Wingstop to open 100 restaurants in the UK, its first entry into Europe

Key Points
  • Wingstop plans to open 100 restaurants in the U.K. over the next 12 years.
  • The chain operates more than 1,000 locations worldwide.
  • Wingstop says the U.K. is a high-chicken consumption market.
Source: Wingstop

A push into European markets is on the horizon for Wingstop.

The company announced Wednesday it will be opening 100 locations in the United Kingdom over the next 12 years.

"We've been very, very focused on about 20 to 25 markets around the globe that we feel are high-chicken consumption markets, have a good competitive set and where we could really differentiate," Larry Kruguer, president of international at Wingstop, told CNBC. "One of those markets just happened to be in Europe."

The chicken wing chain, which operates more than 1,000 restaurants worldwide, said it will open its first restaurant in the U.K. by the end of this year.

However, for restaurants international expansion can be a risky bet.

While Wingstop has expanded to countries like Mexico, Singapore, the Philippines, Indonesia and the United Arab Emirates, the European market is a little different.

Similar to the American restaurant industry, the U.K. is overly saturated and competitive. And its customers are among those who spend the lowest percent of their income on food, Aaron Allen, founder and CEO of global restaurant consulting firm Aaron Allen & Associates, told CNBC.

Because of this, expanding into Europe can be difficult for brands, especially compared with developing markets such as Turkey or China that have lower labor costs, lower building costs, faster growth in population and a higher percentage of people who eat food away from home.

"Western companies often go into Western countries because they understand them, not for the potential," Allen said.

Allen said that the majority of domestic companies that expand to Europe do so because of proximity and familiarity. However, he said that for some, the market is where the investors and franchisees are. Also, it can be a place where a company will receive a tax incentive.

Wingstop's Kruguer told CNBC the company understands that the U.K. is a more challenging environment, but he is optimistic that the chicken wing chain can succeed.

"We believe it's an open market," he said.

The U.K. was one of several markets that the company identified as a place of high-chicken consumption and that Wingstop's small footprint and labor force would be an advantage in the area, Kruguer said. European customers also are looking for alternatives to the traditional chicken menu items, so Wingstop's flavor-packed wings will fit the bill, he added.

Not to mention, Kruguer said that chicken wing prices will be lower in this region because there is less demand.

In the U.S., the rising cost of chicken wings has driven up menu prices and led average checks at wing chains to be 4 percent to 5 percent higher than a year ago, according to Bonnie Riggs, a NPD Group analyst.

Last year, the increase in average checks at restaurants overall was 2 percent, she said.

Wingstop's push into the U.K. comes at a time when the United States has become oversaturated with chicken-wing chains. Unit growth, or the number of new restaurants, among several chains that specialize in serving up wings has grown an average of 12 percent year over year, but traffic to these restaurants is only up an average of 6 percent, Riggs said.

Domestically, Wingstop has focused its effort on takeout and delivery, with limited indoor seating for patrons. Some 75 percent of the chain's business is takeout and 20 percent of all orders are made through digital channels.

However, Kruguer said customers in the European market tend to dine in, which will affect how the company designs its stores and could pose a hurdle for the chain.

"We are pretty cognizant of the realities," Kruguer said. "We're going [into Europe] in an intelligent manner."