Can Pizza Hut’s WingStreet Take Down Buffalo Wild Wings? Here's Why It Matters.

For the longest time, Buffalo Wild Wings (BWLD) has stood at the top of the wing world without a true competitor in sight. This allowed the chain to expand rapidly as sales grew faster than the industry average.

Well now, Yum! Brands (YUM 0.40%) has rolled out its WingStreet concept to more than 5,000 Pizza Huts nationwide. This gives WingStreet a much bigger footprint than Buffalo Wild Wings, which has slightly more than 1,000 restaurants nationwide. Are we about to see a new king of wings?

It was only a matter of time
I'm surprised it's taken this long for Yum! Brands to challenge Buffalo Wild Wings. The growth of Buffalo Wild Wings has been outstanding. The company has grown from 553 locations to more than 1,000 restaurants today, for a 12% compounded annual growth rate in locations. Revenue has grown even faster, at a CAGR  of 25%. Buffalo Wild Wings' revenue has gone from $422 million in 2008 to approximately $1.3 billion last year. Net earnings during this time grew from $24.4 million to $71.5 million.

Buffalo Wild Wings continues to post strong numbers. In the fourth quarter, same-store sales rose 5.2% at company-owned restaurants and 3.1% at franchised locations. Total revenue increased 12.4% to $341.5 million. Earnings per share came in at $1.10, 23.6% higher than last year's fourth quarter.

For Pizza Hut, not so impressive
Same-store sales at Pizza Hut's U.S. operations were down 4% in the fourth quarter, and for the full year, results were down 2%. The one bright spot for Yum! Brands is that Pizza Hut is performing well outside the U.S. In China, Pizza Hut grew same-store sales 5% in the fourth quarter and 4% for the full year. Pizza Hut is growing rapidly in China, where it opened 247 new Pizza Hut Casual Dining locations and 49 new Pizza Hut Home Service units.

How do I get to WingStreet?
WingStreet was originally a separate concept for Yum! Brands, with WingStreet locations positioned next to Pizza Hut restaurants. Now WingStreet is a whole new chicken kitchen located within each Pizza Hut restaurant. In March, Yum! Brands rolled out WingStreet to more than 5,000 Pizza Hut locations nationwide.

The marriage of wings and pizza looks to be a smart move. After all, wings and pizza go together naturally, and pizza is something that Buffalo Wild Wings doesn't have on its menu. To boost this awareness, Pizza Hut will run a national advertising campaign promoting WingStreet. To make matters worse for Buffalo Wild Wings, WingStreet has won several awards, including taking second place at the New York National Buffalo Wing Festival for its Traditional BBQ Wing Sauce last year.

WingStreet wings are available in eight flavors. The sauce varieties are Buffalo Mild, Buffalo Medium, Buffalo Burnin' Hot, Spicy Asian, Spicy BBQ, Honey BBQ, Lemon Pepper, and Garlic Parmesan. The wing varieties include Traditional, Bone-Out, or Crispy Bone-In.

What's next for Buffalo Wild Wings?
Buffalo Wild Wings expects to add 700 locations over the next few years in the U.S. and Canada. The company also plans to expand internationally with several franchise agreements in Mexico, Saudi Arabia, the United Arab Emirates, and the Philippines. Besides its Buffalo Wild Wings restaurants, the company is also an investor and franchisee of PizzaRev. PizzaRev allows customers to craft their own pizzas and then watch the pizza get cooked in a Fire-Deck oven at 900 degrees Fahrenheit in less than three minutes.

Source: Yahoo! Finance

Foolish assessment
While WingStreet has much work to do to catch up to Buffalo Wild Wings, it's a step in the right direction for Pizza Hut and Yum! Brands. The marriage of wings and pizza is a good idea, and the delivery option will appeal to many customers who wish to dine at home. Where Buffalo Wild Wings has the big advantage over WingStreet is its sports bar atmosphere. That is something that will be hard for Pizza Hut to replicate. In the end, it will come down to taste and who makes the better wings. Right now, I give the edge to Buffalo Wild Wings, but WingStreet is looking to mount the first challenge Buffalo Wild Wings has seen.