojangle’s Restaurants Inc., and Zaxby’s are the top 3 competitors of Wingstop in the chicken wings’ business and you can learn more about them on our site on the provided links.
Are you interested in owning a Wingstop franchise? Continue reading to see if the franchise is worth your investment.
The initial investment necessary to begin the operation of a Wingstop restaurant ranges from $347,600 to $759,100, excluding real estate purchase and lease costs. This includes $30,000 that must be paid to the franchisor or affiliate. Additionally, if you want development rights for more than one restaurant, you must pay the franchisor a development fee equal to $10,000 multiplied by the number of restaurants you commit to develop.
The table below shows the breakdown of the initial investments into specific expenses like franchise fees, development fees, rent, and operating inventory.
Royalty Fees: 6% of Gross Sales (Under the 2020 Incentive Program, the Royalty will be 2% of Gross Sales during the Restaurant’s first full year of operation, 4% of Gross Sales during the Restaurant’s second full year of operation, and 6% during the remaining franchise term)
Ad Fund: 4% of Gross Sales
Local advertising takes about 2% of the quarterly Gross Sales.
2019 Measured Period
The 2019 median annual net sales of all franchised Wingstop restaurants was $1,892,388.
2020 Measured Period
The 2020 median annual net sales of all franchised Wingstop restaurants was $1,359,722.
Of the 1151 franchised restaurants in 2020, 484 of them had net sales greater than the average.
To assign a valuation multiple for Wingstop franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for Wingstop Franchise specifically since its transaction data was available on the DealStats website.
Under $1 Million Net Sales
Estimated Selling Price = Net Sales * 0.31
$1 Million – $5 Million Net Sales
Estimated Selling Price = Net Sales * 0.34
Over $5 Million Net Sales
Estimated Selling Price = Net Sales * 0.86
The estimated selling price also known as the Market Value of Invested Capital (MVIC) is the total consideration paid on the seller and includes any cash, notes, and/or securities that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer. Based on this information, we can calculate the resale value of a Wingstop Franchise.
Based on the median multiple of 0.34 and net sales averaging $1,349,561 between 2019 and 2020, a Wingstop Franchise would sell for $458,850. The resale value is less than the midpoint investment of $553,350 by about $94,500 which is not a very significant difference.
However, since the median multiple of net sales averaging over $5 million is high at 0.86, owning multiple Wingstop franchises increases your earning potential from a resale. For example, if you own 10 Wingstop franchises, the average net sales would be about $13,495,610. With the median multiple of 0.86, the resale value of the 10-franchise system would be approximately $11,606,228.
Comparing the resale value to the initial midpoint investment of $5,533,500 for the 10 franchises, we see that the Wingstop makes a significant net gain of over $6 million. In addition to the lucrative proceeds, private equity firms are more interested in investing in multi-unit franchise systems than individual-owned operators.
Read here to learn more: https://www.vettedbiz.com/wingstop-franchise-opportunity-for-2022/
Want to speak with a franchise specialist about Wingstop or another franchise? Click here: https://share.hsforms.com/1ZtNM19w4R8WIXyNa_97N7w4e0xw
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