Wingstop Inc

NASDAQ:WING

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded today, Wednesday, August 2, 2023. On the call today are Michael Skipworth, President and Chief Executive Officer; and Alex Kaleida, Senior Vice President and Chief Financial Officer. I would now like to turn the conference over to Alex. Please go ahead.

[Alex Kaleida, CFO & SVP]

Thank you, and welcome to the Fiscal Second Quarter 2023 Earnings Conference Call for Wingstop. Our results were published earlier this morning and are available on our Investor Relations website at ir.wingstop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. Lastly, for the Q&A session, we ask that you please each keep to one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael.

[Michael Skipworth, President, CEO & Director]

Good morning, and thank you for joining our call. Our second quarter results showcase the underlying strength of the Wingstop brand and the staying power of our strategy. Our results would not have been possible without the incredible work by our team members in the global support center, the restaurant team members, our supplier partners and our brand partners who work tirelessly each day to serve the world flavor. We delivered another industry-leading quarter, led by 16.8% domestic same-store sales growth. Consistent with the underlying strength in our brand we saw in the first quarter, substantially all of our comp in Q2 was driven by transaction growth.

Within our sales growth, we saw further expansion in our digital channels, achieving a record 65.2% digital sales mix for the quarter. We opened 50 net new units during the quarter. This pace of development in same-store sales growth translated to system-wide sales growth of 27.8% in the quarter. Adjusted EBITDA totaled $34.4 million an increase of 47% versus the prior year, highlighting the strength of our asset-light model. Our unit economics are near our historical highs, and we have an energized base of brand partners. We are extremely excited by the strength we are seeing in our development pipeline positioning us for a record year across development metrics, whether it be our development agreement sales, site approvals and new restaurant openings.

We are also making great progress increasing brand health metrics. We hit record highs across brand awareness, purchase consideration and intent as well as media-related perception metrics that include positive buzz, word-of-mouth and likelihood to recommend. And we are also seeing positive trends in value scores with guests in an environment where many brands are measuring decline. While we are encouraged by the progress we are making, we continue to see sustainable growth in front of us when we benchmark Wingstop's brand awareness to other national brands. The roughly 30% growth we've seen in system-wide sales during the first half of the year, gives us the firepower in our national ad fund to continue chipping away at this opportunity.

In our 19 consecutive years of same-store sales growth, we have a proven playbook and a multiyear strategy that we are working in, we continue to execute against. We believe our sales strategies provide us with clear line of sight to growing AUVs north of $2 million. Our strategy remains consistent and clear. Building brand awareness, menu innovation, expanding our delivery channel, digital transformation and data-driven marketing. One of the strategies we've talked about over the years is to broaden the top of the funnel by targeting heavy QSR users, a group that represents over 60% of all QSR visits, and is either not heard of or not tried Wingstop. We're excited by the progress we continue to make against this meaningful opportunity and are bringing a lot of new guests that are experiencing Wingstop for the first time.

These new guests that are coming into Wingstop tend to be Gen Z or millennials, multicultural, tech forward, party size of two or more and willing to spend a little more for quality or indulgent. The profile of the heavy QSR user. While we are encouraged by the progress we are making and the tremendous momentum we have in the brand, there remains a significant awareness opportunity helping fuel continued sales growth. The progress we are seeing in expanding brand awareness will be further bolstered by the launch of our new creative campaign, our first in more than 3 years, coinciding with the start of football season. This new creative, combined with our growing ads will allow us to continue closing our gap in brand awareness with breakthrough creative along with Wingstop showing up in more premium placements focused on live sports.

And to help us continue to execute our proven strategy, I couldn't be more excited about the addition of our new Chief Growth Officer, Anne Fisher. Her experience will position us to advance our best-in-class technology platform, and allow us to further unlock our growing first-party digital database as we work towards our aspirational goal of digitizing every transaction. Another sales driver on our path to $2 million plus AUV is the expansion of our delivery channel where we see the potential to nearly double our channel mix. In July of last year, we launched a second delivery provider for the entire domestic system. The addition of Uber Eats has allowed us to access a new guest that's proven to be highly incremental.

And we see the two delivery marketplaces as another avenue to build awareness. Benchmark suggests delivery sales mix can be north of 50%. Today, we sit at approximately 30% delivery mix in the system. And reflecting on our first year of expanding to an additional delivery provider, we continue to see a substantial opportunity ahead. We have lapped the launch of Uber Eats in July of last year, and we are encouraged by the results we are seeing. We have commented over the last few quarters that we continue to see growth with both DoorDash and Uber Eats delivery channels, and we see continued growth in front of us within these channels. In addition to delivery, our Chicken Sandwich innovation continues to be a sales lever. Oh, and by the way, I'm sure many of you by now have tried at least 1 of our 12 chicken sandwiches, but yet we are only scratching the surface on the opportunity. With more than 2.8 billion chicken sandwich servings annually in the U.S., we are looking to capture our fair share of the category.

This strategy is broader than just winning our fair share. It is also about broadening how consumers view Wingstop. It presents us with the opportunity to capture more occasions beyond that indulgent wing occasion, which we believe can ultimately impact frequency and presents us a huge opportunity for us over the long term.

Wingstop Chicken Sandwiches provide another access point for the brand among new consumers and introduces our differentiating flavors and quality our core fans have enjoyed over the years. Another benefit we have seen as we bring in new guests into the brand through Chicken sandwich is a halo effect on our core wing business as guests learn to navigate the rest of the menu, something we believe just further strengthens our unique position. Chicken Sandwich has also helped advance our supply chain strategy.

The combination of increasing our utilization of breast meat and our size and scale has positioned us to make meaningful progress towards our goal of minimizing volatility we see in food costs. As we sit here today, the majority of our chicken we purchased is not directly tied to the week-to-week volatility that is seen in the spot market. This is a fundamental shift in our model and is helping us mitigate the volatility we have historically seen in food cost.

As we continue to win more chicken sandwich occasions, we see a path to 50% plus boneless mix, which we believe could result in a structural change to our long-term food cost target, potentially yielding COGS in the low 30% range and further enhancing our best-in-class unit economics. These multiyear sales drivers that we are executing against have combined to drive significant transaction growth and gives us confidence in achieving our targeted AUV in excess of $2 million.

Our supply chain strategy and growth in AUVs have strengthened unit economics. The average investment to open a Wingstop is still a relatively modest $450,000 and with system AUVs of $1.7 million, brand partners aren't seeing a payback in less than 2 years. Our brand partners recognize the staying power of our strategies and the strength of our unit economics, which is supported by the fact that over 90% of new restaurant openings come from existing brand partners reinvesting back into the brand. A strong statement supporting our best-in-class returns and translates into significant demand for growth. Brand partners are motivated and excited to grow their Wingstop footprint as we continue to see our pipeline strengthen not only for new site approvals, but also for new development agreements, giving us confidence in our path to achieve our long-term goal of 7,000-plus global restaurants.

You've heard me say that we believe our international business is well positioned for growth. During the first half, we saw an acceleration in international same-store sales growth and the investments we have been making and the team are paying off. We signed two new markets during the quarter, Netherlands and Puerto Rico, which fit perfectly within the regional expansion strategy we have discussed over the years. We're growing our footprint in our newest markets, Canada and Korea while AUVs are accelerating. The business development pipeline remains strong, and I'm excited about the momentum that it's building in our international business.

As we sit here today, the consumer is proving to be more resilient than what many of us might have expected to start the year. Whether it is continued inflation, rising interest rates or even the restart of student loan payments later this year, we acknowledge the macro backdrop continues to have a fair amount of uncertainty. However, despite the uncertainty ahead, we believe we are well positioned to deliver another industry-leading year. In the second quarter, we opened our 2,000th global restaurants. Our system sales have surged past $3 billion on a trailing 12-month basis through June, which is nearly double when comparing to just 3 years ago during the same time period. This is a direct reflection that our multiyear strategies are working and showcases the underlying momentum in the brand.

It's also what gives us confidence to raise our full year 2023 outlook on domestic same-store sales growth from high single digits to a 10% to 12% range with our sites clearly set on delivering an industry-leading 20th consecutive year of same-store sales growth. In addition, with the visibility that we have in our construction pipeline, we are updating on our development outlook from approximately 240 net new units to between 240 and 250 net new units, which would translate to a record number of net new units opened in a year for Wingstop. Before I hand it over to Alex, I wanted to share some exciting news on the ESG front. A key focus area in our ESG efforts is giving back to the communities in which we serve.

Our Wingstop charities mission is to amplify the flavor of our communities through service while focused on environment, education, sports, food and entrepreneurship. In December of 2022, we launched Round Up, a program in which our guests have the ability to round up their digital checks to the nearest dollar to donate to Wingstop Charity. This provides an opportunity to partner with more organizations in need of support. I'm excited to announce that in the third quarter, Wingstop Charities is partnering with No Kid Hungry, where 100% of the Roundup contributions made between August 1 and September 30, will go to support this terrific organization.

No Kid Hungry is an organization that is changing the way that schools and communities ensure our youth have the food they need to learn, grow and succeed. Their mission is to end child hunger and to help ensure every single child in America has the food they need to grow up healthy and strong. I'm thrilled with our efforts and the opportunities to have an even greater impact in the communities we serve. That the foundation of our strategies is people and our culture, which we refer to as the Wingstop way. We believe these are competitive advantages for us. And as we look ahead to second half of 2023, I'm excited by how the Wingstop team is positioned to deliver another industry-leading year.

With that, I'd like to turn the call over to Alex.

[Alex Kaleida, CFO & SVP]

Thank you, Michael. The second quarter continued to demonstrate the strength of our long-term strategies. We delivered 27.8% growth in system-wide sales in the second quarter which, as you heard Michael mention, now exceed $3 billion. Total revenue increased to $107.2 million from $83.8 million in the prior year fiscal second quarter. Royalty revenues, franchise fees and other revenue increased by $11.9 million in Q2, driven primarily by 182 franchise restaurant openings since the prior year comparable period and a 16.8% increase in domestic same-store sales, which was driven almost entirely by transaction growth. Company-owned restaurant sales totaled $22.6 million in Q2 an increase of $3.8 million, primarily due to a 5.7% increase in company-owned same-store sales driven by transaction growth and 6 net new restaurants versus the prior year comparable period.

Cost of sales as a percentage of company-owned restaurant sales improved by more than 580 basis points compared to the prior year, mainly driven by a reduction in food, beverage and packaging costs which included a nearly 40% decrease in the cost of bone-in wings. Our supply chain strategy is to mitigate volatility in our food costs in a component of our strategy where we've made a lot of progress is around shifting more of our buy from the spot market. Based on the progress we are making against our supply chain strategy and leading indicators for our core commodities, we entered the second half of the year with greater predictability and we continue to have line of sight to a food cost for 2023 in the low 30% range.

And consistent with our outlook last quarter, we anticipate company-owned restaurant cost of sales to be approximately 75%. With the progress we are making on our supply chain strategy, this visibility into food costs extends beyond 2023 and is generating quite a bit of excitement among our brand partners as unit economics have strengthened to near record levels.

In the second quarter, SG&A totaled $22.1 million, an increase of $8.2 million versus the prior year comparable period. This quarter lapped a significant stock award forfeiture last year and in the current quarter included investments in head count and strategic projects to support the long-term growth of the business, as well as an increase in performance-based stock and incentive compensation as a result of our performance.

Adjusted EBITDA, a non-GAAP measure, was $34.4 million during the quarter, an increase of 47% versus the prior year. Adjusting for nonrecurring items, we delivered adjusted earnings per diluted share, a non-GAAP measure of $0.57, a 27% increase versus the prior year. Our highly franchised asset-light model continues to deliver strong free cash flows. As of the end of the second quarter, we had $521 million in net debt. Our net debt to trailing 12-month adjusted EBITDA was at 4x, which is a half turn lower than at the end of the fourth quarter. Underscoring our ability to quickly delever through a combination of adjusted EBITDA growth and strong free cash flow generation. We are maintaining a strong cash balance that stands at approximately $200 million and we believe puts us in a position of strength as we enter the back half of this year.

A component of our return of capital strategy is through our regular quarterly dividend, which is targeted at approximately 40% of free cash flow. Our Board of Directors today approved a 16% increase in our quarterly dividend to $0.22 per share of common stock, resulting in a total dividend value of $6.6 million. This dividend will be paid on September 8, 2023, to stockholders of record as of August 18, 2023. Now moving on to our outlook for 2023. With the strong start to the year, we now anticipate domestic same-store sales growth of 10% to 12% for full year 2023, an increase from high single digits.

Based on the visibility we have in our pipeline, we are raising our development outlook to a range of 240 to 250 net new units. And consistent with our prior comments, we also anticipate our pace of openings to be weighted more towards the fourth quarter. SG&A guidance is estimated to be between $91 million and $93 million, including $3.9 million in nonrecurring consulting projects to support our strategic initiatives and an estimated $14 million to $15 million of stock-based compensation expense, which was increased from $12 million to $13 million due to the performance of the business. For modeling purposes, we anticipate SG&A in the second half will be evenly split between the 2 quarters. Our strategies remain consistent, and we are focused on execution which is evident with the strong start in the first half of the year.

Our multiyear growth strategy is a unique part of the story for Wingstop have staying power and give us the confidence in delivering upon our increased outlook for 2023. I want to thank our team members, supplier partners and brand partners for all their hard work and dedication to deliver a best-in-class experience for our guests. With that, I'd like to now turn to Q&A. Operator, please open the line for questions.

[Operator]

[Operator Instructions]. Today's first question comes from David Tarantino with Baird.

[David Tarantino, Robert W. Baird & Co.]

Congratulations on great results. My question is on the comp trend that you're seeing. And clearly, still very strong on an absolute basis in Q2. But it was a little lower than in Q1. So I wanted to ask how you're viewing that change in the business from Q1 to Q2? And whether you think it's an underlying deceleration or not given -- I know it's kind of tough for us to tell given all the noise and the comparisons related to COVID. So I guess, how are you viewing the business trend kind of Q1 to Q2?

[Michael Skipworth, President, CEO & Director]

I think as we think about the comp that we delivered in Q2, it's something we're obviously extremely proud about, particularly when to the underlying momentum and strength of the brand to deliver a comp of 16.8%, which it's been substantially driven by transaction growth, speaks a lot to the effectiveness of our strategies that we're executing against and just the overall health of the brand. I think you heard us in our prepared remarks, talk about whether it's from brand health metrics we're setting record levels for the brand and seeing really strong improvement. And then when you look at some of the metrics around value as an example, where we're showing and measuring really great progress and improvements in value scores when the industry is measuring declines.

And so I think it really differentiates our position. But as we think about the quarter, I think obviously, we talked about this in prior quarters, we saw a bit of a perfect storm hit our business in April of last year. But then we moved quickly and deployed or leaned into our proven playbook, our value playbook, and was able to reverse that trend pretty quickly. So the compares did get a little bit more challenging as we moved through the quarter and not nearly as easy as what we lapped in April. But I think overall, we feel really good about where we stand and the trends that we're seeing in the business.

I think if we take a step back, I can remember just about a year ago, we were celebrating achieving $1.5 million AUVs for the brand. And at that point in time, we shared a broader strategy that showed what we believe is the growth levers we can execute against to scale AUVs north of $2 million. And fast forward to today, we're already up over $1.7 million. And so as we think about the unit economics and the strength that we're seeing there and how that's feeding into a significant amount of demand with brand partners, we're really encouraged by the underlying momentum we see.

[David Tarantino, Robert W. Baird & Co.]

Great. And just a follow-up to that, Michael. I think one thing that's on investors' minds is how you lap this big performance you've seen in the first half of this year. So I guess, what are your thoughts on being able to just maintain kind of positive momentum on top of what you've seen recently as you think about the next 4 quarters playing out?

[Michael Skipworth, President, CEO & Director]

Another good question. And I think it's something we're actually really confident in because as we think about these sales levers that we're executing against, whether it's continuing to grow brand awareness, whether it's through menu of innovation and capturing new occasions through chicken sandwich, and as we mentioned in our prepared remarks, seeing that halo effect on the rest of our business as these new guests come in through a very familiar and easy entry point of chicken sandwich and are able to navigate the rest of the menu or the expansion of delivery where we mentioned it's at 30% today, but we still see an opportunity as we benchmark ourselves to other more mature heavy off-premise brands. An opportunity to almost double that channel mix and obviously, continued digital expansion and then leveraging our first-party data.

And so all of these things give us a lot of confidence in our ability to continue to grow AUVs and sustain continued sales growth and deliver on our long-term algorithm. And I think what's unique about our story is these aren't LTOs or onetime sales benefits. These are new sales layers that we continue to build upon. And I can remember answering the same question a couple of years ago when we saw extensive growth in our business from the pandemic. And we talked about that just simply being a pull forward of growth. And we were able to build on top of some and comp on top of some pretty incredible numbers back then and we don't see I think next year will be any different.

[Operator]

And our next question today comes from Jeffrey Bernstein with Barclays.

[Jeffrey Bernstein, Barclays Bank]

First question is just on the unit growth. You raised your opening target modestly for '23. Now it looks like 12% to 13% growth. Just wondering if you could talk about maybe where the incremental growth is coming from, whether by geography or presumably a lot more existing franchisees, any reason to believe that the 2024 year will see any kind of slowdown in growth if we were to see a tougher macro? Or is your line of sight pretty strong that the 10% is the base, but you have demand to exceed that going to '24, where maybe the macro might be a little bit more challenged? And then I had one follow-up.

[Michael Skipworth, President, CEO & Director]

We're definitely bullish about development for this year in particular. And what we're encouraged by is, it's balanced. It's balanced it through fortress markets, non-fortress markets. And again, you did mention it, but it is the majority of our development coming from existing brand partners that are reinvesting in the brand. We mentioned it in our prepared remarks, but there's a significant amount of demand and excitement from our brand partner community to continue to grow. We're seeing our pipeline of sold restaurant commitments for next year, continue to build very nicely. And in addition to that, we continue to see a really strong steady flow of sites coming in to be approved giving us a lot of confidence in continuing to be able to expand our footprint.

And I think for us, a lot of that centers around the progress that we've made obviously driving top line probably equally as important is continuing to advance our supply chain strategy, where we've been able to move more and more of our buyer away from the spot market in how we structure some of the agreements with our supplier partners. And that's enabled us to provide a lot more predictability. And ultimately, as what our supply chain strategy as stated is to minimize the volatility that we see in food costs. And so we feel really good about how that's coming together, the progress that we're making. And I think as you heard in Alex's comments in our prepared remarks, reiterating what we told you last quarter around cost of sales margins for our company restaurants, I think it's a good indication.

[Jeffrey Bernstein, Barclays Bank]

Understood. And then the follow-up is really on something you didn't necessarily mentioned in your prepared remarks, but AI, which I know from recent conversations, it sounds like you were testing AI and I think you're 40 or so company-operated units in Dallas. I know that region still gets a fair amount of orders over the phone. So I'm just wondering if you can share any early feedback maybe on benefits of the shift to digital or other potential AI opportunities? Obviously, this is a sector where that is getting a fair amount of discussion. I know you guys tend to be on the forefront from a technology perspective. So any color on the AI test or future opportunities would be great.

[Michael Skipworth, President, CEO & Director]

Yes. Thank you, Jeff. We're really excited about this AI solution that we've expanded the test on as it relates to intercepting phone orders, which still represent roughly 15% of our sales today. And so as we think about our digital sales mix, which we mentioned for Q2, was at a record 65.2%. We see a ton of runway to continue to expand our digital sales mix. And I think when you look at the overall industry and you've seen consumers revert back to prepandemic behaviors you're seeing digital sales mix for a lot of brands go the other direction. And we're continuing to expand, and we think this AI solution is a great catalyst for further expansion, where we enjoy and benefit from a higher average check.

But what we've seen in the additional restaurants that we've expanded to is pretty consistent with what we mentioned last quarter, and that is, we think it's capturing more calls that were previously missed, it's offering a better guest experience and then obviously, if the team members' not on the phone, while guests are at the counter picking up an order and having to manage both of those things at the same time, it provides a better team member experience. And so really excited about the progress we're seeing within the test and the opportunity we have in front of us to lean in and leverage AI.

[Operator]

And our next question today comes from Andrew Charles at TD Cowen.

[Andrew Charles, TD Cowen]

I have two questions for Alex. First, I want to get your updated thoughts on accelerating cash to shareholders. Last March, you fortified the balance sheet, about $130 million of unrestricted cash as you pursue the supplier strategy you're on pace on this year with less than 4x net debt to EBITDA. So curious, what do you see to accelerate cash returns to shareholders? And how would you think this is more likely to be executed through releasing that excess cash on the balance sheet or through perhaps a dividend recap?

[Alex Kaleida, CFO & SVP]

Consistent with our comments we made in the prior quarter, we intended to enter the second half in a position of strength with our balance sheet. So we are set up to be opportunistic with this cash, which could include a return of capital. And we are having regular dialogue with our Board on how to best optimize our return of capital strategy. So I think you've seen that cadence from us over the years around that every 18-month window. And we also obviously deploying the cash and move our leverage up a bit, but we're also comfortable at a little higher leverage than where we're at today to your point.

[Andrew Charles, TD Cowen]

Great. And then my follow-up question is on bone-in wings prices. I think you said bone-in wings are going to continue to be benign in the back half of the year and then you have line of sight into 2024. And so wondering, can you expand more on that? What are the early indicators for 2024 wing costs that helped lead to or helping to lead to record store level cash flows in 2023. I know Michael, last call, you talked about, obviously, beef inflation is going to lead chicken suppliers increased production, increased supply. Is that settled the thought for 2024?

[Alex Kaleida, CFO & SVP]

Yes, Andrew, this is something we're really excited about and our brand partners as well. I think this is the first year starting earlier in the year. We've been able to articulate where we see our food cost in that low 30% range for the year. And that's a function of what Michael mentioned on the call around moving more of our buy off the spot market. While we do watch the market, we're less reliant on that week-to-week buy because of the way we've been able to introduce different pricing arrangements with our suppliers. And for the first time, frankly, in years, in our history, we've been able to lean into 2024 as well, deploying this strategy of mitigating volatility in our food costs. And so it's more about -- it's less about the market dynamics and more about where this -- where our strategy is leading us into the following year.

[Operator]

And our next question today comes from Joshua Long with Stephens.

[Joshua Long, Stephens Inc.]

When thinking about the unit development pipeline, Michael, I think you mentioned the ongoing strength and the fact that it continues to build globally. Just curious if you could quantify what that pipeline looks like. I think in prior calls, you've been you had built something along the lines of 1,200 units. But just curious if you could add an additional layer of texture on that. And then secondarily, just within the current environment, just what that development backdrop looks like? Obviously, you're able to take up the development range for the year, which is exciting, but curious what the kind of your brand partners and what you all are facing in terms of either permitting or supply chain headwinds in the current environment.

[Michael Skipworth, President, CEO & Director]

I think we mentioned it on the call, we were trending towards record levels in just about every metric across development, whether that's RDA commitment sales, whether it's sites approved or obviously based on our guide for the balance of the year. 2023 is shaping up to be a record year of new restaurant openings, and that pipeline continues to build. And so I think a lot of that has to do with some of my prior comments I made around just the strengthening of the unit economics that our brand partners see, the staying power of these sales drivers that we're executing against. And then as we mentioned earlier, the progress that we're making against our supply chain strategy that's providing more predictability and mitigating the risk around volatility that we see in food cost.

And so we're pretty encouraged by that progress. And obviously, our brand partners are really excited about it. And I think another thing they're really excited about is we talked about last year's vintage of new restaurants that came in at $1.3 million on average. And those restaurants today are comping strong. I think that's something we've demonstrated consistently over the years. That our restaurants come out of the gate strong and then just build from there, another unique element to our growth story. And then as we look at the restaurants that we opened this year, they're actually coming out of the gates and trending at above $1.3 million, which again further the excitement that we see from our brand partners, and I think ultimately fuels that development we talked about.

[Joshua Long, Stephens Inc.]

That's very helpful. As a follow-up, when we think about the momentum behind Chicken Sandwich and the opportunity to bring new guests into the brand through that funnel that you mentioned, lot of work there and still more work to be done for sure. But can you talk about what you've seen thus far in terms of how you engage with guests when they enter the system, how they start to explore the menu and what kind of what that wingstop journey is for them. It seems like there's an opportunity to support some of that boneless mix that you talked about and then perhaps even kind of your core heritage bone-in specialty as well. But just curious what you've learned with them and how they've communicated with you all as they've gotten into the system.

[Michael Skipworth, President, CEO & Director]

Yes, it's a great question and it's something that we're pretty excited about, I think, feeds into the overall confidence that we have is that these new guests that are coming in. They're very familiar and understand how to engage with brands with a chicken sandwich, where maybe historically, they've only thought of wings as a special occasion, whether it be Super Bowl or some other group gathering. And as they come in, we are seeing them navigate the rest of the menu. And I think that is what's translating to a pretty unique situation where this comp growth that we're talking about and the transaction growth that we're seeing it's pretty consistent across daypart. It's pretty consistent across channel, and we're pretty excited about just seeing this overall what we call halo effect to the rest of the menu.

But one of the data points I'll share with you that really highlights the progress that we're making is as we exited Q2, our boneless mix was the highest it's ever been at 43%. And so we talk about not only can this new guests come in through chicken sandwich and provide an overall benefit to the menu. We see that as continuing to build confidence around driving boneless mix long term north of 50%, which could structurally change kind of our overall food target which typically is mid-30s, we could actually see that move down to something in the low 30% range, which is pretty exciting when you think about combining that with the AUV growth that we're delivering really strengthens those unit economics and feeds that long-term growth story, which is really exciting when you think we just eclipsed 2,000 restaurants and have an opportunity in front of us to scale this brand to north of 7,000.

[Operator]

And our next question today comes from Jon Tower at Citi.

[Jon Tower, Citigroup]

Great. I was actually maybe just following up to that last point on the traffic growth. Is there any way you could break down the traffic growth that you're seeing between new customers versus, say, building frequency from existing customers based on the data that you have today?

[Michael Skipworth, President, CEO & Director]

I mean I'm sure we could get to that. What we're seeing, though, and I think is what's really encouraging is these new customers that are coming in are moving up the frequency curve and that's exactly what we want to see. And we talked about chicken sandwich, where it is a little bit more of a different occasion than our typical wing occasion, and it does over-index towards launch. And so I did mention that comp was pretty consistent any way you cut it, but it was stronger over that lunch day part, which I think we'd like to see, and see a lot of opportunity there to continue to grow. But we talk about our chicken sandwich mix. It's still mixing in that mid-single-digit range. But the fact that we're seeing growth in all areas of the business we think a better way to look at it and how we measure it is actually in quantity of sandwiches sold per restaurant per week, and we sold more sandwiches in Q2 than Q1, which is encouraging as we think about the back half of the year.

[Jon Tower, Citigroup]

Got it. And just I know it's something that you kind of not wanted to pursue in the past, but the idea of our rewards program, our loyalty program. Curious to get your updated thinking here. Obviously, you've got a high digital mix of customers and clearly driving quite a bit of traffic these days. But thinking about this business over the longer term, when you look across the rest of the landscape, it appears that loyalty has worked relatively well for quite a few brands, particularly within the limited service space. So curious to get your updated thoughts there, if anything has changed?

[Michael Skipworth, President, CEO & Director]

Yes. I think what's -- another thing that's pretty unique about Wingstop is we've built this database 35 million users strong, and we've done that without a loyalty program, which is pretty incredible. If you think about the opportunity we have in front of us, but we continue to make progress against this roughly $50 million investment we're making in our own proprietary tech stack.

And we think that will be an enabler that's going to allow us to really leverage this first-party data to personalize that customer journey and get a little bit -- a lot more targeted with how we engage with guests that we think will help further drive digital expansion. And then obviously, as we progress and we know that it could be a lever for us down the road as we aspire to digitize every transaction. We could engage with guests in some form of early access, maybe secret menu, some way to specialize the experience for guests that are signed up with a program with Wingstop.

[Operator]

And our next question today comes from Andy Barish with Jefferies.

[Andrew Barish, Jefferies]

Just a quick one and kind of flushing out the guide of 10% to 12% on the same-store sales. Obviously, the math implies low to mid-single digits for the back half of the year. Are you willing to kind of give us sort of as you lap Uber and then have the chicken sandwich lap in front of you sort of where things are today or kind of where your -- where you're pointing to within that guidance range at this point?

[Michael Skipworth, President, CEO & Director]

Andy, yes, absolutely. I think a good way to think about it, and we've shared this, I think, in prior quarters is when we launched Uber Eats, we saw, call it, roughly a mid-single-digit sales mix through that platform. And we've talked over the quarters about continued growth in Q2 kind of our exit rate, if you will, that channel mix through Uber Eats platform was roughly double where it was when we launched. And so that gives us a lot of confidence in our ability to lap that and really what we alluded to in our prepared remarks. And so I think chicken sandwich is really no different in that we are selling more sandwiches, and we continue to see this overall halo effect to the rest of our business.

And you couple that with our growing ad fund increased media, this new creative that we have coming around football season. We're in here in the back half of the year with confidence. But obviously, like most other brands, there's still that overall uncertainty that's in the macro backdrop that everybody has to kind of navigate and measure.

[Andrew Barish, Jefferies]

Got it. And then just quickly on the consulting fees or fees that are running through the G&A this year. Can you give us a little color on where that is? I imagine some of it is looking at China again, but anything else that you'd care to call out?

[Michael Skipworth, President, CEO & Director]

Yes. Andy, I think over the years, we've been a brand or we've demonstrated that when we see an opportunity to put our foot on the gas and drive growth, that's exactly what we do. And so as we think this work and kind of the consulting fees here are really centered around strengthening our category of one position and just further bolstering our strategy for us to execute on this next phase of growth.

[Operator]

And our next question today comes from Jeff Farmer with Gordon Haskett.

[Jeff Farmer, Gordon Haskett]

Just a big picture follow-up to a handful of earlier questions. So really just looking back at your traffic growth drivers over the better part of the last year, a lot of things in play. But if you think about the move to always advertising, the Chicken Sandwich launch delivery growth, what can you share with us in terms of what has proven to be the most impactful driver over the last year? And in terms of thinking about drivers moving forward, which you continue to see being a driver as we get into back half of '23 and to '24.

[Michael Skipworth, President, CEO & Director]

I think we got a similar question last quarter in it's -- when you think about the elevated advertising dollars that we have going into our media spend, and you think about us leveraging chicken sandwich as part of the messaging or using some of those dollars to drive just general awareness, it gets kind of challenging to tease apart. I think the thing that we talked about last quarter that continued this quarter is this overall strength that we're seeing in our brand is really the results of all of these things kind of working in concert with one another. And I think we mentioned it last quarter, but we obviously over-delivered even beyond what we expected, and we're continuing to just see overall strength.

[Jeff Farmer, Gordon Haskett]

Okay. And then just one quick follow-up. As it relates to the 10% to 12% full year seeing for sales guidance, again, I might have missed it, but what level of menu pricing is contemplated in that guidance?

[Michael Skipworth, President, CEO & Director]

We basically are reverting back to our historical approach in pricing, and that is 1 to 2 points of price through two windows. We did execute a window in the first half of the year, and we will execute another pricing window in the back half of the year.

[Operator]

And our next question today comes from Brian Harbour with Morgan Stanley.

[Brian Harbour, Morgan Stanley]

Yes. This was sort of asked, but I think maybe just ask a different way. Have you kind of seen evidence that some of the customers that have come for the Chicken Sandwich or maybe some of the customers that have come in through Uber, are those -- are they increasing their frequency over time? Are they in fact higher frequency than some of your existing customers or perhaps the reverse? How have you -- I think the point is you've done a very good job kind of driving trial have you seen evidence that those are becoming very loyal customers?

[Michael Skipworth, President, CEO & Director]

I think the short answer is yes. We have seen these guests come in. And as I mentioned before, we're seeing them move up the frequency curve after that initial trial or initial visit. And for the quarter, we actually did see a nice uptick in frequency. And I think we mentioned it in our prepared remarks, beyond just frequency, if you look at all brand-level metrics we saw really strong improvement, record levels for the brand, kind of across the board. And I mentioned in my prepared remarks, when you think about this overall macro backdrop to be sitting here, driving transaction growth like we are and have value scores improving really gives us a lot of confidence in our ability to navigate the back half. And if there is a significant shift to consumer sentiment, we have a proven playbook. We know that we can lean into value, retain those indulgent occasions. And so we feel really good about where we stand today.

[Brian Harbour, Morgan Stanley]

Could you also just maybe provide more detail on international. You kind of mentioned the acceleration in same-store sales. We obviously don't see some of those metrics reported regularly. But is it consistent with the U.S., any markets that are kind of doing better there? What's the additional opportunity to drive sales internationally?

[Michael Skipworth, President, CEO & Director]

Yes, Brian, we're really excited about the momentum we see in our international business and the demand that's in our pipeline. I'll give you one example. And we -- I think this is we've talked about it before, this is the playbook that we're leveraging in new markets, and that is the progress we've made in the U.K. And last week, our U.K. business set another record week of sales. And in fact, our original restaurant in the U.K., in London and Cambridge Circus that opened 5 years ago roughly last week, had a record week and sold over $100,000 in sales for the week. And so I think that just speaks to some of the momentum that I referenced, and we're seeing that same playbook being deployed in Canada, we're seeing it deployed in Korea, and we're seeing those AUVs continue to grow while we expand our footprint there.

And then obviously, we talked about the two new markets that we signed in the quarter and the pipeline for new territory is really strong. So we're pretty excited about how our international business is performing, how the team is executing the strategy and then ultimately, how it will become more of the growth story as we look a little further out.

[Operator]

And our next question today comes from Brian Moon with Piper Sandler.

[Unidentified Analyst]

Just a question on delivery sales channel, a follow-up on some of the comments from the prepared remarks. Now that you're firmly established on both of the large platforms what do you think is the primary driver of the growth in the coming years from the 30% sales mix to 50% sales mix? Is it -- do you just believe more and more consumers will migrate to aggregators over time and you will benefit because of your offering? Or are you actually potentially working on some strategies or some marketing to help influence that growth forward on your side?

[Alex Kaleida, CFO & SVP]

Brian, this is Alex. I can jump in here. I think we've talked about a bit that we essentially turned on Uber Eats last year with the launch. And so we haven't invested in the platform. That is an opportunity for us to deploy our advertising dollars to build more awareness. Even though we've seen our mix double since the launch week as we've lapped that, that's a big opportunity for us to build awareness in those two platforms, both DoorDash and Uber Eats marketplaces continue to grow as we expand our awareness. We build frequency, as Michael referenced. And so it is an opportunity for us to invest in those platforms that can lead us on that path towards those benchmarks of 50% plus.

[Operator]

And our next question today comes from Chris Carril with RBC Capital Markets.

[Christopher Carril, RBC Capital Markets]

I guess just following up on the chicken sandwich and the potential long-term benefits you're seeing from it. How, if at all, does the momentum you're seeing with the sandwich influence how you're thinking about restaurant formats or real estate strategy longer term?

[Michael Skipworth, President, CEO & Director]

I think for chicken sandwich, one of the things, if you reflect back on WingStop in our 30 years, our degree of menu innovation has really been limited to flavor. And so we go back a couple of decades, we added boneless wings and then shortly thereafter added tenders. And then last year, we added chicken sandwich. And I think one of the things that was key in all of those is to not compromise the simplicity of our operations. And we put a lot of work in partnership with our brand partners to ensure that when we launch Chicken sandwich, it didn't impact the simplicity and efficiency of our box. And so I think that supports the fact that I don't really think it's going to change the overall format of the box, the layout.

We continue to -- as we sit here today, we call it, 94%, 95% of our sales are off-premise. And so we'll continue to execute that because with that efficient footprint, heavy off-premise in the AUVs that we have grown. The unit economics are really strong. As we sit here today, we continue to see a big opportunity with chicken sandwich that we've talked about. And I think longer term, we can see that continuing to influence frequency in addition to just bringing in new guests to the brand as well. So it's something we're pretty excited about.

[Christopher Carril, RBC Capital Markets]

Okay. Great. And then I know you touched on this in your prepared remarks. But could you expand maybe a bit more on brand awareness? And if you could maybe provide any quantitative measures around this relative to peers. And then obviously, new store growth and system sales growth is going to help fuel advertising. But is there anything else you would highlight as part of your strategy to drive awareness higher?

[Alex Kaleida, CFO & SVP]

Yes. We made considerable progress on awareness, but it still remains a significant gap to where our numbers are relative to what we measure as those top 10 QSR brands. And so that's what our advertising dollars. We just surpassed $100 million for the first time last year. The system sales growth gives us opportunities to add more weeks on air, have an always on message through the year and increase the density of our advertising during the weeks we're on. And so really, when you compare our advertising funds to those larger, more mature brands, we have a large runway ahead to make Wingstop more mainstream.

[Operator]

And our next question today comes from Gregory Francfort with Guggenheim.

[Gregory Francfort, Guggenheim Securities]

I just wanted to maybe follow up on I think there was two questions ago. Can you talk how you're thinking about deploying advertising dollars into either DoorDash or Uber Eats or your native platforms, how you're balancing those priorities?

[Michael Skipworth, President, CEO & Director]

Yes. No, I think it's a good question, and it's one of those things we've we see as a big opportunity for us. If you reflect back on our overall progress in delivery at roughly 30% sales mix today. We -- that really hasn't been based with us deploying a significant amount of our ad dollars on their platforms. A lot of the advertising you see, the promotions you see are funded by those partners because we deliver a really nice high average check and that's good for their drivers and good for their business. And so we've seen them a willingness to invest in Wingstop, which we appreciate.

And obviously, when we think about that opportunity to over double -- or almost double our delivery channel mix, we obviously know that as we drive awareness of our brand on those platforms, we'll capture more occasions. So we see that as one of those multiyear sales drivers that we talked about earlier that allow us to sit here today and raise our outlook for the year. And then obviously, continue to see expanded AUV growth, which is strengthening the unit economics.

[Operator]

And our next question today comes from Michael Tamas with Oppenheimer & Company.

[Michael Tamas, Oppenheimer]

You were way ahead of the industry in terms of taking less menu pricing and even leaning into value more, which I think was a big advantage in likely widened your relative pricing at the competitors. So now it seems like value is becoming a little more widespread across the industry and menu pricing also coming down. So do any of these change in dynamics cause you to think about your sales strategies differently as it relates to value or promotions?

[Michael Skipworth, President, CEO & Director]

I think we're definitely in a unique position, whereas if you look at Q2, as an example, I think the QSR industry on average had about 10 points of price on the menu. And we were sitting in a very unique position. And I think that speaks to the comments we made about improvements in our value scores. And so what we are hearing from consumers in our research is they value or they're being a little bit more discerning with their dollars and what they're looking for is quality and indulgence, and I think that plays perfectly within Wingstop and how our brand is positioned. And so we will have a balanced message for those that are value sensitive. But then obviously, we still have the opportunity to capture so many new occasions. So as consumers are looking for quality and indulgence, I think Wingstop's well positioned and just further supports the strategy that we're executing against.

[Michael Tamas, Oppenheimer]

And then on the -- you've mentioned a few times about your new supply chain strategy, buying more of the birds, not being so reliant on the spot market. And you mentioned visibility in the '24. I mean how long is that sort of agreement in place for? Is it just in to '24? Do you think that there's an opportunity for that to be sort of a much longer term looking out maybe a couple of years?

[Michael Skipworth, President, CEO & Director]

Yes. I mean, I think we have made meaningful progress with our supply chain strategy and remain confident in continuing to execute against that. And as I mentioned earlier, we exited Q2 at a record level of boneless mix 43%. And as we win more chicken sandwich occasions as we see that halo effect on the rest of our business. We see the opportunity to continue to drive that mix. But obviously, with that underlying transaction growth, we're using more breast meat in absolute pound perspective.

And so as we continue to use more breast meat, our supplier partners really like that, and it's allowing us to have fundamentally different conversations with them around how we structure our pricing arrangements for wings and as we sit here today, obviously, the Urner Barry is just north of $1 a pound, but it's even as we sit here today, it's well under the 5-year average to the tune of roughly $0.50, $0.55 from the 5-year average. And so obviously, we viewed this as the time to look longer term and talk differently and structure the arrangements differently with our supplier partners to ensure more predictability. And as we mentioned before, ultimately mitigate the volatility that we see in food costs. So we're pretty encouraged about the progress we've made.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's question-and-answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.