Look out, Buffalo Wild Wings (NASDAQ:BWLD). Wingstop may be small and privately-held now but the chain is accumulating spicy wing fans faster than the time it takes to down a pint during the Super Bowl. I know what you're thinking; Wing Stop is a limited-service chain while Buffalo Wild Wings is a full-service sports bar. Guess what -- Wingstop is becoming that too.
I'm not just referring to the fact that many Wingstop locations do indeed serve draft beer and, of course, wings. That alone makes it a competitor to Buffalo Wild Wings for at least some customers, but Wingstop seems to be migrating toward a match-up in the sports arena with its larger competitor.
Back in 2011, Wingstop announced it was test marketing a new fast-casual concept called Wingstop Sports. The place has more room, more food items on the menu, more beer choices, and of course more giant TVs to turn the place into a sports bar.
Bill Knight, COO of Wingstop, stated at the time, "This isn't a bar; we're not trying to be a Buffalo Wild Wings, but we obviously don't want to compete with ourselves either."
Um, yeah. Wings, beer, and sports. Obviously Wingstop Sports directly competes with Buffalo Wild Wings. It's OK to admit it, Bill.
Sounds like the testing went well
Wingstop Sports locations seem to be slowly but surely popping up here and there. For example, one opened up in Las Vegas. Another did in Orange, California. At least two more have opened up in the same general area as the original test location in South Texas which included one in the town of Elsa just this past June 20.
The reviews on Yelp gave the Orange location 3.5 stars. There are also 10 Buffalo Wild Wings restaurants within the vicinity of that Wingstop Sports and all 10 of them got lower ratings from reviewers. If you check out the reviews of Wingstop Sports on other sites, you will notice a similar pattern of rave reviews.
Why Buffalo Wild Wings should worry
So far Wingstop only poses a very small threat to Buffalo Wild Wings and that comes from the chicken itself. However, given Wingstop's eye-popping success lately in terms of growth percentage, that chicken threat could become one from the sports bar and beer business as well if Wingstop starts rapidly rolling it out.
Meanwhile, Buffalo Wild Wings is no slouch on the growth scale. The chain snagged the No. 9 spot on the list of top growth restaurant chains last year according to a report by National Restaurant News. However, guess which one grabbed the No. 3 spot? Yup, it was Wingstop.
Wingstop grew systemwide sales by a staggering 19.8% last year alone. Sales per unit jumped 9.1% while its unit count leaped 10.5%. Buffalo Wild Wings had an almost identical unit growth rate, but sales per unit only tacked on 3%.
Meanwhile, Wingstop boasts that it has tacked on over 10 years of same-store sales growth and reported same-store sales growth of 9.6% in the first quarter of this year. That's faster than Buffalo Wild Wings at 6.6% for its company-owned spots during the same period.
Wingstop has grown to over 600 locations since its founding in 1995 while Buffalo Wild Wings has reached over 1,000 since its founding in 1982. If history is any guide, both are very capable of long-term rapid growth but Wingstop Sports could still potentially take a serious bite out of some of Buffalo Wild Wings' business.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and Yelp. The Motley Fool owns shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.