Wingstop could soon raise its own chickens

(CNN) — Wingstop wants to lower its food supply costs. So it’s considering raising its own chickens.

Restaurant brands like Wingstop have struggled with their supply chains in recent years, as the Covid-19 pandemic, extreme weather, and the war in Ukraine, among other factors, have tightened food supplies and sent prices soaring. That pain has been especially significant for a chain like Wingstop, which specializes in one type of food.

During an investor day Tuesday, the company discussed its efforts to strengthen its supply chain. One tactic is already in place: Making use of more parts of a chicken, a move it experimented with via “Thighstop,” a virtual brand that served crispy thighs to customers who ordered on a dedicated Thighstop website or through DoorDash. Those items have since been added to Wingstop’s regular menu.

Other potential solutions are now on the table, including becoming its own chicken supplier.

“There’s … scenarios that could include an acquisition of a small poultry complex or building our own poultry complex,” said Wingstop CFO Alex Kaleida during Tuesday’s event. “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.”

Wing prices are volatile: In June of last year, when the company launched Thighstop, wholesale wing prices had spiked dramatically compared to the year prior. Although securing supply by investing in a poultry operation wouldn’t be cheap, Kaleida believes it would help Wingstop avoid sudden spikes in its chicken costs.

Wingstop estimates that one poultry complex could provide about 20% of its overall wing purchases.

Securing its chicken supply chain could be “potentially game-changing” for the company, Wedbush restaurant analyst Nick Setyan said in a note Tuesday. That’s because better clarity on food costs could encourage more operators to open Wingstop franchises, fueling growth.

In the first quarter, Wingstop added 60 restaurants, a record. Sales at stores open at least a year ticked up by 1.2% in that period.

If Wingstop moves forward with its plan to open a poultry plant, it will be following in the footsteps of big box stores including Walmart and Costco.

A few years ago, Walmart opened a meatpacking operation in Georgia to cut, package and label its own brand of steaks and roasts for regional stores. Costco has also developed its own farm-to-store poultry production operation in Nebraska to supply its popular rotisserie chicken offering.

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