Wingstop Inc. made its public debut Friday at $19 per share, in an IPO valued at $110.2 million.
The Dallas-based fast-casual franchisor, which trades on the Nasdaq under the ticker symbol “WING,” raised its offering price twice before its debut. Estimates started at a range of $12 to $14 a share, and increased earlier this week to $16–$18. As of Friday’s market close, the 5.8 million offered shares had increased more than 60 percent, to about $30.50 per share.
“We have something that’s attractive to investors. We’ve got all the growth characteristics of a fast-casual concept, but we have the size and scale of this brand at 700 locations, and the cash-flow characteristics of a best-in-class franchisor,” Wingstop president and CEO Charlie Morrison told Nation’s Restaurant News Friday.
Morrison said the company converts 94 percent of its net income before interest, taxes, depreciation and amortization, or EBITDA, back into cash.
“Investors love that,” he said. “Pairing those two things together makes Wingstop unique when compared with a lot of the other fast-casual IPOs you’ve seen.”
Other restaurant companies that made public debuts this year include New York City-based Shake Shack Inc., which rose in January on its first day of trading to a valuation of nearly $1.8 billion. In May, Charlotte, N.C.-based Bojangles Inc. raised more than $147 million in its IPO, selling nearly 7.8 million shares priced at $19 a share.
In addition to the 5.8 million shares Wingstop offered Friday, the company could sell another 870,000 shares to meet excess demand in an “over-allotment option,” which would increase the value of the offering to $126.7 million.
Morrison said Wingstop continues to grow. Over the past fiscal year, the company grew its unit count by 16 percent, and by 18 percent in first quarter.
“We’ve estimated that the U.S. potential alone is about 2,500 restaurants,” Morrison said. “If you look at our footprint today, we are in 37 states. We can more than double the size of this chain just in existing markets we are in today. We think we have a long runway ahead of us.”
Morrison said Wingstop restaurants build sales over time, and that the company has posted 11 consecutive years of positive same-store sales growth.
“Our brand does not have that ‘honeymoon effect,’ where we start strong and taper off,” he said. “Our targeted first-year opening is about $820,000 average unit volume, and then from there continue to grow. Second-year target is $890,000.”
Units typically are 1,700 square feet, with 50 seats, and 75 percent of business as carry out.
“For franchisees, that represents a very great and efficient unit economic model,” Morrison said. “In year two, the rate of return on investment is between 35 and 40 percent cash-on-cash return for the franchisees.”
Morrison said the company will continue to build on its three strategic pillars of flavor, simplicity and value.
“We try to keep the menu very simple: It’s wings, fries and sides. Ninety percent of our revenue is generated in those,” he said. “I really believe in simplicity of concepts today. Customers crave that simplicity, focus and attention to detail that we put into everything we do.”
To introduce potential customers to Wingstop, the company rolled a branded food truck into Manhattan’s Times Square to hand out samples near the Nasdaq marquee.
Wingstop’s IPO underwriters included Morgan Stanley, Jefferies and Baird.
Wingstop was founded in 1994 and purchased by Roark Capital Group in 2010. The chain has about 700 units in 36 states. Wingstop began franchising internationally in 2009, and now has 41 units in Indonesia, Mexico, the Philippines, Russia, Singapore and the United Arab Emirates.
This story has been revised to reflect the following update:
Update: June 12, 2015 This story has been updated with Wingstop’s Friday market closing price.