Wingstreet

Wingstreet

In the foodservice industry, there usually is no chicken-or-the-egg question of what comes first between a successful restaurant concept and the complex operating model that grows it to a national chain and sustains its market share. Typically, the idea for a new restaurant hatches first, and the system that makes it a national brand follows.

But don’t tell that to officials at Dallas-based WingStreet.

The chain of more than 1,000 U.S. locations—specializing in chicken wings for dine-in, carryout or, the big point of differentiation, delivery—started in 2003 with just five units in Dallas and has become the industry’s largest wings chain even without advertising nationwide.

Of course, it helps that the executives charged with spreading WingStreet across the country have years of experience operating its 8,000-plus-unit sibling brand, Pizza Hut [3]. One of those officers, Lisken Lawler, director of concept development and national marketing for Pizza Hut and WingStreet, says the younger concept’s signature wings were designed to pair with the older chain’s pizza, but the potential for the wings to anchor an entirely new, complementary restaurant brand became clear.

“We found that pizza and wings go together well, and the market for delivering off-premise wings was there in 2003,” she said. “We started WingStreet as a separate concept because we wanted to show customers we have top-quality wings that are the best in the marketplace. We felt like we capitalized on great sharable foods that could be delivered, and that’s where our growth has been.”

WingStreet’s meteoric rise in number of units hasn’t exactly snuck up on people. Its signature product gained fame at the 2006 National Buffalo Wing Festival in Buffalo, N.Y., by winning the “Best Original Wing Sauce” category and placing second in the “Best Hot Wing Sauce” class. Also, its Honey BBQ flavor took “Best Wing Sauce” honors at the 2006 Florida Wings Fest, and its Medium sauce won first place at the 2006 Denver Post Blind Taste [4] Test for “Best Take-Out Wings with Medium Sauce.”

WingStreet has expanded primarily through co-branded locations with Pizza Hut, the pizza segment’s largest chain, owned by Louisville, Ky.-based quick-service conglomerate Yum! Brands Inc [5]. Scott Bergren, president of Pizza Hut and WingStreet, says the delivery aspect of the restaurant industry is a very expensive investment, and WingStreet’s capability to serve customers through Pizza Hut’s delivery system is one of its biggest competitive advantages.

“We think the big opportunity is our pre-existing distribution network around the United States,” Bergren says. “There’s no way to expand this quickly without a partner brand like Pizza Hut. Our objective is to get WingStreet into every Pizza Hut. That should cover all of America.”

While Yum officials foresee a WingStreet on every Main Street, the concept also gets a warm reception on Wall Street. One financial analyst, Ashley Woodruff of Friedman, Billings, Ramsey & Co. in New York, sees WingStreet as a way to reverse Pizza Hut’s long decline in domestic same-store sales.

“Pizza Hut has been Yum’s worst performer over the past few years,” Woodruff said. “I view WingStreet positively. If added to the Pizza Hut concept in a major way and advertised well, it could add a significant increase in sales.”

At Yum’s Aug. 15 analyst meeting for Pizza Hut, the company told attendees that WingStreet products account for as much as 15 percent of Pizza Hut’s current sales mix, Woodruff said. The company aims to reach the 3,000-unit mark in the “near term,” though Woodruff said Yum officials would not qualify how soon they would hit that target.

Once WingStreet has about 3,000 units, Woodruff says, Yum could then roll out nationwide ads. As WingStreet leverages Pizza Hut’s market penetration, it likely would capitalize on Americans’ growing appetite for wings and intense flavors, says industry analyst Harry Balzer.

“Over the past 10 years, I’d say chicken wings have been one of the highlights of the industry,” says Balzer, vice president of The NPD Group, a Port Washington, N.Y.-based global market research firm. “Chicken in and of itself is a category that continues to grow, maybe because we’re getting new varieties of chicken products, like chicken sandwiches, snack products or wings. It’s a continuation of Americans’ desire for different flavors, and there are unlimited ways of flavoring chicken wings.”

WINGSTREET

Owner: Yum! Brands Inc.Headquarters: DallasNo. of units: more than 1,000Average unit volume: undisclosedStates where located: more than 30Type of concept: chicken wingsAverage check: undisclosedYear founded: 2003

WingStreet offers eight flavors, from the mild Honey BBQ to the very spicy Burnin’ Hot, to go with three varieties of wings: traditional nonbreaded, bone-in breaded or boneless breaded. Sides include the chain’s WingStreet Taters. In addition, the WingStreet and Pizza Hut co-branded menu offers four pasta dishes, seven toasted sandwiches, seven salads and three desserts, including WingStreet’s Hot Cinnamon Apple Pies, six miniature fried apple pies sprinkled with cinnamon and sugar.

Yum does not break down per-restaurant financial specifics, such as average check, but menu prices top out at $6.99 for salads and pastas and at $7.99 for sandwiches. Traditional or breaded bone-in wings cost $3.49 for five, $5.99 for 10, $10.99 for 20 and $19.99 for 40, while breaded boneless wings are slightly more expensive.

While WingStreet is known as a pioneer in delivering wings, it will concentrate more on its dine-in business in co-branded units as it develops further.

“If we were limited just as a delivery and carryout concept, we’d be done today,” Bergren says. “What we’ve found is, as we’ve married Pizza Hut and WingStreet together in a new building, it’s had enormous street impact. The combination of two brands on the building tells customers that they have two of their favorite kinds of food in an environment they want to eat in.”

The co-branded locations serve various groups of customers in addition to diverse menu items, Lawler adds.

“Dine-in is an area we’re focusing on,” she says. “It’s all about creating a fun, casual environment. We call it ‘come-as-you-are casual.’ There’s lots of variety, and it’s applicable across all ages. We have young guys coming in here telling us they like to come for happy hour, and we have grandparents that like to bring their grandchildren in here as well, so there’s a wide range of people coming in.”

Lawler and Bergren both say WingStreet will grow with a mix of company-owned and franchised stores. So far, Yum’s established community of Pizza Hut franchisees is receptive to growing the WingStreet system, they say.

“Franchisees are essentially good business people,” Bergren says. “When they see a good case for growing their businesses, they’re quick to adopt. They’ve aggressively accepted this idea. Some of our bigger franchisees are jumping in with both feet.”

SPECIAL REPORT: HOT CONCEPTS!TM [6]