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What changed in Wingstop Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Wingstop Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+270 added−236 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Wingstop Inc.'s 2023 10-K

270 paragraphs added · 236 removed · 199 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAll of our franchise agreements require that each franchised restaurant be operated in accordance with our defined operating procedures, adhere to the menu we establish, and meet applicable quality, service, health, and cleanliness standards. We may terminate the franchise rights of any franchisee who does not comply with our standards and requirements.
Biggest changeOur training program covers various topics including Wingstop culture, food preparation and storage, food safety, cleaning and sanitation, marketing and advertising, point of sale (“POS”) systems, accounting, and hospitality, among others. 6 All of our franchise agreements require that each franchised restaurant be operated in accordance with our defined operating procedures, adhere to the menu we establish, and meet applicable quality, service, health, and cleanliness standards.
Examples of some of our recent efforts and metrics include: • diversity and inclusion education training was offered to team members throughout the year; • 60% of our franchisees and 56% of our board of directors identify as diverse; • 86% of our team members identify as diverse; and • we are a member of the Women’s Foodservice Forum and the Multicultural Foodservice & Hospitality Alliance Group.
Examples of some of our recent efforts and metrics include: • diversity and inclusion education training was offered to team members throughout the year; • 60% of our franchisees and 56% of our board of directors identify as diverse; • 85% of our team members identify as diverse; and • we are a member of the Women’s Foodservice Forum and the Multicultural Foodservice & Hospitality Alliance Group.
To support these objectives, our team member programs are designed to develop talent and prepare team members for advancement and leadership positions in the future; provide market-competitive pay and benefits; focus on team members’ health, safety and well-being; enhance our culture through our continuing efforts to make our workplace more engaging and inclusive; and acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce.
Our team member programs are designed to develop talent and prepare team members for advancement and leadership positions in the future; provide market-competitive pay and benefits; focus on team members’ health, safety and well-being; enhance our culture through our continuing efforts to make our workplace more engaging and inclusive; and acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce.
Item 1. Business Throughout this report, unless the context indicates otherwise, Wingstop Inc. (NASDAQ: WING) and its consolidated subsidiaries are referred to as the “Company,” “Wingstop,” or in the first-person notations of “we,” “us,” and “our.” General Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world, with over 1,950 locations worldwide.
Item 1. Business Throughout this report, unless the context indicates otherwise, Wingstop Inc. (NASDAQ: WING) and its consolidated subsidiaries are referred to as the “Company,” “Wingstop,” or in the first-person notations of “we,” “us,” and “our.” General Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world, with over 2,200 locations worldwide.
We specify a POS system and restaurant management system in all domestic restaurants that helps facilitate the operation of the restaurants by recording sales, purchasing and inventory of goods, managing of labor and assessing restaurant performance.
We specify a POS system and restaurant management system in all domestic restaurants that help facilitate the operation of the restaurants by recording sales, purchasing and inventory of goods, managing of labor and assessing restaurant performance.
The Wingstop Way extends to the brand’s environmental, social and governance platform as Wingstop seeks to provide value to all stakeholders. Sustaining Long-Term Same Store Sales Growth We believe in sustaining long-term same store sales growth through a combination of brand awareness, menu innovation, expansion of our delivery channels, data-driven marketing and maximizing our digital leadership position.
The Wingstop Way extends to the brand’s environmental, social and governance platform as Wingstop seeks to provide value to all guests. Sustaining Long-Term Same Store Sales Growth We believe in sustaining long-term same store sales growth through a combination of brand awareness, menu innovation, delivery, data-driven marketing and maximizing our digital leadership position.
Our domestic market expansion strategy focuses on maximizing our brand market share and visibility in key priority markets. We have a robust development pipeline with approximately 90% of our domestic commitments as of December 31, 2022 from existing franchisees, supporting the strength of our restaurant business model and our positive franchisor-franchisee relationships.
Our domestic market expansion strategy focuses on maximizing our brand market share and visibility in key priority markets. We have a robust development pipeline with approximately 90% of our domestic commitments as of December 30, 2023 from existing franchisees, supporting the strength of our restaurant business model and our positive franchisor-franchisee relationships.
Each restaurant is subject to licensing and regulation by a number of governmental authorities, including with respect to zoning, health, safety, sanitation, nutritional information disclosure, environmental, and building and fire safety, in the jurisdiction in which the restaurant is located.
Each Wingstop restaurant is subject to licensing and regulation by a number of governmental authorities, including with respect to zoning, health, safety, the preparation and sale of food, sanitation, food safety, nutritional information disclosure, environmental, and building and fire safety, in the jurisdiction in which the restaurant is located.
Therefore, chicken is our largest product cost item and represented approximately 60% of all purchases for the 2022 fiscal year. Company-owned and franchised restaurants purchase their bone-in and boneless chicken wings, chicken tenders, and chicken fillets from suppliers that we designate and approve.
Therefore, chicken is our largest product cost item and represented approximately 53.3% of all purchases for the 2023 fiscal year. Company-owned and franchised restaurants purchase their bone-in and boneless chicken wings, chicken tenders, and chicken fillets from suppliers that we designate and approve.
Paired with our numerous order options (eat-in (to the extent available) / to go / delivery; individual / combo meals / family packs) that allow guests to eat Wingstop during any occasion, whether it is a quick carry-out snack, a party size order for their favorite group occasion, or delivery for a family meal, we believe this customizable unique experience drives repeat business and brand loyalty.
Paired with our numerous order options (dine-in / carryout / delivery; individual / combo meals / family packs) that allow guests to enjoy Wingstop during any occasion, whether it is a quick carry-out snack, a party size order for their favorite group occasion, or delivery for a family meal, we believe this customizable unique experience drives repeat business and brand loyalty.
Wingstop has also negotiated agreements with its soft drink suppliers to offer soft drink dispensing systems, along with associated branded products, in all Wingstop restaurants. 7 Information / Technology Systems We have core information systems in place that, together with focused investments we are making in technology, we believe are designed to scale and support our future growth plans.
Wingstop has also negotiated agreements with its beverage suppliers to offer beverage dispensing systems, along with associated branded products, in all Wingstop restaurants. Information / Technology Systems We have core information systems in place that, together with focused investments we are making in technology (including our digital platform), we believe are designed to scale and support our future growth plans.
We license the use of our registered marks to franchisees through franchise agreements. Environmental Matters We are not aware of any federal, state or local environmental laws or regulations that we would expect to materially affect our earnings or competitive position or result in material capital expenditures. However, we cannot predict the effect of possible future environmental legislation or regulations.
We license the use of our registered marks to franchisees through franchise agreements. Environmental Matters We are not aware of any federal, state or local environmental laws or regulations that we would expect to materially affect our earnings or competitive position or result in material capital expenditures.
Existing franchisees accounted for more than 90% of franchised restaurants opened in each of 2021 and 2022, which we believe further underscores our restaurant model’s financial appeal. Upon opening, our restaurant volume generally builds year after year. Our domestic average unit volume (“AUV”) has grown consistently, approximating $1.6 million during fiscal year 2022.
Existing franchisees accounted for more than 90% of franchised restaurants opened in each of 2022 and 2023, which we believe further underscores our restaurant model’s financial appeal. Upon the opening of a new restaurant, its sales volume generally builds year after year. Our domestic average unit volume (“AUV”) has grown consistently, approximating $1.8 million during fiscal year 2023.
We require our franchisees’ electronic information systems, including POS systems, to comply with and be maintained in accordance with established network security standards, including applicable Payment Card Industry and data privacy standards. Human Capital Resources As of December 31, 2022, we employed 1,031 employees, affectionately referred to as team members, of whom 239 were full-time corporate-based and regional personnel.
We require our franchisees’ electronic information systems, including POS systems, to comply with and be maintained in accordance with established network security standards, including applicable Payment Card Industry and data privacy standards. Human Capital Resources As of December 30, 2023, we employed 1,225 employees, affectionately referred to as “team members,” of whom 271 were full-time corporate-based and regional personnel.
To learn more about how Wingstop Charities is making an impact in our local communities, visit www.wingstopcharities.org. 9 Available Information We make available, free of charge, through our internet website www.wingstop.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
Available Information We make available, free of charge, through our internet website www.wingstop.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.
We offer comprehensive benefit programs to eligible team members. Our core health and welfare benefits are supplemented with a variety of voluntary benefits and paid time away from work programs. We maintain a strong focus on team member well-being, health and safety.
We offer comprehensive benefit programs to eligible team members. Our core health and welfare benefits are supplemented with a variety of voluntary benefits and paid time away from work programs. We maintain a strong focus on team member well-being, health and safety. We invest in people and infrastructure to build the organization for the next level.
Our domestic operating model targets a low average estimated initial investment of approximately $440,000, excluding real estate purchase or lease costs and pre-opening expenses. In year two of operation, we target a franchisee unlevered cash-on-cash return of approximately 50%+.
Our domestic operating model provides for a low average initial investment of approximately $480,000, excluding real estate purchase or lease costs and pre-opening expenses. In year two of operation of a new restaurant, we target a franchisee unlevered cash-on-cash return of approximately 70%+.
PFG provides consolidated deliveries with a tightly controlled and monitored cold chain. Its national distribution system has a documented recovery plan to handle any disruption. Wingstop contracts directly with manufacturers to sell products to PFG, who in turn receives a fee for delivering these items to our restaurants. The majority of Wingstop’s highest-spend items are formula or fixed-contract priced.
The distributor’s national distribution system has a documented recovery plan to handle any disruption. 7 Wingstop contracts directly with manufacturers to sell products to the distributor, who in turn receives a fee for delivering these items to our restaurants. The majority of Wingstop’s highest-spend items are formula or fixed-contract priced.
In addition to seeking to acquire new talent in the marketplace that share our values and goals, we recognize and support the growth and development of our team members and offer opportunities to participate in regular talent and development planning reviews to assist us with growing our internal restaurant teams.
In addition to seeking to acquire new talent in the marketplace that share our values and goals, we recognize and support the growth and development of our team members and offer opportunities to participate in regular talent and development planning reviews to assist us with growing our internal restaurant teams. 8 Government Regulation We and our franchisees are subject to various federal regulations affecting the operation of our business.
Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act, and various other federal and state laws governing matters such as minimum wage 8 requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.
We and our franchisees are subject to the U.S. Fair Labor Standards Act, the U.S. Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act, and various other federal and state laws governing matters such as minimum wage requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.
The continued growth of our national advertising program since its inception in 2017 supports elevated marketing spend and premium placements through an extensive range of social media and digital marketing channels, including search engine, digital video, and social media advertising, to allow us to target core customers and create top of mind consideration with relevant, impactful messaging. 5 We are making focused investments in customer relationship management (“CRM”) and our digital platform, which will allow us to transition from the traditional promotion-based marketing approach to a digital platform-based strategy.
The national advertising program supports elevated marketing spend and premium placements through an extensive range of social media and digital marketing channels, including search engine, digital video, and social media advertising, to allow us to target core customers and create top of mind consideration with relevant, impactful messaging. 5 The national advertising program also supports our digital initiatives and related strategies, including our focused investments in customer relationship management (“CRM”) and our digital platform, which allows us to deploy a digital platform-based marketing strategy.
The foundation of this approach is our culture, which we define as The Wingstop Way, and our investment in people as a competitive advantage necessary to build our organization for the next level. The Wingstop Way includes a core value system of being Authentic, Entrepreneurial, Service-minded, and Fun.
The foundation of this approach is our culture, which we define as The Wingstop Way, our investment in people as a competitive advantage necessary to continue to scale our organization for the next phase of growth, and our cultivation of a global mindset. The Wingstop Way includes core values centered around being Authentic, Entrepreneurial, Service-minded, and Fun.
Our franchise owners are independent business owners, so they and their team members are not included in our team member count and are not our team members. Our human capital objectives include attracting, training, motivating, rewarding and retaining team members.
Our franchise owners are independent business owners, so they and their employees are not considered our team members and are therefore not included in our team member count. Our human capital objectives include attracting, retaining, and accelerating the growth of our team members.
Our Franchise Franchise Overview Our franchisees operated a total of 1,916 restaurants in 44 states and nine countries as of December 31, 2022. We have rigorous qualification criteria and training programs for our franchisees and require them to adhere to strict operating standards.
Our Franchise Franchise Overview Our franchisees operated a total of 2,165 restaurants in 45 states and 11 countries and U.S. territories as of December 30, 2023. We have rigorous qualification criteria and training programs for our franchisees and require them to adhere to strict operating standards.
We also believe that there is a significant opportunity to grow our business internationally. As of December 31, 2022, we had 238 international restaurants located in eight countries, all of which were franchised. In fiscal year 2022, we opened 45 international restaurants.
We also believe that there is a significant opportunity to grow our business internationally. In fiscal year 2023, we opened 50 net new international restaurants, and as of December 30, 2023, we had 288 international restaurants located in 10 countries and U.S. territories, all of which were franchised.
The master franchisee is generally required to pay an initial, upfront development fee for the territory as well as a franchise fee for each restaurant opened.
The master franchise agreement typically requires the franchisees to open a minimum number of restaurants within a specified period. The master franchisee is generally required to pay an initial, upfront development fee for the territory as well as a franchise fee for each restaurant opened.
We believe that 6 maintaining superior food quality, an inviting and energetic atmosphere, and excellent guest service are critical to the reputation and success of our concept. Therefore, we enforce the contractual requirements of our franchise agreements. We have a broad and diversified domestic franchisee base.
We may terminate the franchise rights of any franchisee who does not comply with our standards and requirements. We believe that maintaining superior food quality, an inviting and energetic atmosphere, and excellent guest service are critical to the reputation and success of our concept. Therefore, we enforce the contractual requirements of our franchise agreements.
All food items and packaging goods for Wingstop restaurants are currently sourced through one distributor, Performance Food Group (“PFG”). Currently, there are 17 geographically diverse PFG distribution centers, which carry all products required for a Wingstop restaurant and service all of Wingstop’s domestic restaurants. PFG is contractually obligated to deliver products to our restaurants at least twice weekly.
All food items and packaging goods for Wingstop restaurants in the U.S. are currently supplied through one distributor. Currently, there are 17 geographically diverse distribution centers, which carry all products required for a Wingstop restaurant and service all of Wingstop’s domestic restaurants.
Since 2014, the number of franchisees who own ten or more restaurants has more than doubled. This increase is consistent with our strategy to grow with our existing franchisees. As of December 31, 2022, our domestic franchise base had an average restaurant ownership of approximately seven restaurants per franchisee and an average tenure of thirteen years. U.S.
We have a broad and diversified domestic franchisee base. Since 2014, the number of franchisees who own ten or more restaurants has more than doubled. This increase is consistent with our strategy to grow with our existing franchisees.
Franchise Agreements We enter into area development agreements with U.S. franchisees, pursuant to which they are granted the right to develop restaurants in a defined market area. Franchisees pay a $10,000 development fee per restaurant to-be-developed at the time a development agreement is signed, which fee is not refundable.
Franchisees pay a $10,000 development fee per restaurant to-be-developed at the time a development agreement is signed, which fee is not refundable.
International Franchise Agreements Our markets outside of the United States are operated by master franchisees with franchise and distribution rights for entire regions or countries. The master franchise agreement typically requires the franchisees to open a minimum number of restaurants within a specified period.
Beginning the second fiscal quarter 2024, the advertising fund contribution rate will increase to 5.3% to support digital and technology-related costs. International Franchise Agreements Our markets outside of the United States are operated by master franchisees with franchise and distribution rights for entire regions or countries.
During the 2022 fiscal year, we had no material environmental compliance-related capital expenditures. Community Involvement In 2016, we created Wingstop Charities, a non-profit organization dedicated to enhancing and elevating the community work of our franchisees to make a difference in the lives of our youth.
Community Involvement In 2016, we created Wingstop Charities, a non-profit organization dedicated to enhancing and elevating the community work of our franchisees to make a difference in the communities we serve. We are committed to strengthening those communities through the Wingstop Charities Community Grant Program, which supports nonprofit organizations focused on education, sports, entrepreneurship, the environment, and food.
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Our training program covers various topics including Wingstop culture, food preparation and storage, food safety, cleaning and sanitation, marketing and advertising, point of sale (“POS”) systems, accounting, and hospitality, among others.
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As of December 30, 2023, our domestic franchise base of 216 franchisees had an average restaurant ownership of approximately nine restaurants per franchisee and an average tenure of fourteen years. U.S. Franchise Agreements We enter into area development agreements with U.S. franchisees, pursuant to which they are granted the right to develop restaurants in a defined market area.
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Another area of focus for us is investing in people and infrastructure to build the organization for the next level.
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The distributor is contractually obligated to deliver products to our restaurants at least twice weekly, and provides consolidated deliveries with a tightly controlled and monitored cold chain for perishable items.
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Government Regulation We and our franchisees are subject to various federal regulations affecting the operation of our business. We and our franchisees are subject to the U.S. Fair Labor Standards Act, the U.S.
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Other factors pertaining to our competitive position in the industry are addressed under the section entitled “Risks Related to Our Business and Our Industry” and listed in “Item 1A. Risk Factors” of this report.
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We are committed to strengthening the communities we serve by being strong, active, corporate citizens and good neighbors. In fiscal year 2022, more than 82 community organizations received grant funding from Wingstop Charities, and we also launched the Morrison Family Scholarship Program which provides scholarship opportunities for team members who are first-generation college students.
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However, increased focus on environmental matters by legislative, governmental or other authorities may lead to new regulatory initiatives, particularly in the area of climate change. We cannot predict the effect of possible future environmental legislation or regulations (including those related to climate change). During the 2023 fiscal year, we had no material environmental compliance-related capital expenditures.
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In fiscal year 2020, we donated $1 million to the National Restaurant Association, Educational Foundation’s Restaurant Employee Relief Fund, and in partnership with our franchisees, donated more than one million meals to frontline workers and COVID-19 first responders. In addition, Wingstop Charities has donated over $1.5 million through local grants, team member assistance and scholarships since its inception.
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In fiscal year 2023, more than 100 community organizations received grant 9 funding totaling over $1.3 million from Wingstop Charities, including our first national partnership with No Kid Hungry. Since its inception, Wingstop Charities has awarded over 300 grants and contributed more than $3 million across three key programs: Community Grants, Team Member Assistance, and the Morrison Family Scholarship Program.
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To learn more about how Wingstop Charities is making an impact in our local communities, visit www.wingstopcharities.org.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn order to maintain quality-control standards and consistency among restaurants, we require through our franchise agreements that our franchisees obtain food and other supplies from preferred suppliers approved by us in advance. All food items and packaging goods for Wingstop restaurants are currently sourced through one distributor with 17 geographically diverse distribution centers.
Biggest changeAll food items and packaging goods for Wingstop restaurants are currently sourced through one distributor with 17 geographically diverse distribution centers. In this regard, we and our franchisees depend on a group of suppliers and our distributor for food ingredients, beverages, paper goods, and distribution.
Our franchise system subjects us to a number of risks, any one of which may impact our ability to collect royalty payments from our franchisees, may harm the goodwill associated with our franchise, and may materially adversely affect our business and results of operations. Our franchisees are an integral part of our business.
Our franchise system subjects us to a number of risks, any one of which may impact our ability to collect royalty payments from our franchisees, harm the goodwill associated with our franchise, and materially adversely affect our business and results of operations. Our franchisees are an integral part of our business.
We compete with other restaurant chains and other retail businesses for quality site locations, management, hourly employees, and qualified franchisees. We also face the risk that new or existing competitors will copy our business model, menu options, presentation, or ambiance, among other things.
We and our franchisees compete with other restaurant chains and other retail businesses for quality site locations, management, hourly employees, and we also compete for qualified franchisees. We also face the risk that new or existing competitors will copy our business model, menu options, presentation, or ambiance, among other things.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 15,000,000 shares of undesignated preferred stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only upon the request of a majority of our board of directors or by the chairman of the board of directors; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving staggered three-year terms; and • prohibit cumulative voting in the election of directors.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 15,000,000 shares of undesignated preferred stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only upon the request of a majority of our board of directors or by the chairman of the board of directors; 24 • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving staggered three-year terms; and • prohibit cumulative voting in the election of directors.
In addition, we have opted out of the Delaware General Corporation Law (“DGCL”) Section 203, relating to business combinations with interested stockholders, but our amended and restated certificate of incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (any 23 stockholder with 15% or more of our capital stock) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions.
In addition, we have opted out of the Delaware General Corporation Law (“DGCL”) Section 203, relating to business combinations with interested stockholders, but our amended and restated certificate of incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (any stockholder with 15% or more of our capital stock) for a period of three years following the date on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions.
In the last several years, this principle has been the subject of differing and inconsistent interpretations at the National Labor Relations Board and in the courts, and the question of whether a franchisor can be held liable for the actions or liabilities of a franchisee under a vicarious liability theory, sometimes called “joint employer,” has become highly fact dependent and generally uncertain.
In the last several years, this principle has been the subject of differing and inconsistent interpretations at the National Labor Relations Board (“NLRB”) and in the courts, and the question of whether a franchisor can be held liable for the actions or liabilities of a franchisee under a vicarious liability theory, sometimes called “joint employer,” has become highly fact dependent and generally uncertain.
Increased weather volatility or other long-term changes in weather patterns, including related to climate change, could have a significant impact on the price of availability of some of our ingredients. Additionally, avian influenza, or similar poultry-related diseases, may negatively affect the supply chain by increasing costs and limiting availability of chicken.
Increased weather volatility or other long-term changes in weather patterns, including those related to climate change, could have a significant impact on the price or availability of some of our ingredients. Additionally, avian influenza, or similar poultry-related diseases, may negatively affect the supply chain by increasing costs and limiting availability of chicken.
If we cannot generate sufficient cash flow from operations to make scheduled principal amortization and interest payments on our debt 22 obligations in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures, or seek additional equity investments.
If we cannot generate sufficient cash flow from operations to make scheduled principal amortization and interest payments on our debt obligations in the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital expenditures or seek additional equity investments.
Our success depends on our ability to compete with many other restaurants. The restaurant industry in general, and the fast casual category in particular, are intensely competitive, and we compete with many well-established restaurant companies on the basis of food taste and quality, price, service, value, location, convenience, digital engagement and overall customer experience.
Our success depends on our ability to compete with many other restaurants. The restaurant industry in general, and the fast casual category in particular, are intensely competitive, and we compete with many well-established restaurant companies on the basis of food taste and quality, price, service, value, location, convenience, digital engagement, delivery and overall customer experience.
In addition, we may be subject to claims by our franchisees relating to our Franchise Disclosure Document ("FDD"), including claims based on financial information contained in our FDD. Engaging in such litigation or arbitration may be costly and time-consuming and may distract management and materially adversely affect our relationships with franchisees and our ability to attract new franchisees.
In addition, we may be subject to claims by our franchisees relating to our Franchise Disclosure Document (“FDD”), including claims based on financial information contained in our FDD. Engaging in such litigation or arbitration may be costly and time-consuming and may distract management and materially adversely affect our relationships with franchisees and our ability to attract new franchisees.
Failure by our franchisees to comply with employment eligibility or immigration laws may also result in adverse publicity and reputational harm to our brand and could subject them to fines, penalties and other costs. These factors could materially adversely affect our business, financial condition, and results of operations.
Failure by our franchisees to comply with employment eligibility or immigration laws may also result in adverse publicity and 20 reputational harm to our brand and could subject them to fines, penalties and other costs. These factors could materially adversely affect our business, financial condition, and results of operations.
In addition, the ability of a defendant-franchisee to make royalty payments in the event of such 17 claims may be decreased and adverse publicity resulting from such allegations may materially adversely affect us and our brand, regardless of whether these allegations are valid or whether we or they are liable.
In addition, the ability of a defendant-franchisee to make royalty payments in the event of such claims may be decreased and adverse publicity resulting from such allegations may materially adversely affect us and our brand, regardless of whether these allegations are valid or whether we or they are liable.
No assurance can be given that any refinancing or additional financing will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and capital markets and other factors beyond our control.
No assurance can be given that any refinancing or additional financing will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and capital markets and other factors 23 beyond our control.
These and any future similar increases 19 in other regions in which our restaurants operate will increase the cost of labor and may negatively affect our and our franchisees profit margins as we and our franchisees may be unable to increase our menu prices in order to pass future increased labor costs on to our guests.
These and any future similar increases in other regions in which our restaurants operate will increase the cost of labor and may negatively affect our and our franchisees profit margins as we and our franchisees may be unable to increase our menu prices in order to pass future increased labor costs on to our guests.
Litigation against a franchisee or its affiliates by third parties or regulatory agencies, whether in the ordinary course of business or otherwise, may also include claims against us by virtue of our relationship with the defendant-franchisee, whether under vicarious liability, joint employer, or other theories.
Litigation against a franchisee or its affiliates by 17 third parties or regulatory agencies, whether in the ordinary course of business or otherwise, may also include claims against us by virtue of our relationship with the defendant-franchisee, whether under vicarious liability, joint employer, or other theories.
Accordingly, results for any one fiscal quarter or year are not necessarily indicative of results to be expected for any other fiscal quarter or year and our results for any particular future period may decrease compared to the prior period. In the future, operating results may fall below the expectations of securities analysts and investors.
Accordingly, results for any one fiscal quarter or year are not necessarily indicative of results to be expected for any other fiscal quarter or year and our results for any particular future period may decrease or change compared to the prior period. In the future, operating results may fall below the expectations of securities analysts and investors.
We and our franchisees are, from time to time, the subject of, or potentially the subject of, complaints or litigation, including customer claims, class-action lawsuits, personal-injury claims, environmental claims, intellectual property claims, employee claims regarding workplace matters such as wage-related or workforce scheduling claims, allegations of improper termination, harassment, discrimination and claims related to violations of laws, such as the Americans with Disabilities Act of 1990 ("ADA"), religious freedom laws, the Fair Labor Standards Act, other employment-related laws, the Occupational Safety and Health Act, the Employee Retirement Income Security Act of 1974, as amended, advertising laws and state and local “dram shop” laws.
We and our franchisees are, from time to time, the subject of, or potentially the subject of, complaints or litigation, including customer claims, class-action lawsuits, personal-injury claims, environmental claims, intellectual property claims, employee claims regarding workplace matters such as wage-related or workforce scheduling claims, allegations of improper termination, harassment, discrimination and claims related to violations of laws, such as the Americans with Disabilities Act of 1990 (“ADA”), religious freedom laws, the Fair Labor Standards Act, other employment-related laws, the Occupational Safety and Health Act, the Employee Retirement Income Security Act of 1974, as amended, advertising laws and state and local “dram shop” laws.
Further, if our digital ordering and payment platforms do not meet customers’ expectations in terms of security, speed, attractiveness, or ease of use, customers may be less inclined to return to such platforms.
If our digital ordering and payment platforms do not meet customers’ expectations in terms of security, speed, attractiveness, or ease of use, customers may be less inclined to return to such platforms.
Given our geographic concentrations, economic conditions and other unforeseen events, including but not limited to negative publicity, local strikes, terrorist attacks, increases in energy prices, natural or man-made disasters, adverse weather conditions, or the enactment of more stringent state and local laws and regulations in these areas, could have a disproportionate adverse effect on our business and results of operations.
Given our geographic concentrations, economic conditions and other unforeseen events, including but not limited to negative publicity, local strikes, terrorist attacks, increases in energy prices, natural or man-made disasters, adverse weather conditions, or the enactment of more stringent state and local laws and regulations in these geographic areas, could have a disproportionate adverse effect on our business, financial condition, and results of operations.
Such losses could have a material adverse effect on our business and results of operations. Our franchise agreements require each franchisee to maintain certain insurance types and levels. Certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks.
Such losses could have a material adverse effect on our business, financial condition, and results of operations. Our franchise agreements require each franchisee to maintain certain insurance types and levels. Certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks.
A cyber incident could also require us to provide notifications, result in adverse publicity, loss of sales and profits, increase fees payable to third parties, and result in penalties or remediation and other costs that could materially adversely affect the operation of our business and results of operations.
A cyber incident could also require us to provide notifications, result in adverse publicity, loss of sales and profits, increase fees payable to third parties, and result in penalties or remediation and other costs that could materially adversely affect the operation of our business, financial condition, and results of operations.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including those described under “Risks Related to Our Business and Our Industry” and the following: • potential fluctuation in our annual or quarterly operating results; • changes in capital market conditions that could affect valuations of restaurant companies in general or our goodwill in particular or other adverse economic conditions; • changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; • downgrades by any securities analysts who follow our common stock; • future sales of our common stock by our officers, directors and significant stockholders; • global economic, legal, and regulatory factors unrelated to our performance; • investors’ perceptions of our prospects; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, or capital commitments; and • investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including those described under “Risks Related to Our Business and Our Industry” and the following: • potential fluctuation in our annual or quarterly operating results; • changes in capital market conditions that could affect valuations of restaurant companies in general or our goodwill in particular or other adverse economic conditions; • changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock; • downgrades by any securities analysts who follow our common stock; • changes in our dividend policy or any share repurchase program; • future sales of our common stock by our officers, directors and significant stockholders; • global economic, legal, and regulatory factors unrelated to our performance; • investors’ perceptions of our prospects; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, or capital commitments; and • investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives.
If our initiatives are not successful, resulting in expenses incurred without the benefit of higher revenue, our business, financial condition and results of operations could be materially adversely affected. We are vulnerable to changes in consumer preferences and regulation of consumer eating habits that could harm our business, financial condition, results of operations and cash flow.
If our initiatives are not successful, resulting in expenses incurred without the benefit of higher revenue, our business, financial condition and results of operations could be materially adversely affected. We are vulnerable to changes in consumer preferences and regulation of consumer eating habits that could harm our business, financial condition, and results of operations.
In addition, if our franchisees fail to renew their franchise agreements, our royalty revenue may decrease, which in turn could materially adversely affect our business and operating results. The failure of our franchisees to comply with applicable laws could negatively impact our reputation or results of operations.
In addition, if our franchisees fail to renew their franchise agreements, our royalty revenue may decrease, which in turn could materially adversely affect our business, financial condition, and operating results. The failure of our franchisees to comply with applicable laws could negatively impact our reputation or results of operations.
For example, our franchisees are solely responsible for making their own hiring, firing and disciplinary decisions, scheduling hours and establishing wages. Any failure by our franchisees to comply with applicable employment laws could negatively impact our reputation and our ability to hire and/or retain employees.
For example, our franchisees are solely responsible for making their own hiring, firing and disciplinary decisions, scheduling hours and establishing compensation. Any failure by our franchisees to comply with applicable employment laws could negatively impact our reputation and our ability to hire and/or retain employees.
A substantial judgment against us could materially adversely affect our business and operating results. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to any of these or other matters.
A substantial judgment against us could materially adversely affect our business, financial condition, and operating results. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to any of these or other matters.
Our increasing reliance on credit or debit cards for payment increases the risk of regulatory compliance and security breaches or intrusions, which could materially adversely impact our business or results of operations. The majority of our restaurant sales are paid by credit or debit cards.
Our increasing reliance on credit or debit cards for payment increases the risk of regulatory compliance and security breaches or intrusions, which could materially adversely impact our business, financial condition, or results of operations. The majority of our restaurant sales are paid by credit or debit cards.
Because we and our franchisees rely on digital orders for a significant portion of our sales, any limitations in functionality, interruptions or unavailability of any of our digital ordering or payment platforms could limit or delay customers’ ability to order through such platforms.
Because we and our franchisees rely on digital orders for a significant portion of our sales, any limitations in functionality, interruptions or unavailability of any of our or third-party digital ordering or payment platforms could limit or delay customers’ ability to order through such platforms.
We and our franchisees are subject to various existing U.S. federal, state, local, and foreign laws affecting the operation of restaurants and the sale of food and alcoholic beverages, including various license and permit requirements, health, sanitation, fire, and safety standards.
We and our franchisees are subject to various existing U.S. federal, state, local, and foreign laws affecting the operation of restaurants and the sale of food and alcoholic beverages, including various sales tax laws, license and permit requirements, health, sanitation, fire, and safety standards.
Food costs may also increase as a result of factors beyond our control, such as inflation, general economic conditions, seasonal fluctuations, weather conditions, energy costs, feed prices, industry demand, food safety concerns, product recalls and government regulations.
Food costs may also increase as a result of factors beyond our control, such as inflation, general economic conditions, seasonal fluctuations, weather conditions, energy costs, feed prices, labor shortages, industry demand, food safety concerns, product recalls and government regulations.
As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Additionally, there has been an increase in data integration and complexity of our technology systems, particularly in our international markets.
As our brand profile and our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Additionally, there has been an increase in data integration and complexity of our technology systems, particularly in our international markets.
A substantial judgment, or judgment or other liability in excess of our or our franchisees’ available insurance coverage, resulting from claims could materially adversely affect our business and results of operations. We may engage in litigation or arbitration with our franchisees.
A substantial judgment, or judgment or other liability in excess of our or our franchisees’ available insurance coverage, resulting from claims could materially adversely affect our business, financial condition, and results of operations. We may engage in litigation or arbitration with our franchisees.
We and our franchisees face many challenges in opening new restaurants, including: • availability of financing; • selection and availability of and competition for suitable restaurant locations; • negotiation of acceptable lease and financing terms; • securing required governmental permits and approvals, including zoning approvals; • availability and training of, and wage rates for, qualified personnel; • availability of required restaurant equipment; • unanticipated increases in construction and development costs; and • the legal and regulatory requirements applicable to our industry.
We and our franchisees face many challenges in opening new restaurants, including: • selection and availability of and competition for suitable restaurant locations; • availability of financing; • negotiation of acceptable lease and financing terms; • securing required governmental permits and approvals, including zoning approvals; • availability and training of, and compensation for, qualified personnel; • availability of required restaurant equipment; • unanticipated increases in construction and development costs; and • the legal and regulatory requirements applicable to our industry.
In addition, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.
In addition, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. 25 Item 1B.
Reports, whether or not true, of injuries caused by food tampering have in the past severely injured the reputations and brands of restaurant chains in the quick service restaurant segment and could affect us in the future as well.
Reports, whether or not true, of injuries caused by food tampering have in the past severely injured the reputations and brands of restaurant chains in the quick service restaurant market and could affect us in the future as well.
Any such limitation, damage, interruption or unavailability of our digital commerce platforms or failure of those platforms to meet customers’ expectations could materially adversely affect our and our franchisees' sales and our results of operations and financial condition.
Any such limitation, damage, interruption or unavailability of our digital commerce platforms or failure of those platforms to meet customers’ expectations could materially adversely affect our and our franchisees’ sales and our growth prospects, results of operations and financial condition.
In the event that a rapid amortization event occurs under the indenture governing the securitized debt (including, without limitation, upon an event of default under the indenture or the failure to repay the securitized debt at the end of the applicable term), the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business and materially adversely affect our results of operations.
If a rapid amortization event occurs under the indenture governing the securitized debt (including, without limitation, upon an event of default under the indenture or the failure to repay the securitized debt at the end of the applicable term), the funds available to us would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business and materially adversely affect our financial condition or results of operations.
Consumer preferences and eating habits often change rapidly and without warning, moving from one trend to another among many product or retail concepts. We depend on some of these trends, including the trend regarding away-from-home or take-out dining.
Consumer preferences and eating habits often change rapidly and without warning, moving from one trend to another among many products or concepts. We depend on some of these trends, including the trend regarding away-from-home or take-out dining.
Our operating results may fluctuate significantly because of a number of factors, including: • the timing of new restaurant openings; • profitability of our restaurants, especially in new markets; • changes in interest rates; • increases and decreases in average weekly sales and same store sales, including due to the timing and popularity of sporting and other events; • macroeconomic conditions, globally, nationally and locally; • changes in consumer preferences and competitive conditions; • legal and regulatory changes; • costs associated with litigation; • increases in infrastructure costs; and • fluctuations in commodity prices.
Our operating results may fluctuate significantly because of a number of factors, including: • the timing of new restaurant openings; • profitability of our restaurants, especially in new markets; • inflationary pressures and changes in interest rates; • increases and decreases in average weekly sales and same store sales, including due to the timing and popularity of sporting and other events; • macroeconomic and geopolitical conditions, globally, nationally and locally; • changes in consumer discretionary spending, consumer preferences and competitive conditions; • legal and regulatory changes; • costs associated with litigation; • increases in infrastructure costs; and • fluctuations in commodity prices.
The systems currently used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payments themselves, all of which can put electronic payment at risk, are determined and controlled by the payment card industry, not by us, through enforcement of compliance with the Payment Card Industry - Data Security Standards (as modified from time to time, "PCI DSS").
The systems currently used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payments themselves, all of which can put electronic payment at risk, are determined and controlled by the payment card industry, not by us, through enforcement of compliance with the Payment Card Industry - Data Security Standards (as modified from time to time, “PCI DSS”).
These competitors may have, among other things, a 13 more diverse menu, lower operating costs, better locations, better facilities, better management, more effective marketing, more efficient operations, stronger brand recognition, more loyal customer base and more convenient offerings than we have.
These competitors may have, among other things, a more diverse menu, lower operating costs, better locations, better facilities, better management, more effective marketing, more efficient operations, stronger brand recognition, more loyal customer bases and more convenient offerings than we have.
Any failure by us or our third-party delivery providers to provide timely and reliable delivery services may materially adversely affect our business and reputation. As of December 31, 2022, delivery services were available at all Wingstop restaurants throughout the United States. Interruptions or failures in our delivery services could prevent the timely or successful delivery of our products.
Any failure by us or our third-party delivery providers to provide timely and reliable delivery services may materially adversely affect our business and reputation. As of December 30, 2023, delivery services were available at all Wingstop restaurants throughout the United States. Interruptions or failures in our delivery services could prevent the timely or successful delivery of our products.
Our failure to add a significant number of new restaurants or grow domestic same store sales would adversely affect our ability to increase our revenue and operating income and could materially adversely affect our operating results. As we continue to grow, our existing systems and processes and personnel may not be adequate to support our continued growth.
Our failure to add a significant number of new restaurants or grow same store sales would adversely affect our ability to increase our revenue and operating income and could materially adversely affect our business, financial condition, and operating results. As we continue to grow, our existing systems and processes and personnel may not be adequate to support our continued growth.
Any such claim or proceeding could cause us to incur significant unplanned expenses and significantly harm our reputation, which could have a material adverse impact on our financial condition, results of operations and cash flows.
Any such claim or proceeding could cause us to incur significant unplanned expenses and significantly harm our reputation, which could have a material adverse impact on our business, financial condition, and results of operations.
Negative publicity over 18 the health aspects of, or animal welfare or other social or environmental concerns related to, the food items we sell may adversely affect demand for our menu items and could have a material adverse effect on traffic, sales and results of operations.
Negative publicity over, or increased costs relating to, the health aspects of, or animal welfare or other social or environmental concerns related to, the food items we sell may adversely affect demand for our menu items and could have a material adverse effect on traffic, sales and results of operations.
The costs to us to eliminate any of the foregoing cybersecurity vulnerabilities or to address a cyber incident could be significant and have material adverse impact on our financial condition, results of operations and cash flows.
The costs to us to eliminate any of the foregoing cybersecurity vulnerabilities or to address a cyber incident could be significant and have material adverse impact on our business, financial condition, and results of operations.
As a result, we may not be able to anticipate or successfully react to changing food costs, including the price of bone-in chicken wings, by adjusting our purchasing practices, increasing our menu prices to pass along commodity price increases to our customers or making other operational adjustments, which could materially adversely affect our operating results.
As a result, we may not be able 13 to anticipate or successfully react to changing food costs, including the price of bone-in chicken wings, by adjusting our purchasing practices, increasing our menu prices to pass along commodity price increases to our customers or making other operational adjustments, which could materially adversely affect the demand for product and our operating results.
These factors, over which neither our franchisees nor we have control, may include: • recessionary or expansive trends in international markets; • changing labor conditions and difficulties in staffing and managing our foreign operations; • increases in the taxes we pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws; • difficulty in securing suitable local suppliers in international markets; • changes in inflation rates; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brand, reputation, and intellectual property; • difficulty in collecting our royalties and longer payment cycles; • expropriation of private enterprises; • anti-American sentiment in certain locations and the identification of the Wingstop brand as an American brand; • political and economic instability, including due to COVID-19 or other pandemics or similar events; • the U.S.
These factors, over which neither our franchisees nor we have control, may include: • recessionary or expansive trends and economic downturns in international markets; • changing labor conditions and difficulties in staffing and managing our foreign operations; • increases in the taxes we pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our compliance with a variety of foreign laws; • difficulty in securing suitable local suppliers in international markets; • changes in inflationary pressures and interest rates; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brand, reputation, and intellectual property; • difficulty in collecting our royalties and longer payment cycles; • expropriation of private enterprises; • anti-American sentiment in certain locations and the identification of the Wingstop brand as an American brand; • political and economic instability, including due to national and international conflicts or wars, sanctions, acts of terror, COVID-19 or other pandemics or similar events; • the U.S.
We and our franchisees must abide by the PCI DSS in order to accept electronic payment transactions. If we or our franchisees fail to abide by the PCI DSS, we or our franchisees could be subject to fines, penalties or litigation, which could adversely impact our results of operations.
We and our franchisees must abide by the PCI DSS in order to accept electronic payment transactions. If we or our franchisees fail to abide by the PCI DSS, we or our franchisees could be subject to fines, penalties or litigation, which could materially adversely impact our business, financial condition, or results of operations.
We may become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we may also be subject to lawsuits or other proceedings relating to these types of incidents.
In addition, we or our franchisees may become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and we or our franchisees may also be subject to lawsuits or other proceedings relating to these types of incidents.
We may also be adversely affected by customers’ experiences with third-party delivery from our restaurants. 20 We may be adversely affected by news reports or other negative publicity, regardless of their accuracy, regarding food quality issues, public health concerns, illness, safety, injury, security breaches or intrusions with respect to confidential guest or employee information, employee related claims relating to alleged employment discrimination, wage and hour violation, labor standards or health care and benefit issues, or government or industry findings concerning our restaurants, restaurants operated by other food service providers, or others across the food industry supply chain.
We may be adversely affected by news reports or other negative publicity, regardless of their accuracy, regarding food quality issues, public health concerns, illness, safety, injury, security breaches or intrusions with respect to confidential guest or employee information, employee related claims relating to alleged employment discrimination, wage and hour violation, labor standards or health care and benefit issues, or government or industry findings concerning our restaurants, restaurants operated by other food service providers, or others across the food industry supply chain.
Our inability to successfully recruit and retain highly-skilled and talented executive officers and other key employees, or successfully execute succession planning, could have a material adverse effect on our business and prospects and impair our growth, as we may not be able to find suitable individuals to replace such personnel on a timely basis.
Our inability to successfully recruit and retain highly-skilled and talented executive officers and other key employees, as well as a qualified workforce in our restaurants, or to successfully execute succession planning for key employees, could have a material adverse effect on our business and prospects and impair our growth, as we may not be able to find suitable individuals to replace such personnel on a timely basis.
Our menu is currently comprised primarily of chicken wings, tenders and sandwiches, and fries, and a change in consumer preferences away from these offerings would have a material adverse effect on our business.
Our menu is currently comprised primarily of chicken wings, tenders and sandwiches, and fries, and a change in consumer preferences away from these offerings would have a material adverse effect on our business, financial condition, and operating results.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could materially affect our results of operations.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability which could materially affect the operation of our business, our financial condition, and results of operations.
A regulatory, judicial or legislative determination that we are a “joint employer” with our franchisees or that our franchisees are part of one unified system subject to joint and several liability could subject us and/or our franchisees to liability for employment-related, health and safety related and other liabilities of our franchisees and could cause us to incur other costs that have a material adverse effect on our results of operations.
A regulatory, judicial or legislative determination that we are a “joint employer” with our franchisees or that our franchisees are part of one unified system subject to joint and several liability could subject us and/or our franchisees to liability for employment-related, health and safety related and other liabilities of our franchisees and could cause us to incur other costs that have a material adverse effect on our profitability, which would adversely impact our business, financial condition, and results of operations.
Because our ability to control our franchisees is limited, our franchisees may fail to focus on the fundamentals of restaurant operations, such as quality, service, and cleanliness, which would have a negative impact on our success.
Because our ability to control our franchisees is limited, our franchisees may fail to focus on the fundamentals of restaurant operations, such as quality, service, and cleanliness, which would have a negative impact on our success and/or adversely impact the goodwill associated with our franchise.
Overall difficulty of suppliers meeting restaurant product demand (including with respect to new product offerings like the launch of our chicken sandwich in 2022), interruptions in the supply chain, obstacles or delays in the process of renegotiating or renewing agreements with preferred suppliers or the distributor, financial difficulties experienced by suppliers or the distributor, or the deficiency, lack, or poor quality of alternative suppliers or distributors could adversely impact company-owned restaurant and franchisee sales, which could materially adversely affect our business and operating results and, in the case of reduced franchisee sales, would reduce our royalty income and revenue.
Overall difficulty of suppliers meeting restaurant product demand, interruptions in the supply chain, obstacles or delays in the process of renegotiating or renewing agreements with preferred suppliers or the distributor, financial difficulties experienced by suppliers or the distributor, or the deficiency, lack, or poor quality of alternative suppliers or distributors could adversely impact company-owned restaurant and franchisee sales, which could materially adversely affect our business, financial condition, and operating results and, in the case of reduced franchisee sales, would reduce our royalty income and revenue.
Noncompliance with applicable laws, regulatory requirements and governmental guidelines regulating franchising could reduce anticipated royalty income, which in turn could materially adversely affect our business and operating results.
Noncompliance with applicable laws, regulatory requirements and governmental guidelines regulating franchising could reduce anticipated royalty income, which in turn could materially adversely affect our business, financial condition, and results of operations.
As a result, a substantial portion of our revenue comes from royalties generated by our franchised restaurants. Accordingly, we are reliant on the performance of our franchisees in successfully operating their restaurants and paying royalties to us on a timely basis.
As of December 30, 2023, approximately 98% of our restaurants were operated by franchisees. As a result, a substantial portion of our revenue comes from royalties generated by our franchised restaurants. Accordingly, we are reliant on the performance of our franchisees in successfully operating their restaurants and paying royalties to us on a timely basis.
Third parties also may be able to develop and deploy viruses, worms and other malicious software programs, such as ransomware, that attack our, our franchisees’ and third parties with whom we do business’s systems or otherwise exploit any security vulnerabilities.
Third parties have been and will likely be able to continue to develop and deploy viruses, worms and other malicious software programs, such as ransomware, that attack our, our franchisees’ and third parties with whom we do business’s systems or otherwise exploit any security vulnerabilities.
We and our franchisees may also have a substantial number of hourly employees who are required to be paid pursuant to applicable federal or state minimum wage laws. From time to time, various federal and state legislators have proposed or approved changes to the minimum wage requirements, especially for fast-food workers.
We and our franchisees may also have a substantial number of hourly employees who are required to be paid pursuant to applicable federal or state minimum wage laws. From time to time, various federal, state, and local legislators have proposed or approved changes to minimum wage, predictive scheduling with penalty pay, and additional time off requirements, especially for fast-food workers.
In the United States, these include rules and regulations promulgated under the authority of the FTC, the Health Insurance Portability and Accountability Act of 1996, federal and state labor and employment laws, state data breach notification laws, and state privacy laws such as the California Consumer Privacy Act of 2018 and the California Privacy Rights Act.
In the United States, these include rules and regulations promulgated under the authority of the FTC, the Health Insurance Portability and Accountability Act of 1996, federal and state labor and employment laws, state data breach notification laws, and state privacy laws such as the California Consumer Privacy Act of 2018 (the “CCPA”) and the California Privacy Rights Act (the “CPRA”) (which will become enforceable in March 2024).
In that event, the price of our common stock would likely decrease. 14 Cyber incidents or deficiencies in cybersecurity could negatively impact our business by causing data loss, a disruption to our operations, a compromise or corruption of confidential or personal information, damage to our employee and business relationships and reputation, and/or litigation and liability, all of which could subject us to loss and harm our brand.
Cyber incidents or deficiencies in cybersecurity could negatively impact our business by causing data loss, a disruption to our operations, a compromise or corruption of confidential or personal information, damage to our employee and business relationships and reputation, and/or litigation and liability, all of which could subject us to loss and harm our brand.
If we, our employees, franchisees, or vendors fail to comply with applicable laws, regulations, or contract terms, and covered information is obtained by unauthorized persons, used inappropriately, or destroyed, it could adversely affect our reputation, disrupt our operations and result in costly litigation, judgments, or penalties resulting from violation of laws and payment card industry regulations.
The rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. 14 If we, our employees, franchisees, or vendors fail to comply with applicable laws, regulations, or contract terms, and covered information is obtained by unauthorized persons, used inappropriately, or destroyed, it could adversely affect our reputation, disrupt our operations and result in costly litigation, judgments, or penalties resulting from violation of laws and payment card industry regulations.
From time to time, legislative proposals are made to increase the minimum wage at the federal, state and local level, or create a council that could, among other things, increase minimum wages and impose additional minimum working or operating standards.
From time to time, legislation increases the minimum wage at the federal, state and local level, or creates a council that could, among other things, increase minimum wages and impose additional minimum working or operating standards.
For example, our brand value could suffer and our business could be adversely affected if customers perceive a reduction in the quality and safety of our food, value, or service or otherwise believe we have failed to deliver a consistently positive experience.
For example, our brand value could suffer and our business could be adversely affected if customers perceive a reduction in the quality and safety of our food, value, or service or otherwise believe we have failed to deliver a consistently positive experience. We may also be adversely affected by customers’ experiences with third-party delivery from our restaurants.
Because many of our restaurants are concentrated in certain geographic areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas. As of December 31, 2022, 57% of our 1,721 domestic restaurants were spread across Texas (25%), California (20%), Illinois (6%), and Florida (6%).
Because many of our restaurants are concentrated in certain geographic areas, we are susceptible to economic and other trends and developments, including adverse weather conditions, in these areas. 19 As of December 30, 2023, 56% of our 1,926 domestic restaurants were spread across Texas (23%), California (20%), Florida (7%), and Illinois (6%).
Customers are increasingly using e-commerce websites and apps, both domestically and internationally, like www.wingstop.com, our mobile ordering application, and third-party delivery apps, to order and pay for our products and select optional delivery and curbside services.
Customers are increasingly using e-commerce websites and apps, both domestically and internationally, like www.wingstop.com, our mobile ordering application, and third-party delivery apps, to order and pay for our products and select optional delivery and curbside services. In the fourth quarter of 2023, digital sales accounted for 67.0% of our domestic sales.
If we are unable to compete effectively, it could decrease our traffic, sales and profit margins, which could materially adversely affect our business, financial condition, and results of operations. Interruptions in the supply of product to company-owned restaurants and franchisees could materially adversely affect our revenue.
If we are unable to compete effectively, it could decrease our traffic, sales and profit margins, which could materially adversely affect our business, financial condition, and results of operations. Changes in food and supply costs could materially adversely affect our results of operations.
Although we have developed criteria to evaluate and screen prospective franchisees, our franchisees may not ultimately have the business acumen or be able to access the financial or management resources that they need to open and successfully operate the restaurants contemplated by their agreements with us, or they may elect to cease restaurant development for other reasons and state franchise laws may limit our ability to terminate or modify these license agreements.
Although we have developed criteria to evaluate and screen prospective franchisees, our franchisees may not ultimately have the business acumen or be able to access the financial or management resources that they need to open and successfully operate the restaurants contemplated by their agreements with us.
In addition, our franchisees may fail to participate in our marketing initiatives, which could materially adversely affect their sales trends, average weekly sales, and results of operations.
In addition, our franchisees may fail to renovate their existing restaurants or support our marketing initiatives, which could materially adversely affect their sales trends, average weekly sales, and results of operations, thereby impacting royalty revenue.
As our competitors expand their operations or as new competitors enter the industry, we expect competition to continue to intensify. Should our competitors increase their spending on advertising and promotions or if their advertising and promotions are more effective, we could experience a loss of customer traffic to our competitors and a material adverse effect on our results of operations.
Should our competitors increase their spending on advertising and promotions or if their advertising and promotions are more effective, we could experience a loss of customer traffic to our competitors and a material adverse effect on our business, financial condition, and results of operations.
Our business, financial condition and results of operations may be adversely affected if the global markets in which our franchised restaurants compete are affected by changes in political, economic, or other factors.
Therefore, as we expand internationally, our franchisees may not experience the operating margins we expect, and our results of operations and growth may be materially adversely affected. Our business, financial condition and results of operations may be adversely affected if the global markets in which our franchised restaurants compete are affected by changes in political, economic, or other factors.
Those markets may have competitive conditions, consumer tastes and discretionary spending patterns that are different from those in our existing markets, and we may encounter well-established competitors with substantially greater financial resources than us. As a result, those new restaurants may be less successful than restaurants in our existing markets.
Some of our new restaurants are located in markets where there may be limited or no market recognition of our brand. Those markets may have competitive conditions, consumer tastes and discretionary spending patterns that are different from those in our existing markets, and we may encounter well-established competitors with substantially greater financial resources than us.
We have little control over such suppliers or the distributor. Disruptions in these relationships may reduce company-owned restaurant and franchisee sales and, in the case of reduced franchisee sales, our royalty income.
Disruptions in these relationships may reduce company-owned restaurant and franchisee sales and, in the case of reduced franchisee sales, our royalty income.
In addition, 21 the departure of any of our executive officers or key employees could be viewed in a negative light by investors and analysts, which could cause the price of our common stock to decline. Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the value of our brand.
The departure of any of our executive officers or key employees could be viewed in a negative light by investors and analysts, which could cause the price of our common stock to decline.
Our business is subject to various laws and regulations and changes in such laws and regulations, and/or our failure to comply with existing or future laws and regulations, could materially adversely affect us.
Existing insurance coverage may not provide protection from all the costs that may arise from such events. Our business is subject to various laws and regulations and changes in such laws and regulations, and/or our failure to comply with existing or future laws and regulations, could materially adversely affect us.
The establishment of such laws in one state may have a ripple effect in other states, substantially increase labor costs and negatively impact our operating costs.
The establishment of such laws in one state may have a ripple effect in other states, substantially increase labor costs and negatively impact our operating costs. Our success depends in part upon effective advertising and marketing campaigns, which may not be successful, and franchisee support of such advertising and marketing campaigns.
The risks associated with such negative publicity cannot be eliminated or completely mitigated and may materially affect our business. The availability of information on social media platforms is virtually immediate as is its impact. Many social media platforms immediately publish the content their subscribers and participants can post, often without filters or checks on accuracy of the content posted.
The risks associated with such negative publicity cannot be eliminated or completely mitigated and may materially affect our business, financial condition, and results of operations. The availability of information on social media platforms is virtually immediate as is its impact.
Furthermore, a bankruptcy of any multi-unit franchisee could negatively impact our ability to collect payments due under such franchisee’s franchise agreements. In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise agreements under the applicable bankruptcy code, in which case 11 there would be no further royalty payments from such franchisee.
In a franchisee bankruptcy, the bankruptcy trustee may reject its franchise agreements under the applicable bankruptcy code, in which case there would be no further royalty payments from such franchisee.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll domestic and international franchise restaurants are leased or owned directly by the respective franchisees. We believe that our existing headquarters and other leased and owned facilities are adequate to meet our current requirements. Due to lower square footage requirements, our restaurants can be located in a variety of locations.
Biggest changeAll domestic and international franchise restaurants are leased or owned directly by the respective franchisees. Due to lower square footage requirements, our restaurants can be located in a variety of locations. They tend to be located primarily in shopping centers, as in-line or end-cap locations. Our restaurants generally occupy approximately 1,700 square feet of leased retail space.
Removed
They tend to be located primarily in shopping centers, as in-line or end-cap locations. Our restaurants generally occupy approximately 1,700 square feet of leased retail space. As of December 31, 2022, we and our franchisees operated 1,959 restaurants in 44 states and 9 countries.
Added
As of December 30, 2023, we and our franchisees operated 2,214 restaurants in 45 states and 11 countries and U.S. territories.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 26 PART II
Biggest changeHowever, a significant increase in the number of these claims or an increase in amounts owing under successful claims could materially and adversely affect our business, financial condition, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. 28 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities We did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December 31, 2022. 27 Performance Graph The following performance graph compares the dollar change in the cumulative stockholder return on our common stock with the cumulative total returns of the NASDAQ Composite Index, the Standard & Poor’s 600 Restaurants Index (the “S&P 600 Restaurant Index”) and the Standard & Poor’s 400 Restaurant Index (the “S&P 400 Restaurant Index”).
Biggest changeAs of December 30, 2023, $125.0 million remained available under the Share Repurchase Authorization. 29 Performance Graph The following performance graph compares the dollar change in the cumulative stockholder return on our common stock with the cumulative total returns of the NASDAQ Composite Index and the Standard & Poor’s 400 Restaurant Index (the “S&P 400 Restaurant Index”).
We evaluate dividend payments on common stock within the context of our overall capital allocation strategy with our board of directors on an ongoing basis, giving consideration to a number of factors including our current and forecast earnings, financial condition, the general economic and regulatory environment, cash requirements, cash surplus and other factors.
We evaluate dividend payments on common stock within the context of our overall capital allocation strategy with our board of directors on an ongoing basis, giving consideration to a number of factors including our current and forecasted earnings, financial condition, the general economic and regulatory environment, cash requirements, cash surplus, legal requirements or limitations, and other factors.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NASDAQ Global Select Market under the symbol “WING”. As of February 21, 2023, there were 127 stockholders of record of our common stock. This number excludes stockholders whose stock is held in nominee or street name by brokers.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NASDAQ Global Select Market under the symbol “WING”. As of February 20, 2024, there were 132 stockholders of record of our common stock. This number excludes stockholders whose stock is held in nominee or street name by brokers.
Recent Sales of Unregistered Securities There were no sales of unregistered securities during the fiscal year ended December 31, 2022 that were not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Recent Sales of Unregistered Securities There were no sales of unregistered securities during the fiscal year ended December 30, 2023 that were not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
This graph assumes a $100 investment in our common stock and in each of the foregoing indices on December 30, 2017, and assumes the reinvestment of dividends, if any. The indices are included for comparative purposes only.
This graph assumes a $100 investment in our common stock and in each of the foregoing indices on December 29, 2018, and assumes the reinvestment of dividends, if any. The indices are included for comparative purposes only.
This graph is “furnished” and not “filed” with the SEC and it is not “soliciting material”, and should not be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.
This graph is “furnished” and not “filed” with the SEC and it is not “soliciting material,” and should not be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filing. 30 Item 6. Reserved Not applicable.
There can be no assurance that we will continue to pay such dividends or the amount of such dividends. 28
There can be no assurance that we will continue to pay such dividends or as to the amount of any such dividends if paid.
On February 21, 2023, the Company’s board of directors declared a quarterly dividend of $0.19 per share of common stock, to be paid on March 31, 2023 to stockholders of record as of March 10, 2023, totaling approximately $5.7 million.
Dividends on Common Stock On February 20, 2024, the Company’s board of directors declared a quarterly dividend of $0.22 per share of common stock, to be paid on March 29, 2024 to stockholders of record as of March 8, 2024, totaling approximately $6.5 million.
Removed
During 2022, the Company decided to change its peer group comparison from the S&P 600 Restaurant Index to the S&P 400 Restaurant Index as the Company believes that the companies included in the S&P 400 Restaurant Index more appropriately reflect the scope of the Company’s operations and match the competitive market in which the Company operates.
Added
Issuer Purchases of Equity Securities The following table sets forth information on our share repurchases of our common stock during the fourth quarter of 2023: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) October 1, 2023 - October 28, 2023 — $ — — $ — October 29, 2023 - November 25, 2023 — — — — November 26, 2023 - December 30, 2023 78,801 $ 193.51 78,801 125,000,000 Total 78,801 $ 193.51 78,801 $ 125,000,000 (1) On August 23, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution to repurchase $125.0 million of the Company’s common stock.
Removed
Dividends on Common Stock Please refer to “Note 3 - Dividends” of the Notes to the Consolidated Financial Statements for information on dividends declared and paid in the fiscal years ended December 31, 2022 and December 25, 2021.
Added
Pursuant to the terms of the ASR Agreement, the Company paid the financial institution $125.0 million and, on August 25, 2023, the Company received and retired 567,151 shares of its common stock. Final settlement of the ASR Agreement occurred on December 21, 2023, and the Company received and retired an additional 78,801 shares of common stock.
Added
In connection with the ASR Agreement, the Company received and retired a total of 645,952 shares of common stock at an average share price of $193.51.
Added
The total number of shares repurchased under the ASR Agreement was based on a daily volume-weighted average share price during the valuation period specified in the ASR Agreement, less a discount and subject to adjustments.
Added
(2) On August 16, 2023, the Company’s Board of Directors approved a new share repurchase program with authorization to purchase up to $250.0 million of its outstanding shares of common stock (the “Share Repurchase Authorization”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 December 25, 2021 Domestic Franchised Activity: Beginning of period 1,498 1,327 Openings 187 170 Closures (4) (2) Acquired by Company (3) (3) Re-franchised by Company — 6 Restaurants end of period 1,678 1,498 Domestic Company-Owned Activity: Beginning of period 36 32 Openings 5 7 Closures (1) — Acquired from franchisees 3 3 Re-franchised to franchisees — (6) Restaurants end of period 43 36 Total Domestic Restaurants 1,721 1,534 International Franchised Activity: Beginning of period 197 179 Openings 45 34 Closures (4) (16) Restaurants end of period 238 197 Total System-wide Restaurants 1,959 1,731 System-wide sales.
Biggest changeDomestic Company-owned Domestic Franchised International Franchised (1) System-wide Restaurant count at December 25, 2021 36 1,498 197 1,731 Openings 5 187 45 237 Closures (1) (4) (4) (9) Net purchase from (sold by) franchisees 3 (3) — — Restaurant count at December 31, 2022 43 1,678 238 1,959 Openings 4 202 59 265 Closures — (1) (9) (10) Net purchase from (sold by) franchisees 2 (2) — — Restaurant count at December 30, 2023 49 1,877 288 2,214 (1) Includes U.S. territories.
System-wide sales represents net sales for all of our company-owned and franchised restaurants (as reported by franchisees). This measure allows management to better assess changes in our royalty revenue, our overall store performance, the health of our brand and the strength of our market position relative to competitors.
System-wide sales. System-wide sales represents net sales for all of our company-owned and franchised restaurants (as reported by franchisees). This measure allows management to better assess changes in our royalty revenue, our overall store performance, the health of our brand and the strength of our market position relative to competitors.
These estimates require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions.
These estimates may require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions.
Some of the limitations are: • such measures do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; • such measures do not reflect changes in, or cash requirements for, our working capital needs; • such measures do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; • such measures do not reflect our tax expense or the cash requirements to pay our taxes; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Some of the limitations are: • such measures do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; 33 • such measures do not reflect changes in, or cash requirements for, our working capital needs; • such measures do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt; • such measures do not reflect our tax expense or the cash requirements to pay our taxes; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
We believe the probability of incurring an actual liability under such indemnifications is sufficiently remote so that no liability has been recorded. Critical Accounting Policies and Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.
We believe the probability of incurring an actual liability under such indemnifications is sufficiently remote so that no liability has been recorded. 39 Critical Accounting Policies and Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.
On March 9, 2022, the Company completed a securitized financing transaction, pursuant to which Wingstop Funding LLC (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company, issued $250 million of its Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”).
Securitized financing facility . On March 9, 2022, the Company completed a securitized financing transaction, pursuant to which Wingstop Funding LLC (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company, issued $250 million of its Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”).
Transaction size increases are driven by price increases or favorable mix shift from either an increase in items purchased or shifts into higher priced items. 31 EBITDA and Adjusted EBITDA. We define EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization.
Transaction size increases are driven by price increases or favorable mix shift from either an increase in items purchased or shifts into higher priced items. EBITDA and Adjusted EBITDA. We define EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization.
It is possible that materially different amounts would be reported using different assumptions. Our critical accounting policies and estimates are more fully described in “Note 1 - Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements.
It is possible that materially different amounts would be reported using different assumptions. Our most significant accounting policies and estimates are more fully described in “Note 1 - Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements.
We operate on a 52- or 53-week fiscal year ending on the last Saturday of each calendar year. Our fiscal quarters are comprised of 13 weeks, with the exception of the fourth quarter of a 53-week year, which contains 14 weeks. Fiscal year 2022 contains 53 weeks, while fiscal year 2021 contains 52 weeks.
We operate on a 52- or 53-week fiscal year ending on the last Saturday of each calendar year. Our fiscal quarters are comprised of 13 weeks, with the exception of the fourth quarter of a 53-week year, which contains 14 weeks. Fiscal year 2023 contains 52 weeks, while fiscal year 2022 contains 53 weeks.
We define Adjusted net income as net income adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term.
We define Adjusted net income as net income adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and related tax adjustments that management believes are not indicative of the Company’s core operating results or business outlook over the long-term.
In addition to the 2022 Notes, the Company’s outstanding debt consists of its existing Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”). No borrowings were outstanding under the 2022 Variable Funding Notes as of December 31, 2022. Dividends .
In addition to the 2022 Notes, the Company’s outstanding debt consists of its existing Series 2020-1 2.84% Fixed Rate Senior Secured Notes, Class A-2 (the “2020 Notes”). No borrowings were outstanding under the 2022 Variable Funding Notes as of December 30, 2023. Dividends .
However, any future declarations of dividends, as well as the amount and timing of such dividends, is subject to capital availability and the discretion of our board of directors, which must evaluate, among other things, whether cash dividends are in the best interest of our stockholders.
However, any future declarations of dividends, as well as the amount and timing of such dividends, is subject to capital availability and the discretion of our board of directors, which must evaluate, among other things, whether cash dividends are in the best interest of our stockholders. Share Repurchase Program.
Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this report and Item 1A. Risk Factors for a discussion of these risks and uncertainties.
Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this report and “Item 1A. Risk Factors” for a discussion of these risks and uncertainties.
We do not currently expect the restrictions in our debt instruments to impact our ability to make regularly quarterly dividends pursuant to our quarterly dividend program.
We do not currently expect the restrictions in our debt instruments to impact our ability to make regular quarterly dividends pursuant to our quarterly dividend program.
As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.
As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense.
Loss on debt extinguishment and financing transactions was $0.8 million during fiscal year 2022 due to costs and fees associated with the extinguishment of our 2020 Variable Funding Note on March 9, 2022. Income tax expense.
Loss on debt extinguishment and financing transactions Loss on debt extinguishment and financing transactions was $0.8 million during fiscal year 2022 due to costs and fees associated with the extinguishment of our 2020 variable funding note facility on March 9, 2022.
A comparison of our results of operations and cash flows for fiscal year 2021 compared to fiscal year 2020 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 25, 2021, filed with the SEC on February 16, 2022.
A comparison of our results of operations and cash flows for fiscal year 2022 compared to fiscal year 2021 can be found under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 22, 2023.
Domestic same store sales have increased for 19 consecutive years beginning in 2004, which includes 5-year cumulative domestic same stores sales growth of 50.4% since the beginning of fiscal year 2018. We believe our asset-light, highly-franchised business model generates strong operating margins and requires low capital expenditures, creating shareholder value through strong and consistent operating cash flow and capital-efficient growth.
Domestic same store sales have increased for 20 consecutive years beginning in 2004, which includes 5-year cumulative domestic same stores sales growth of 62.2% since the beginning of fiscal year 2019. We believe our asset-light, highly-franchised business model generates strong operating margins and requires low capital expenditures, creating shareholder value through strong and consistent operating cash flow and capital-efficient growth.
We define Adjusted EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization, further adjusted for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, gains and losses on the disposal of assets, and stock-based compensation expense.
We define Adjusted EBITDA as net income before interest expense, net, income tax expense (benefit), and depreciation and amortization, with further adjustments for losses on debt extinguishment and financing transactions, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense.
The change was primarily due to additional borrowings under our 2022 Class A-2 Notes (as defined below) of $250 million, partially offset by the payment of a special dividend in connection with the securitized financing transaction totaling $119.5 million, as well as deferred financing and other debt related costs incurred of $5.4 million in fiscal year 2022.
Cash provided by financing activities of $103.3 million in fiscal year 2022 was primarily 38 related to the net cash provided by additional borrowings under our 2022 Class A-2 Notes (as defined below) of $250 million, partially offset by the payment of a special dividend in connection with the securitized financing transaction totaling $119.5 million, as well as deferred financing and other debt related costs incurred of $5.4 million.
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our 2022 Variable Funding Notes (defined below). As of December 31, 2022, the Company had $205.7 million of cash and restricted cash on its balance sheet.
Our primary sources of short-term and long-term liquidity are expected to be cash flows from operations and available borrowings under our 2022 Variable Funding Notes (defined below). As of December 30, 2023, the Company had $119.7 million of cash and cash equivalents on its balance sheet, including advertising fund cash and cash equivalents.
Income tax expense was $16.4 million in fiscal year 2022, yielding an effective tax rate of 23.6%, compared to an effective tax rate of 27.6% in the prior fiscal year. The decrease in the effective tax rate was primarily due to the impact of tax benefits associated with stock awards forfeited during fiscal year 2022. Liquidity and Capital Resources General.
Income tax expense The effective tax rate in fiscal year 2023 was 25.6%, compared to an effective tax rate of 23.6% in the prior fiscal year. The increase in the effective tax rate was primarily due to the impact of tax benefits associated with stock awards forfeited during fiscal year 2022 . Liquidity and Capital Resources General.
We paid quarterly cash dividends of $0.17 per share of common stock in each of the first two quarters of 2022, and quarterly cash dividends of $0.19 per share of common stock in both the third and fourth quarters of 2022, resulting in aggregate dividend payments of $21.5 million in fiscal year 2022.
We paid quarterly cash dividends of $0.19 per share of common stock in each of the first two quarters of 2023, and quarterly cash dividends of $0.22 per share of common stock in both the third and fourth quarters of 2023, resulting in aggregate quarterly dividend payments of $24.4 million in fiscal year 2023.
Overview Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong, consistent growth. As of December 31, 2022, we had a total 1,959 restaurants in our system. Our restaurant base is 98% franchised, with 1,916 franchised locations (including 238 international locations) and 43 company-owned restaurants as of December 31, 2022.
Overview Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong, consistent growth. As of December 30, 2023, we had a total of 2,214 restaurants in our system. Our restaurant base is 98% franchised, with 2,165 franchised locations (including 288 international locations) and 49 company-owned restaurants as of December 30, 2023.
Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations on a period-over-period basis and would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not part of normal day-to-day operations of our business. 32 Management uses EBITDA and Adjusted EBITDA: • as a measurement of operating performance because they assist us in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations; • for planning purposes, including the preparation of our internal annual operating budget and financial projections; • to evaluate the performance and effectiveness of our operational strategies; • to evaluate our capacity to fund capital expenditures and expand our business; and • to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance-based equity awards.
Management uses EBITDA and Adjusted EBITDA: • as a measurement of operating performance because they assist us in comparing the operating performance of our restaurants on a consistent basis, as they remove the impact of items not directly resulting from our core operations; • for planning purposes, including the preparation of our internal annual operating budget and financial projections; • to evaluate the performance and effectiveness of our operational strategies; • to evaluate our capacity to fund capital expenditures and expand our business; and • to calculate incentive compensation payments for our employees, including assessing performance under our annual incentive compensation plan and determining the vesting of performance-based equity awards.
Net cash provided by operating activities was $76.2 million in fiscal year 2022, an increase of $27.4 million from cash provided by operating activities of $48.9 million in the prior fiscal year.
Net cash provided by operating activities was $121.6 million in fiscal year 2023, an increase of $45.4 million from cash provided by operating activities of $76.2 million in the prior fiscal year.
On February 21, 2023, the Company’s board of directors approved a dividend of $0.19 per share, to be paid on March 31, 2023 to stockholders of record as of March 10, 2023, totaling approximately $5.7 million.
On February 20, 2024, the Company’s board of directors approved a dividend of $0.22 per share, to be paid on March 29, 2024 to stockholders of record as of March 8, 2024, totaling approximately $6.5 million.
Advertising fees increased $37.5 million, of which $17.0 million was due to a 16.8% increase in system-wide sales during fiscal year 2022, $10.9 million was due to an increase in the national advertising fund contribution rate to 5% from 4% effective the first day of the fiscal second quarter 2022, and approximately $2.7 million was due to additional advertising fees from the 53rd week.
Advertising fees increased $38.1 million, of which $34.6 million was due to a 27.1% increase in system-wide sales during fiscal year 2023, and $6.2 million was due to an increase in the national advertising fund contribution rate to 5% from 4% effective the first day of the fiscal second quarter 2022.
The following table shows summary cash flows information for fiscal years 2022 and 2021 (in thousands): Year ended December 31, 2022 December 25, 2021 Net cash provided by (used in): Operating activities $ 76,238 $ 48,878 Investing activities (28,683) (29,853) Financing activities 103,254 (23,389) Net change in cash, cash equivalents and restricted cash $ 150,809 $ (4,364) Operating activities .
The following table shows summary cash flows information for fiscal years 2023 and 2022 (in thousands): Year ended December 30, 2023 December 31, 2022 Net cash provided by (used in): Operating activities $ 121,601 $ 76,238 Investing activities (52,153) (28,683) Financing activities (155,487) 103,254 Net change in cash, cash equivalents and restricted cash $ (86,039) $ 150,809 Operating activities .
Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors. 34 The following table reconciles net income to adjusted net income and calculates adjusted earnings per diluted share for the fiscal years ended December 31, 2022 and December 25, 2021 (in thousands): Year Ended December 31, 2022 December 25, 2021 Numerator: Net income $ 52,947 $ 42,658 Adjustments: Loss on debt extinguishment and financing transactions (a) 1,124 — Loss (gain) on disposal of assets (b) 1,164 (3,497) Consulting fees (c) 875 425 Tax effect of adjustments (d) (759) 737 Adjusted net income $ 55,351 $ 40,323 Denominator: Weighted-average shares outstanding - diluted 29,963 29,944 Adjusted earnings per diluted share $ 1.85 $ 1.35 (a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended December 31, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
The following table reconciles net income to adjusted net income and calculates adjusted earnings per diluted share for the fiscal years ended December 30, 2023 and December 31, 2022 (in thousands): Year Ended December 30, 2023 December 31, 2022 Numerator: Net income $ 70,175 $ 52,947 Adjustments: Loss on debt extinguishment and financing transactions (a) — 1,124 Consulting fees (b) 5,150 875 Tax effect of adjustments (c) (1,236) (480) Adjusted net income $ 74,089 $ 54,466 Denominator: Weighted-average shares outstanding - diluted 29,856 29,963 Adjusted earnings per diluted share $ 2.48 $ 1.82 (a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended December 31, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 38.3% in fiscal year 2022 compared to 44.8% in the prior fiscal year. The decrease is primarily due to a 26.9% decrease in the cost of bone-in chicken wings as compared to the prior year period.
The decrease is primarily due to a 27.1% decrease in the cost of bone-in chicken wings as compared to the prior year period. Labor costs as a percentage of company-owned restaurant sales were 24.0% in fiscal year 2023 compared to 24.1% in the prior fiscal year.
Total Revenue. During fiscal year 2022, total revenue was $357.5 million, an increase of $75.0 million, or 26.6%, compared to $282.5 million in the prior fiscal year.
Revenue During fiscal year 2023, total revenue was $460.1 million, an increase of $102.5 million, or 28.7%, compared to $357.5 million in the prior fiscal year.
Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend. Selling, general and administrative (“SG&A”). SG&A was $67.1 million in fiscal year 2022, an increase of $4.2 million, or 6.6%, compared to $62.9 million in the prior fiscal year.
Advertising expenses Advertising expenses were $166.6 million, an increase of $43.5 million, compared to $123.1 million in fiscal year 2022. Advertising expenses are recognized at the same time the related revenue is recognized, which does not necessarily correlate to the actual timing of the related advertising spend.
Our net cash used in investing activities was $28.7 million in fiscal year 2022, a decrease of $1.2 million, from $29.9 million in fiscal year 2021.
Our net cash used in investing activities was $52.2 million in fiscal year 2023, an increase of $23.5 million, from $28.7 million in fiscal year 2022.
(d) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the periods ended December 31, 2022 and December 25, 2021, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions. 35 Results of Operations Year ended December 31, 2022 compared to year ended December 25, 2021 The following table sets forth certain income and expense items included in the Consolidated Statements of Comprehensive Income for fiscal year 2022 and fiscal year 2021 (in thousands, except for percentages): Year ended Increase / (Decrease) December 31, 2022 December 25, 2021 $ % Revenue: Royalty revenue, franchise fees and other $ 158,614 $ 130,676 $ 27,938 21.4 % Advertising fees 119,011 81,529 37,482 46.0 % Company-owned restaurant sales 79,896 70,297 9,599 13.7 % Total revenue 357,521 282,502 75,019 26.6 % Costs and expenses: Cost of sales (1) 63,395 57,416 5,979 10.4 % Advertising expenses 123,069 83,989 39,080 46.5 % Selling, general and administrative 67,061 62,895 4,166 6.6 % Depreciation and amortization 10,899 7,943 2,956 37.2 % Loss (gain) on disposal of assets 1,164 (3,497) 4,661 (133.3) % Total costs and expenses 265,588 208,746 56,842 27.2 % Operating income 91,933 73,756 18,177 24.6 % Interest expense, net 21,230 14,984 6,246 41.7 % Loss on debt extinguishment and financing transactions 814 — 814 100.0 % Other (income) expense 573 (135) 708 (524.4) % Income before income tax expense 69,316 58,907 10,409 17.7 % Income tax expense 16,369 16,249 120 0.7 % Net income $ 52,947 $ 42,658 $ 10,289 24.1 % (1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.
(c) Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24% for the periods ended December 30, 2023 and December 31, 2022, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions. 35 Results of Operations Year ended December 30, 2023 compared to year ended December 31, 2022 The following table sets forth certain income and expense items included in the Consolidated Statements of Comprehensive Income for fiscal year 2023 and fiscal year 2022 (in thousands, except for percentages): Year ended Increase / (Decrease) December 30, 2023 December 31, 2022 $ % Revenue: Royalty revenue, franchise fees and other $ 207,077 $ 158,614 $ 48,463 30.6 % Advertising fees 157,138 119,011 38,127 32.0 % Company-owned restaurant sales 95,840 79,896 15,944 20.0 % Total revenue 460,055 357,521 102,534 28.7 % Costs and expenses: Cost of sales (1) 70,646 63,395 7,251 11.4 % Advertising expenses 166,583 123,069 43,514 35.4 % Selling, general and administrative 96,898 67,061 29,837 44.5 % Depreciation and amortization 13,239 10,899 2,340 21.5 % Loss on disposal of assets 95 1,164 (1,069) (91.8) % Total costs and expenses 347,461 265,588 81,873 30.8 % Operating income 112,594 91,933 20,661 22.5 % Interest expense, net 18,227 21,230 (3,003) (14.1) % Loss on debt extinguishment and financing transactions — 814 (814) (100.0) % Other (income) expense 57 573 (516) (90.1) % Income before income tax expense 94,310 69,316 24,994 36.1 % Income tax expense 24,135 16,369 7,766 47.4 % Net income $ 70,175 $ 52,947 $ 17,228 32.5 % (1) Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, but excludes depreciation and amortization, which are presented separately.
Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management measure our core operating performance over time by removing items that are not related to day-to-day operations. 33 The following table reconciles net income to EBITDA and adjusted EBITDA for the fiscal years ended December 31, 2022 and December 25, 2021 (in thousands): Year ended December 31, 2022 December 25, 2021 Net income $ 52,947 $ 42,658 Interest expense, net 21,230 14,984 Income tax expense 16,369 16,249 Depreciation and amortization 10,899 7,943 EBITDA $ 101,445 $ 81,834 Additional adjustments: Loss on debt extinguishment and financing transactions (a) 1,124 — Loss (gain) on disposal of assets (b) 1,164 (3,497) Consulting fees (c) 875 425 Stock-based compensation expense (d) 4,200 9,631 Adjusted EBITDA $ 108,808 $ 88,393 (a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended December 31, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
The following table reconciles net income to EBITDA and adjusted EBITDA for the fiscal years ended December 30, 2023 and December 31, 2022 (in thousands): Year ended December 30, 2023 December 31, 2022 Net income $ 70,175 $ 52,947 Interest expense, net 18,227 21,230 Income tax expense 24,135 16,369 Depreciation and amortization 13,239 10,899 EBITDA $ 125,776 $ 101,445 Additional adjustments: Loss on debt extinguishment and financing transactions (a) — 1,124 Consulting fees (b) 5,150 875 Stock-based compensation expense (c) 15,558 4,200 Adjusted EBITDA $ 146,484 $ 107,644 (a) Represents costs and expenses related to our 2022 securitized financing facility and payment of a special dividend, as well as the extinguishment of our 2020 variable funding note facility; all transaction costs are included in Loss on debt extinguishment and financing transactions during the year ended December 31, 2022, with the exception of $310,000 that is included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
The decrease in cash used in investing activities was primarily due to an investment in our United Kingdom franchisee made during fiscal year 2021, as well as a decrease in purchases of property and equipment during the current fiscal year, partially offset by changes in cash related to restaurant acquisition and asset disposal transactions as compared to the prior fiscal year.
The increase in cash used in investing activities was primarily due to an increase in purchases of property and equipment during the current fiscal year, as well as an increase in restaurant acquisition costs as compared to the prior fiscal year. Financing activities .
EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP. These should not be viewed as an alternative to cash flows from operating activities as a measure of our liquidity.
These should not be viewed as an alternative to cash flows from operating activities as a measure of our liquidity.
The increase in depreciation and amortization was primarily due to capital expenditures related to our technology investments, as well as an estimated $0.3 million related to the 53rd week. Interest expense, net. Interest expense, net was $21.2 million in fiscal year 2022, an increase of $6.2 million, or 41.7%, compared to $15.0 million in the prior fiscal year.
The increase in depreciation and amortization was primarily due to capital expenditures related to our technology investments, partially offset by an estimated $0.3 million related to the 53 rd week in the prior fiscal year.
The following table sets forth our key performance indicators for the fiscal years ended December 31, 2022 and December 25, 2021 (in thousands, except unit data): Year ended December 31, 2022 December 25, 2021 Number of system-wide restaurants at period end 1,959 1,731 System-wide sales (1) $ 2,738,920 $ 2,344,728 Domestic AUV $ 1,606 $ 1,592 Domestic same store sales growth (2) 3.4 % 8.0 % Company-owned domestic same store sales growth (2) 1.0 % 3.4 % Total revenue $ 357,521 $ 282,502 Net income $ 52,947 $ 42,658 Adjusted EBITDA (3) $ 108,808 $ 88,393 Adjusted net income (4) $ 55,351 $ 40,323 (1) The percentage of system-wide sales attributable to company-owned restaurants was 2.9% and 3.0% for the fiscal years ended December 31, 2022 and December 25, 2021, respectively.
For a reconciliation of net income to Adjusted net income and for further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize them, see footnote 3 below. 32 The following table sets forth our key performance indicators for the fiscal years ended December 30, 2023 and December 31, 2022 (in thousands, except unit data): Year ended December 30, 2023 December 31, 2022 Number of system-wide restaurants at period end 2,214 1,959 System-wide sales (1) $ 3,482,370 $ 2,738,920 Domestic AUV $ 1,827 $ 1,606 Domestic same store sales growth (2) 18.3 % 3.4 % Company-owned domestic same store sales growth (2) 8.2 % 1.0 % Total revenue $ 460,055 $ 357,521 Net income $ 70,175 $ 52,947 Adjusted EBITDA (3) $ 146,484 $ 107,644 Adjusted net income (4) $ 74,089 $ 54,466 (1) The percentage of system-wide sales attributable to company-owned restaurants was 2.8% and 2.9% for the fiscal years ended December 30, 2023 and December 31, 2022, respectively.
Highlights for Fiscal Year 2022, which included a 53rd operating week: • System-wide sales increased 16.8% over the prior fiscal year to $2.7 billion; • System-wide restaurant count increased 13.2% over the prior fiscal year to a total of 1,959 worldwide locations, driven by 228 net unit openings; • Domestic same store sales increased 3.4% over the prior fiscal year; • Company-owned restaurant same store sales increased 1.0% over the prior fiscal year; • Digital sales continue to exceed 60% of system-wide sales; • Domestic AUV of $1.6 million; • Total revenue increased 26.6% over the prior fiscal year to $357.5 million; • Net income increased 24.1% over the prior fiscal year to $52.9 million, or $1.77 per diluted share, compared to $42.7 million, or $1.42 per diluted share in the prior fiscal year; and • Adjusted EBITDA, a non-GAAP measure, increased 23.1% to $108.8 million, compared to adjusted EBITDA of $88.4 million in the prior fiscal year. 30 Key Performance Indicators Key measures that we use in evaluating our restaurants and assessing our business include the following: Number of restaurants.
Highlights for Fiscal Year 2023 Compared to Fiscal Year 2022 (1) • System-wide sales increased 27.1% over the prior fiscal year to $3.5 billion; • System-wide restaurant count increased 13.0% over the prior fiscal year to a total of 2,214 worldwide locations, driven by 255 net unit openings; • Domestic same store sales increased 18.3% over the prior fiscal year; • Company-owned domestic same store sales increased 8.2% over the prior fiscal year; • Digital sales increased to 67.0% of system-wide sales; • Domestic AUV increased to $1.8 million; • Total revenue increased 28.7% over the prior fiscal year to $460.1 million; • Net income increased 32.5% over the prior fiscal year to $70.2 million, or $2.35 per diluted share, compared to $52.9 million, or $1.77 per diluted share in the prior fiscal year; • Adjusted net income and adjusted earnings per diluted share, both non-GAAP measures, increased 36.0% to $74.1 million, or $2.48 per diluted share, compared to $54.5 million, or $1.82 per diluted share in the prior fiscal year; and • Adjusted EBITDA, a non-GAAP measure, increased 36.1% to $146.5 million, compared to adjusted EBITDA of $107.6 million in the prior fiscal year.
Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.3% in fiscal year 2022 compared to 16.3% in the prior fiscal year.
The decrease is primarily due to sales leverage related to the company-owned domestic same store sales increase of 8.2%, offset by an increase in company-owned restaurant wages. Other restaurant operating expenses as a percentage of company-owned restaurant sales were 19.1% in fiscal year 2023 compared to 19.3% in the prior fiscal year.
The increase was due to the securitized financing transaction completed on March 9, 2022, which increased our outstanding debt by $250 million, as well as an estimated $0.4 million related to the 53rd week. 37 Loss on debt extinguishment and financing transactions.
These decreases were partially 37 offset by an increase in interest expense related to the securitized financing transaction completed on March 9, 2022, which increased our outstanding debt by $250 million.
However, we believe the accounting policies described below are particularly important to the portrayal and understanding of our financial position and results of operations. Revenue Recognition Royalties, including franchisee contributions to the Ad Fund, are calculated as a percentage of franchise restaurant sales over the term of the franchise agreement.
However, we believe the accounting policies described below are particularly important to the portrayal and understanding of our financial position and results of operations. Revenue Recognition Revenues consist primarily of royalties, national advertising fund contributions, initial and renewal franchise fees, and upfront fees from development agreements and international territory agreements.
(c) Represents costs and expenses related to a consulting project to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
(b) Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete, project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
These increases were partially offset by a decrease of $5.4 million in stock-based compensation expense primarily related to stock awards forfeited in fiscal year 2022. Depreciation and amortization. Depreciation and amortization was $10.9 million in fiscal year 2022, an increase of $3.0 million, or 37.2%, compared to $7.9 million in the prior fiscal year.
Depreciation and amortization Depreciation and amortization was $13.2 million in fiscal year 2023, an increase of $2.3 million, or 21.5%, compared to $10.9 million in the prior fiscal year.
The remainder was generated by franchised restaurants, as reported by our franchisees. (2) For fiscal 2022, same store sales percentages were calculated excluding the 53rd week. (3) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).
(3) EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). EBITDA and Adjusted EBITDA should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP.
We define Adjusted earnings per diluted share as Adjusted net income divided by weighted average diluted share count. For a reconciliation of net income to Adjusted net income and for further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize them, see footnote 3 below.
We define Adjusted earnings per diluted share as Adjusted net income divided by weighted average diluted share count.
(c) Represents costs and expenses related to consulting projects to support the Company's strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income. (d) Includes non-cash, stock-based compensation, net of forfeitures.
(b) Represents non-recurring consulting fees that are not part of our ongoing operations and are incurred to execute discrete, project-based strategic initiatives, which are included in Selling, general and administrative on the Consolidated Statements of Comprehensive Income.
Royalty revenue, franchise fees and other increased $27.9 million, of which $8.2 million was due to 221 net franchise restaurant openings since December 25, 2021, $12.3 million was due to domestic same store sales growth of 3.4%, and approximately $3.0 million was due to additional royalties from the 53rd week.
Royalty revenue, franchise fees and other increased $48.5 million, of which $25.6 million was due to domestic same store sales growth of 18.3%, and $16.5 million was due to net new franchise development since December 31, 2022. Other revenue increased by $4.2 million primarily due to an increase in vendor rebates.
Additionally, during the prior year fiscal period, a $6.9 million non-recurring rebate of advertising surplus was returned to franchisees, reducing the revenue recognized. Company-owned restaurant sales increased $9.6 million, primarily due to an increase of $7.7 million related to the increase in the number of company-owned restaurants compared to the prior year comparable period.
Company-owned restaurant sales increased $15.9 million primarily due to an increase of $10.3 million related to the increase in the number of company-owned restaurants as compared to the prior fiscal year, as well as an increase of $7.1 million related to company-owned same store sales growth of 8.2%, which was driven by an increase in transactions.
The increase in SG&A was primarily due to an increase of $4.0 million in headcount-related expenses to support the growth in our business, an increase of $2.3 million in professional fees to support the Company’s strategic initiatives, an increase of $0.5 million in travel expenses, and approximately $1.0 million related to the 53rd week.
In fiscal year 2023, incentive compensation and performance-based stock compensation expense increased $9.3 million primarily related to the Company’s current fiscal year performance, professional and consulting fees increased $7.2 million associated with the Company’s strategic initiatives, and headcount related expenses increased $4.1 million to support the growth in our business.
The table below presents the major components of Cost of sales (in thousands, except for percentages): Year ended As a % of company-owned restaurant sales Year ended As a % of company-owned restaurant sales December 31, 2022 December 25, 2021 Cost of sales: Food, beverage and packaging costs $ 30,579 38.3 % $ 31,496 44.8 % Labor costs 19,234 24.1 % 16,022 22.8 % Other restaurant operating expenses 15,380 19.3 % 11,457 16.3 % Vendor rebates (1,798) (2.3) % (1,559) (2.2) % Total cost of sales 63,395 79.3 % 57,416 81.7 % Pre-opening expenses (1) 935 1.2 % 484 0.7 % Cost of sales (excluding pre-opening expenses) $ 62,460 78.2 % $ 56,932 81.0 % (1) Pre-opening expenses are incurred in conjunction with the opening of a new restaurant and are included within Other restaurant operating expenses in the table above.
These increases were partially offset by approximately $1.5 million in sales from the 53 rd week in the prior fiscal year. 36 Cost of sales Year ended As a % of company-owned restaurant sales Year ended As a % of company-owned restaurant sales December 30, 2023 December 31, 2022 Food, beverage and packaging costs $ 31,697 33.1 % $ 30,579 38.3 % Labor costs 22,963 24.0 % 19,234 24.1 % Other restaurant operating expenses 18,314 19.1 % 15,380 19.3 % Vendor rebates (2,328) (2.4) % (1,798) (2.3) % Total cost of sales $ 70,646 73.7 % $ 63,395 79.3 % Food, beverage and packaging costs as a percentage of company-owned restaurant sales were 33.1% in fiscal year 2023 compared to 38.3% in the prior fiscal year.
Removed
(b) Represents a loss (gain) resulting from the sale of assets to a franchisee. The loss (gain) is included in Loss (gain) on disposal of assets on the Consolidated Statements of Comprehensive Income.
Added
Change in Presentation Beginning in the first quarter of 2023, gains and losses on disposal of assets are no longer presented as an adjustment to EBITDA or Net income in our calculation of Adjusted EBITDA, Adjusted net income, and Adjusted earnings per diluted share.
Removed
(b) Represents a loss (gain) resulting from the sale of assets to a franchisee. This loss (gain) is included in Loss (gain) on disposal of assets in the Consolidated Statements of Comprehensive Income.
Added
EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted earnings per diluted share are non-GAAP measures and are defined below. Prior period gains and losses on disposal of assets have been excluded from these measures to conform to the current presentation. This reclassification had no impact on operating income, balance sheets or statements of cash flows.
Removed
Other revenue increased by $4.1 million primarily due to an increase in vendor rebates.
Added
(1) The fiscal year ended December 31, 2022 benefited from a 53 rd week as compared to fiscal 2023. 31 Key Performance Indicators Key measures that we use in evaluating our restaurants and assessing our business include the following: Number of restaurants.
Removed
Also contributing to the increase was company-owned same store sales growth of 1.0%, which was driven by an increase in average ticket, and approximately $1.5 million of additional sales from the 53rd week. 36 Cost of sales.
Added
The remainder was generated by franchised restaurants, as reported by our franchisees. (2) Fiscal 2022 included a 53 rd week; same store sales percentages were calculated excluding the 53 rd week.
Removed
During fiscal year 2022, cost of sales was $63.4 million, an increase of $6.0 million, or 10.4%, compared to $57.4 million in fiscal 2021. Cost of sales as a percentage of company-owned restaurant sales was 79.3% in the current year fiscal period, compared to 81.7% in the prior year fiscal period.
Added
Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations on a period-over-period basis and would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not part of normal day-to-day operations of our business.
Removed
Labor costs as a percentage of company-owned restaurant sales were 24.1% in fiscal year 2022 compared to 22.8% in the prior fiscal year.
Added
Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management measure our core operating performance over time by removing items that are not related to day-to-day operations.
Removed
The increase as a percentage of company-owned restaurant sales was primarily due to higher wage rates in the restaurants recently opened in New York City, as well as increases in company-owned restaurant wages, hiring and training costs as a result of the ongoing competitive labor market during the current year fiscal period.
Added
Fiscal year 2022 includes approximately $0.5 million of third-party consulting fees incurred relating to a strategic initiative to consider the development of a business plan and financial model for potential vertical integration of a poultry complex, which review was completed in fiscal year 2022.
Removed
The increase as a percentage of company-owned restaurant sales was primarily a result of higher rent and occupancy costs associated with the opening of company-owned restaurants in New York City during the current year fiscal period.
Added
Fiscal years 2023 and 2022 include approximately $5.2 million and $0.4 million, respectively, in consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, and which review was completed in fiscal year 2023.
Removed
Pre-opening expenses as a percentage of company-owned restaurant sales were 1.2% in fiscal year 2022 driven by our development of the New York City market. Advertising expenses. Advertising expenses were $123.1 million, an increase of $39.1 million, compared to $84.0 million in fiscal year 2021.
Added
Given the magnitude and scope of these two strategic review initiatives that are not expected to recur in the 34 foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiatives not reflective of the ongoing costs to operate its business. (c) Includes non-cash, stock-based compensation, net of forfeitures.
Removed
Financing activities . Our net cash provided by financing activities was $103.3 million in fiscal year 2022, a change of $126.6 million, from cash used in financing activities of $23.4 million in fiscal year 2021.
Added
Management believes adjusted net income and adjusted earnings per diluted share supplement GAAP measures and enable management to more effectively evaluate the Company’s performance period-over-period and relative to competitors.
Removed
The change was also driven by an increase in the regular quarterly dividend, which totaled $21.5 million in fiscal year 2022, compared to $18.5 million in fiscal year 2021. 38 Securitized financing facility .
Added
Fiscal year 2022 includes approximately $0.5 million of third-party consulting fees incurred relating to a strategic initiative to consider the development of a business plan and financial model for potential vertical integration of a poultry complex, which review was completed in fiscal year 2022.
Removed
The recognition of this revenue is dependent upon the franchise restaurant sales reported by the franchisee through the point of sale system and can require us to make estimates and assumptions. 39
Added
Fiscal years 2023 and 2022 include approximately $5.2 million and $0.4 million, respectively, in consulting fees relating to a comprehensive review of our long-term growth strategy for our domestic business to explore potential future initiatives, and which review was completed in fiscal year 2023.
Added
Given the magnitude and scope of these two strategic review initiatives that are not expected to recur in the foreseeable future, the Company considers the incremental consulting fees incurred with respect to the initiatives not reflective of the ongoing costs to operate its business.
Added
These increases were partially offset by approximately $3.0 million in royalties from the 53 rd week in the prior fiscal year.
Added
These increases were partially offset by approximately $2.7 million in advertising fees from the 53 rd week in the prior fiscal year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed3 unchanged
Biggest changeBone-in chicken wings accounted for approximately 23.1% and 34.5% of our company-owned restaurant costs of sales in fiscal years 2022 and 2021. A hypothetical 10.0% increase in the bone-in chicken wing costs in fiscal year 2022 would have increased costs of sales by approximately $1.5 million during the year.
Biggest changeBone-in chicken wings accounted for approximately 16.8% and 23.1% of our company-owned restaurant costs of sales in fiscal years 2023 and 2022. A hypothetical 10.0% increase in the bone-in chicken wing costs in fiscal year 2023 would have increased company-owned restaurant costs of sales by approximately $1.2 million during the year.
The Company is exposed to interest rate increases under the 2022 Variable Funding Notes; however, the Company had no outstanding borrowings under its 2022 Variable Funding Notes as of December 31, 2022.
The Company is exposed to interest rate increases under the 2022 Variable Funding Notes; however, the Company had no outstanding borrowings under its 2022 Variable Funding Notes as of December 30, 2023.
We do not engage in speculative financial transactions nor do we hold or issue financial instruments for trading purposes. Interest Rate Risk. Our long-term debt, including current portion, consisted entirely of the $724.6 million incurred under the 2022 Notes and 2020 Notes as of December 31, 2022 (excluding unamortized debt issuance costs).
We do not engage in speculative financial transactions nor do we hold or issue financial instruments for trading purposes. Interest Rate Risk. Our long-term debt, including current portion, consisted entirely of the $720.9 million incurred under the 2022 Notes and 2020 Notes as of December 30, 2023 (excluding unamortized debt issuance costs).

Other WING 10-K year-over-year comparisons