Wingstop plans ghost kitchens in Manhattan as firm leans on digital

Wingstop has laid out plans to expand its presence in Manhattan with dozens of new locations set to open in the market, CEO Charlie Morrison told CNBC on Wednesday.

Many of those locations will come in the form of ghost kitchens where the company will lean on digital orders and delivery services in the highly dense market. Wingstop seeks to open 25 company-owned locations in the New York City borough.

“We believe our model being predominantly digital works great with ghost kitchens, which will be probably half the mix of those,” Morrison said in a one-on-one with Jim Cramer on “Mad Money.”

The ghost kitchens can go in places that are not consumer-facing, including on the second floor or in the basement of a building, helping the company to capitalize on its digital strategy, he said.

Digital is at the forefront of Wingstop’s strategy as the company hopes to “digitize every transaction,” Morrison said. The company reported that digital sales made up about 65% of business in the second quarter.

“The key is they are kitchens available to delivery drivers through DoorDash, Uber and others, that can come in, grab the food and take it to everybody,” he said. “Fits great in densely populated areas, cuts back the capital cost substantially.”

Ghost kitchens, or food establishments without dine-in service, have gained traction as the Covid pandemic hobbled the restaurant industry. The cooking facilities have allowed businesses to cut back on costs associated with managing larger properties, especially during lockdowns that fueled demand for deliveries.

Wingstop looks to take advantage of a business model that brands like The Halal Guys, Dog Haus and Wow Bao have found success with. Ghost kitchens could create a $1 trillion global market by 2030, according to Euromonitor.

The first location to open as part of the expansion plan will be on 38th Street in Midtown, according to the company’s website. Wingstop has two restaurants in operation in upper Manhattan, including in the Harlem neighborhood.

Wingstop shares slid more than 2% on Wednesday, though the company posted quarterly results before the bell that beat Wall Street estimates.

Revenue came in at $74 million, up nearly 12% year over year.

After closing at $166.11, Wingstop’s stock is up 25% on the year.