~~Trademarks~~

We own a number of trademarks and service marks registered with the U.S. Patent and Trademark Office and with foreign trademark authorities. We believe that our trademarks and other proprietary rights are important to our success and our competitive position, and, therefore, we devote resources to the protection of our trademarks and proprietary rights.

~~Seasonality~~

~~Our restaurants have not experienced significant revenue fluctuations that can be attributed to seasonal factors.~~

~~Employees~~Human Capital Resources

As of December ~~28, 2019,~~26, 2020, we employed ~~784~~819 employees, affectionately referred to as team members, of whom ~~209~~238 were full-time corporate-based and regional personnel. The remainder were part-time or restaurant-level ~~employees.~~team members. None of our ~~employees~~team members are represented by a labor union or covered by a collective bargaining agreement, and we believe that we have good relations with our ~~employees.~~team members. Our franchise owners are independent business owners, so they and their ~~employees~~team members are not included in our ~~employee~~team member count and are not our ~~employees.~~team members.

8Our human capital objectives include attracting, training, motivating, rewarding and retaining team members. 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.

We are committed to fostering an environment of diversity and inclusion, including among our board members, and having diverse representation across all levels of our workforce.Examples of some of our recent efforts and metrics include:

•we implemented unconscious bias training for all our corporate team members;

•currently 50% of our board of directors classify as diverse;

•we are a member of the Women’s Foodservice Forum; and

•our Chief Executive Officer joined the CEO Action for Diversity and Inclusion.

We are also committed to providing competitive pay to compensate and reward our team members. All corporate management and staff and restaurant management positions, including hourly assistant managers and shift leaders, are eligible for performance-based cash incentives. Our incentive plan reinforces and rewards individuals for achievement of specific company and/or restaurant business goals.

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. Since the onset of the COVID-19 pandemic, we have continued a strong focus on team member well-being, health and safety.

Another area of focus for us is investing in people and infrastructure to build the organization for the next level.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, resulting in a majority of current managers of company-owned restaurants being promoted from within.

COVID-19 Response

We took early action regarding team member well-being in response to the COVID-19 pandemic, implementing comprehensive protocols to protect the health and safety of our team members and guests. Remote work for corporate management and staff was adopted ahead of state and county requirements. We did not reduce scheduled hours for team members in our company-owned restaurants. For team members of our company-owned restaurants, we also enhanced our benefits programs to offer expanded supplemental paid sick leave ahead of state and county mandates and in counties where sick leave was not mandated, as well as distributed COVID-19 related incentive payments to our restaurant team members.

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. 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. A significant number of our and our franchisees’ food service personnel are paid at rates related to the applicable minimum wage, and past increases in the minimum wage have increased our and our franchisees’ labor costs, as would future increases. Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs for goods and services supplied to us and our franchisees.

We are subject to extensive and varied state and local government regulation affecting the operation of our business, as are our franchisees, including regulations relating to public and occupational health and safety, sanitation, fire prevention, and franchise operation. 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. Our and our franchisees’ licenses to sell alcoholic beverages must be renewed

annually and may be suspended or revoked at any time for cause, including violation by us or our employees, or our franchisees or their employees, of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum age of patrons or employees, advertising, wholesale purchasing, and inventory control.

In addition, we are subject to the rules and regulations of the Federal Trade Commission (the "FTC") and various state laws regulating the offer and sale of franchises. The FTC and various state franchise laws require that we furnish a franchise disclosure document containing certain information to prospective franchisees in advance of any franchise sale or the receipt of any consideration for the franchise, and a number of states require registration of the franchise disclosure document at least annually with state authorities. We are operating under exemptions from registration (though not disclosure) in several states based on our qualifications for exemption as set forth in each such state’s laws. Substantive state laws that regulate the franchisor-franchisee relationship, including in the areas of termination and non-renewal, presently exist in a substantial number of states. We believe that our franchise disclosure document and franchising procedures comply in all material respects with both the FTC guidelines and all applicable state laws regulating franchising in those states in which we have offered franchises.

Our international franchised restaurants are subject to national and local laws and regulations that are often similar to those affecting our U.S. ~~stores.~~restaurants. We believe that we have established procedures at our international franchised restaurants that provide reasonable assurance that our international franchised restaurants comply in all material respects with the laws of the applicable foreign jurisdiction.

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. During ~~2019,~~the 2020 fiscal year, there were ~~not~~no material environmental compliance-related capital ~~expenditures, and no such material expenditures are anticipated in 2019.~~expenditures.

Community Involvement

We are committed to strengthening the neighborhoods that we serve by being strong, active, corporate citizens and good neighbors. In fiscal year 2020, we donated $1 million to the National Restaurant Association Educational Foundation’s Restaurant Employee Relief Fund and, along with our franchisees, provided more than 1 million meals to frontline workers and COVID first responders. 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.~~youth, which has donated over $600,000 through local grants and team member assistance since its inception. You can find more about the involvement of Wingstop Charities in its local communities at www.wingstopcharities.org.

Additional Information about the Company

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. Materials filed with the SEC are also available at www.sec.gov.

References to our website addresses or the website addresses of third parties in this report do not constitute incorporation by reference of the information contained on such websites and should not be considered part of this report.

910


Item 1A.			Risk Factors

Risks Related to Our Business and Our Industry

If we fail to successfully implement our growth strategy, which includes opening new restaurants, our ability to increase our revenue and operating profits could be materially adversely affected.

Our growth strategy relies substantially upon new restaurant development by existing and new franchisees and we are continuously seeking to identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current restaurants, demographics, traffic patterns, and information gathered from local employees. While we believe there is opportunity for our brand to grow to up to approximately 6,000 restaurants worldwide over the long term, we do not currently target a specific number of annual new restaurant openings over a multi-year period.expand. 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;

•~~competition for restaurant sites;~~

•negotiation of acceptable lease and financing terms;

•securing required governmental permits and approvals, including zoning approvals;

•~~expansion into new markets, consumer tastes in new markets, and acceptance of our products;~~

•employment and training of and wage rates for qualified ~~personnel in local markets;~~

•~~impact of inclement weather, natural disasters, and other acts of nature;~~personnel;

•general economic and business conditions;

•unanticipated increases in construction and development costs; and

•the ~~general~~ legal and regulatory ~~landscape in which we and~~requirements applicable to our ~~restaurants operate.~~industry.

In particular, because ~~the majority~~substantially all of our new restaurant development is funded by franchisee investment, our growth strategy is dependent on our franchisees’ (or prospective franchisees’) ability to access funds to finance such development. We do not provide our franchisees with direct financing and therefore their ability to access borrowed funds generally depends on their independent relationships with various financial institutions. Some of our existing franchisees utilize loans guaranteed by the U.S. Small Business Administration (“SBA”), which guarantees loans made by financial institutions to small businesses in the United States, including franchisees. If SBA-guaranteed loans are no longer available to our franchisees (or potential franchisees), their ability to obtain the requisite financing at attractive rates, or at all, could be adversely affected. Moreover, if our franchisees (or prospective franchisees) are not able to obtain independent financing ~~from any source~~ at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the development of new restaurants, and our future growth could be adversely affected.

As a result of the foregoing, we cannot predict the time period over which we may achieve our anticipated level of domestic restaurant growth or whether we will achieve this level of growth at all. In addition, as we continue to grow our business, our rate of expansion relative to the size of our restaurant base will eventually decline.

To the extent our franchisees are unable to open new restaurants at the level that we anticipate, our revenue growth would come primarily from growth in same store sales. 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 ~~and~~ adversely ~~harm~~affect our ~~business and~~ operating results. As a result of the foregoing, we cannot predict whether our growth strategy will be successful.

Changes in food and supply costs could materially adversely affect our results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs. There are no established fixed price markets for bone-in chicken wings. As a result, we are subject to prevailing market conditions and remain susceptible to volatility in food costs. Any increase in the prices of the ingredients most critical to our menu, particularly chicken, could materially adversely affect our operating results. Bone-in chicken wing prices in our company-owned restaurants in 2019 averaged 18.1% higher than in 2018 and prices continue to stabilize and approximate 5-year averages. If there is a significant rise in the price or size of bone-in chicken wings, and we are unable to successfully adjust menu prices or otherwise make operational adjustments to account for the higher wing prices, our operating results could be adversely affected. For example, bone-in chicken wings accounted for approximately 28% and 25%

~~of our~~Food costs ~~of sales in fiscal 2019 and 2018, respectively. A hypothetical 10%~~may also increase ~~in the bone-in chicken wing costs for fiscal 2019 would have increased cost of sales by approximately $1.2 million for fiscal 2019.~~

Although we attempt to minimize the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients, there are no established fixed price markets for bone-in chicken wings so we are subject to prevailing market conditions. As a result, we remain susceptible to increases in food costs as a result of factors beyond our control, such as inflation, general economic conditions, seasonal fluctuations, weather conditions, demand, food safety concerns, product recalls and government regulations. ~~Inflation also increases the costs of our food.~~ Additionally, avian influenza, or similar poultry-related diseases, may negatively affect the supply chain by increasing costs and limiting availability of chicken. 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, orincreasing our menu prices ~~which could cause our operating results to deteriorate. In addition, because we provide moderately-priced food, we may choose not to, or be unable~~ to pass along commodity price increases to our ~~customers.~~customers or making other operational adjustments, which could materially adversely affect our operating results.

Our success depends in significant part on the future performance of existing and new franchise restaurants, and we are subject to a variety of additional risks associated with our franchisees.

A substantial portion of our revenue comes from royalties generated by our franchised restaurants. We anticipate that franchise royalties will continue to represent the substantial majority of our revenue in the future. As of December 28, 2019, we had 290 domestic franchisees operating 1,200 domestic restaurants and 9 international franchisees operating 154 international restaurants. Our largest franchisee operated 91 restaurants and our top 10 franchisees operated a total of 485 restaurants as of December 28, 2019. Accordingly, we are reliant on the performance of our franchisees in successfully operating their restaurants and paying royalties to us on a timely basis. 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. We may be unable to successfully implement our growth strategy without the participation of our franchisees and the adherence by our franchisees ofto our restaurant operation guidelines. 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. 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. Although we provide frequent training opportunities to our franchisees to ensure consistency among our operations, there may be differences in the quality of operations at our franchised restaurants that impact the profitability of those restaurants.

In addition, if our franchisees fail to renew their franchise agreements, our royalty revenue may decrease, which in turn could materially ~~and~~ adversely affect our business and operating results. ~~It also may be difficult for us to monitor our international franchisees’ implementation of our growth strategy due to our lack of personnel in the markets served by such franchisees.~~

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 ~~U.S.~~applicable bankruptcy code, in which case there would be no further royalty payments from such franchisee. The amount of the proceeds, if any, that may ultimately be recovered in a bankruptcy proceeding of such franchisee may not be sufficient to satisfy a damage claim resulting from such rejection.

If we fail to identify, recruit and contract with a sufficient number of qualified franchisees, our ability to open new franchised restaurants and increase our revenue could be materially adversely affected. ~~Additionally, our stated sales to investment ratio and target unlevered cash-on-cash return may not be indicative of future results of any new franchised restaurant.~~

The opening of additional franchised restaurants depends, in part, upon the availability of prospective franchisees who meet our criteria. We may not be able to identify, recruit or contract with suitable franchisees in our target markets on a timely basis or at all. 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. If ~~we are unable to recruit suitable franchisees or if franchisees are unable or unwilling to open new restaurants as planned,~~any of these situations occur, our growth may be slower than anticipated, which could materially adversely affect our ability to increase our revenue and materially adversely affect our business, financial condition and results of operations.

Also, the number of new franchised Wingstop restaurants that actually open in the future may differ materially from the number of signed commitments from potential existing and new franchisees. Historically, a portion of our signed commitments ~~sold~~ have not ultimately opened as new franchised Wingstop restaurants. On an annual basis for the past four years approximately 10% - 20% of the total domestic commitments sold have been terminated. Based on our limited history of international restaurant openings, we believe the termination rate of international commitments is likely to approximate the historic termination rate of domestic commitments. The historic conversion rate of signed commitments to new franchised Wingstop locations may not be indicative of the conversion rates we will experience in the future, and the total number of new franchised Wingstop restaurants actually opened in the future may differ materially from the number of signed commitments disclosed at any point in time.

~~Additionally, initial~~Our stated sales to investment ratio and target unlevered cash-on-cash return may not be indicative of future results of any new franchised restaurant.

Initial investment levels, AUV levels, restaurant-level operating costs and restaurant-level operating profit of any new restaurant may differ from average levels experienced by franchisees in prior periods due to a variety of factors, and these differences may be material. Accordingly, our stated sales to investment ratio and average unlevered cash-on-cash return may not be indicative of future results of any new franchised restaurant. In addition, estimated initial investment costs and restaurant-level operating costs are based on information self-reported by our franchisees and have not been verified by us. Furthermore, performance of new restaurants is impacted by a range of risks and uncertainties beyond our or our franchisees’ control, including those described by other risk factors described in this report.

Food safety and food-borne illness ~~and other health~~ concerns may have ana material adverse effect on our business.

Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe, quality food products. However, food-borne illnesses, such as salmonella, E. coli infection, or hepatitis A, and food safety issues, including food tampering or contamination, have occurred in the food industry in the past, and could occur in the future. Any report or publicity linking our restaurants to instances of food-borne illness or ~~other~~ food safety issues ~~including food tampering or contamination,~~ could materially adversely affect our brand and reputation as well as our revenue and profits. Even instances of food-borne illness ~~food tampering~~ or food ~~contamination~~safety issues occurring solely at ~~restaurants of~~ our ~~competitors~~competitors' restaurants could result in negative publicity about the food service industry or fast casual restaurants generally and adversely impact our restaurants.

In addition, our reliance on third-party food suppliers and distributors increases the risk that food-borne illness incidents could be caused by factors outside of our control and that multiple restaurants would be affected rather than a single restaurant. We cannot ensure that all food items are properly maintained during transport throughout the supply chain ~~and~~or that our employees and our franchisees and their employees will identify all products that may be spoiled and should not be ~~used in our restaurants. In addition, our~~used. Our industry has also long been subject to the threat of food tampering by suppliers, employees, and others such as the addition of foreign objects in the food that we sell. 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. If our customers become ill from food-borne illnesses or injured from food tampering, we could also be forced to

temporarily close some restaurants. Moreover, any instances of food contamination, whether or not at our restaurants, could subject our restaurants or our suppliers to a food recall pursuant to the Food and Drug Administration Food Safety Modernization Act.

~~Furthermore,~~Public health epidemics or outbreaks, such as COVID-19, could materially adversely impact our business.

Federal, state and local government responses to a pandemic, such as COVID-19, and our Company’s response to the pandemic have in the past disrupted and in the future may disrupt our business. Because of COVID-19, in the United States and throughout much of the world, individuals are currently being encouraged to practice social distancing, restricted from gathering in groups and, in some areas, placed on complete restriction from non-essential movements outside of their homes. In response to the COVID-19 pandemic and these changing conditions, we closed the dining rooms in all of our domestic restaurants, which at the time represented approximately 20% of our domestic system sales, and also closed the dining rooms in some of our international restaurants. We also incurred additional operating expenses at our company-owned restaurants due to the payment of increased incentive compensation to our full-time team members and increased selling, general and administrative expense due to COVID-19-related support provided to international franchisees. The COVID-19 pandemic and these responses to date have adversely affected and will continue to adversely affect our international guest traffic and sales and operating costs for our company-owned restaurants, and we cannot predict how long the pandemic will last or what other ~~countries have~~government responses may occur.

Continuing disruptions in operations due to pandemics, such as COVID-19-related social distancing, or other movement restricting policies put in place, could impact our revenues or result in our providing payment relief or other forms of support to franchisees, and could materially adversely affect our business and results of operations. Restaurant operations could be further disrupted if any employees are diagnosed with a pandemic illness, such as COVID-19, since this could require some or all of a restaurant’s employees to be quarantined and restaurant facilities to be closed to disinfect. If a significant percentage of the workforce is unable to work, whether because of illness, quarantine, limitations on travel, or other government restrictions in connection with a pandemic, including COVID-19, operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations. In addition, any report or publicity linking our restaurants to instances of pandemic illness exposure could adversely impact our brand and reputation as well as our revenue and profits. Our suppliers could also ~~experienced,~~be adversely impacted by a pandemic, such as COVID-19. If our suppliers’ employees are unable to work or our suppliers' operations are disrupted, we and our franchisees could face shortages of food items or other supplies, and our and our franchisees' operations and sales could be materially adversely impacted by such supply interruptions.

If the business interruptions caused by a pandemic, including COVID-19, last longer than we expect, we or our franchisees may ~~experience~~need to seek additional sources of liquidity. There can be no guarantee that additional liquidity, whether through the credit markets or government programs, will be readily available or available on favorable terms to our franchisees or us. The ultimate impact of the COVID-19 pandemic, or pandemics in the future, ~~outbreaks~~on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of ~~viruses, such as coronovirus, H1N1, avian influenza, various~~the COVID-19 or other ~~forms~~pandemic, the rate at which vaccinations become available, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of ~~influenza, enterovirus, SARS,~~continued business disruption, reduced customer traffic, and Ebola. To the extent that a virus is transmitted by human-to-human contact, our employees or customers could become infected or could choose, or be advised, to avoid gathering in public places and avoid eating in restaurant establishments such as our restaurants, which could adversely affect our business.reduced operations.

Our expansion into new and existing markets may present increased risks.

Some of our new restaurants are ~~planned for~~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. As a result, those new restaurants may be less successful than restaurants in our existing markets.

We may need to build brand awareness in new markets through greater investments in advertising and promotional activity than we originally planned, which could negatively impact the profitability of our operations in such new markets. Our franchisees may find it more difficult in new markets to hire, motivate and keep qualified employees who can project our vision, passion and culture. In addition, we may have difficulty finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of ingredients meeting our quality standards. Restaurants opened in new markets may also have lower average restaurant sales than restaurants opened in existing ~~markets. Sales at restaurants opened in new~~ markets and may take longer to, or fail to, ramp up and reach expected sales and profit ~~levels, and may never do so, thereby affecting our~~

~~overall profitability.~~levels. Additionally, new markets may have higher rents and labor ~~rates as compared to existing markets that~~rates. These factors could negatively ~~affect~~impact our unit ~~economics.~~economics and overall profitability.

We also intend to continue opening new franchised restaurants in our existing markets as a core part of our growth strategy. As a result, the opening of a new restaurant in or near markets in which our restaurants already exist could adversely affect the sales of ~~these~~our existing restaurants.

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, and overall customer experience. Our competitors include individual restaurants and restaurant chains that range from independent local operators to well-capitalized national and regional restaurant companies, including restaurants offering chicken wing products, as well as dine-in, carry-out, and delivery services offering other types of food.

Some of our competitors have substantially greater financial and other resources than we do, which may allow them to react to changes in the restaurant industry better than we can. Other competitors are local restaurants that in some cases have a loyal guest base and strong brand recognition within a particular market. As our competitors expand their operations or as new competitors enter the industry, we expect competition 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. Also, if our advertising~~competitors and ~~promotions become less effective than those of our competitors, we could experience~~ a material adverse effect on our results of operations. We ~~and our franchisees also~~ compete with other restaurant chains and other retail businesses for quality site locations, management, hourly employees, and ~~hourly employees. Tightness in the labor market or union activity could~~qualified franchisees. We also ~~raise costs for our franchisees and us.~~

~~Additionally, we~~ face the risk that new or existing competitors will copy our business model, menu options, presentation, or ambiance, among other things. Consumer tastes, nutritional and dietary trends, traffic patterns, and the type, number, and location of competing restaurants often affect the restaurant business, and our competitors may react more efficiently and effectively to those conditions. In addition, many of our competitors offer lower-priced menu options or meal packages, or have loyalty programs. Several of our competitors compete by offering a broader range of menu items, including items that are specifically identified as low in carbohydrates or healthier, a strategy that we do not currently pursue. This competition in the variety of products offered and the price of products may adversely impact our sales.

Moreover, we may also compete with companies outside the fast casual, quick service, and casual dining segments of the restaurant ~~industry. For example, competitive pressures can come from~~industry, such as deli sections and in-store cafés of several major grocery store chains and from home delivery meal plan services, ~~including those targeted at customers who want healthier food,~~ as well as from convenience stores and other dining outlets. 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, loyal customer base and more convenient offerings than we have.

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.

In 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. In this regard, we and our franchisees depend on a group of suppliers for food ingredients, beverages, paper goods, and ~~distribution, including, but not limited to, four primary chicken suppliers, PFG for distribution, The Coca-Cola Company, and other suppliers. In 2019, we~~distribution. We and our franchisees purchased products from approximately 118 approved suppliers, with approximately 10 of such suppliers providing 78%, based on dollar volume, of all products purchased. We look to approve multiple suppliers for most products, and require any single sourced supplier, such as The Coca-Cola Company, to have contingency plans in place to ensure continuity of supply. In addition, we believe that, if necessary, we could obtain readily available alternative sources of supply for each product that we currently source through a single supplier. To facilitate the efficiency of our franchisees’ supply chain, we have historically entered into several preferred-supplier arrangements for particular food or beverage items. In addition, our restaurants bear risks associated with the timeliness, solvency, reputation, labor relations, freight costs, price of raw materials, and compliance with health and safety standards of each ~~supplier, including, but not limited to, risks associated with contamination to food and beverage products.~~supplier. We have little control over such suppliers. Disruptions in these relationships may reduce company-owned restaurant and franchisee sales and, in ~~turn,~~the case of reduced franchisee sales, our royalty income. 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, financial difficulties experienced by suppliers, or the deficiency, lack, or poor quality of alternative suppliers could adversely impact company-owned restaurant and franchisee sales, ~~and our company-owned restaurant sales,~~ which ~~in turn, would reduce our royalty income and revenue and~~ could materially ~~and~~ adversely affect our business and operating results and, in the case of reduced franchisee sales, would reduce our royalty income and revenue. In addition, our focus on a limited menu could make these consequences more severe.

Our operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to certain factors, some of which are beyond our control, resulting in a decline in our stock price.

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 ~~domestic~~ same store sales, including due to the timing and popularity of sporting and other events;

•macroeconomic conditions, ~~both~~globally, nationally and locally;

•changes in consumer preferences and competitive conditions;

•~~impairment of long-lived assets and any loss on restaurant closures;~~

•increases in infrastructure costs; and

•fluctuations in commodity prices.

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. In that event, the price of our common stock would likely decrease.

~~If we or our franchisees or licensees are unable to protect our customers’ credit card data and other personal information, cyber~~Cyber incidents or deficiencies in cybersecurity could ~~result and~~ 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.

~~Privacy protection is increasingly demanding, and as~~As our reliance on technology ~~increases,~~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. The use of electronic payment methods and the collection and storage of ~~other~~ personal information from individuals expose us and our franchisees to increased risk of cyber incidents, privacy and/or security breaches, and other risks. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information about customers, franchisees, vendors, and employees. The majority of our restaurant sales are by credit or debit cards. In connection with credit or debit card transactions in-restaurant, we and our franchisees collect and transmit confidential information to card processors. Additionally, we collect and store personal information from individuals, including our customers, franchisees, and employees. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting, and storing such information. The use of personally identifiable information by us is regulated by foreign, federal, and state laws, which continue to evolve, as well as by certain third-party agreements. As privacy and information security laws and regulations change, we may incur additional costs to ensure that ~~it remains~~we remain in compliance with those laws and regulations. See “Changing regulations relating to privacy, information security, and data protection could increase our costs, affect or limit how we collect and use personal information ~~and harm our brand~~” below for a further discussion on privacy, information security, and data protection regulations.

Our franchisees, contractors and third parties with whom we do business have experienced cyber incidents and security breaches in which ~~credit and debit card~~confidential or personal information could have been stolen and we, our franchisees, contractors and third parties with whom we do business may experience cyber incidents and security breaches in which ~~credit and debit card~~confidential or personal information is stolen in the future. A number of retailers and other companies have also recently experienced serious cyber incidents and breaches of their information technology systems. Although our business uses secure means to transmit confidential information, thirdThird parties may have the technology or know-how to breach the security of ~~the customer~~confidential or personal information collected, stored or transmitted ~~in connection with credit and debit card~~

~~sales,~~by us or our franchisees, and our and their security measures and those of third parties with whom we do business, including technology vendors, solution providers, software manufacturers and supply chain vendors, may not effectively prohibit others from obtaining improper access to this information. ~~The~~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.The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect for long periods of time, which may cause a breach to go undetected for an extensive period of time. Advances in computer and software capabilities, technology, new tools, and other developments may increase the risk of such a breach. ~~Further,~~If a person is able to circumvent the security measures of our business, our franchisees’ businesses or those of other third parties, he or she could destroy or steal valuable information or disrupt the operations of our business. In addition, our franchisees, contractors or third parties with whom we do business or to whom we outsource business operations may attempt to circumvent our security measures in order to misappropriate confidential information and may purposefully or inadvertently cause a breach involving such information. Furthermore, due to the COVID-19 pandemic, we have allowed our team members in our corporate headquarters to work from home. The significant increase in remote working, particularly for an extended period of time, could increase certain risks to our business, including an increased risk of cybersecurity events, vulnerability of our systems and improper dissemination of confidential or personal information, if our physical and cybersecurity measures or our corporate policies are not effective. 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.

If our employees, franchisees, or vendors fail to comply with applicable laws, regulations, or contract terms, and this information is obtained by unauthorized persons, used inappropriately, or destroyed, it could adversely affect our reputation, could disrupt our operations and result in costly litigation, judgments, or penalties resulting from violation of laws and payment card industry regulations. 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. 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. In addition, our cyber liability coverage may be inadequate or may not be available in the future on acceptable terms, or at all, and defending a suit, regardless of its merit, could be costly and divert management’s attention.

Our increasing reliance on debit or credit cards for payment increases the risk of regulatory compliance and security breaches, which could materially adversely impact our business or results of operations.

The majority of our restaurant sales are paid by credit or debit cards. In connection with credit or debit card transactions in-restaurant, we and our franchisees collect and transmit confidential information to card processors. 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 ~~("PCI~~(as modified from time to time, "PCI DSS"). We and our franchisees must abide by the PCI DSS ~~as modified from time to time,~~ 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. Furthermore, the payment card industry is requiring vendors to become compatible with smart chip technology for payment cards, or EMV-Compliant, or else bear full responsibility for certain fraud losses, referred to as the EMV Liability ~~Shift, which could adversely affect our business.~~Shift. To become EMV-Compliant, merchants ~~must~~often utilize EMV-Compliant payment card terminals at the POS and ~~must also~~ obtain a variety of certifications. At present, many of our company-owned and franchised restaurants ~~are~~have not ~~required to upgrade~~upgraded their POS systems to include such EMV-Compliant payment card terminals and as a result, may be at increased risk for breaches, which could materially adversely affect our business and operating results.

In addition, our franchisees, contractors, or third parties with whom we do business or to whom we outsource business operations may attempt to circumvent our security measures in order to misappropriate confidential information and may purposefully or inadvertently cause a breach involving such information. Third parties may have the technology or know-how to breach the security of the personal information collected, stored, or transmitted by us or our franchisees, and our or their respective security measures, as well as those of our and their technology vendors, may not effectively prohibit others from obtaining improper access to this information. Advances in computer and software capabilities and encryption technology, new tools, and other developments may increase the risk of such a breach. If a person is able to circumvent the security measures of our business or those of third parties, he or she could destroy or steal valuable information or disrupt the operations of our business. If our employees, franchisees, or vendors fail to comply with applicable laws, regulations, or contract terms, and this information is obtained by unauthorized persons, used inappropriately, or destroyed, it could adversely affect our reputation and could disrupt our operations and result in costly litigation, judgments, or penalties resulting from violation of federal and state laws and payment card industry regulations. 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. A cyber incident could also require us to notify customers, employees, or other groups, 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 adversely affect the operation of our business and results of operations. Any such claim or proceeding could cause us to incur significant unplanned expenses, which could have an adverse impact on our financial condition, results of operations and cash flows. Further, adverse publicity resulting from these allegations could significantly harm our reputation and may have a material adverse effect on us and our restaurants. While we currently maintain a cyber liability insurance policy, our cyber liability coverage may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our cyber liability insurance policy may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention.

Changing regulations relating to privacy, information security and data protection could increase our costs and affect or limit how we collect and use personal ~~information, and harm our brand.~~information.

The United States, the European Union, and other countries in which we operate are increasingly adopting or revising privacy, information security, and data protection laws and regulations that could have a significant impact on our current and planned privacy, data protection, and information security-related practices, our collection, use, sharing, retention, and safeguarding of consumer and/or employee information, and some of our current or planned business activities. 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. Many of these laws and regulations provide consumers and employees with a private right of action if a covered company suffers a data breach related to a failure to implement reasonable data security measures. In the European Union, this includes the General Data Protection ~~Regulation, which came into effect in May 2018.~~Regulation. The legal framework around privacy issues is rapidly evolving, as various federal and state government bodies are considering adopting new privacy laws and regulations. These laws and regulations ~~which~~ could result in significant limitations on or changes to the ways in which we can collect, use, host, store, or transmit ~~the~~ personal information and other ~~data of our customers or employees.~~data. Compliance with privacy, data protection, and information security laws ~~affecting customer or employee data~~ to which we are subject could result in additional costs, and our failure to comply with such laws could result in potentially significant regulatory investigations or government actions, penalties or remediation, and other costs, as well as adverse publicity, loss of sales and profits, and an increase in fees payable to third parties. ~~All~~Each of these implications could materially adversely affect our revenues, results of operations, business, and financial condition.

We and our franchisees rely on computer systems to process transactions and manage our business, and a disruption or a failure of such systems or technology could harm our ability to effectively manage our business.

Network and information technology systems are integral to our business. We utilize various computer systems, including our franchisee reporting system, by which our franchisees report their weekly sales and pay their corresponding royalty fees and required Ad Fund contributions. When sales are reported by a franchisee, a withdrawal for the authorized amount is initiated from the franchisee’s bank on a set date each week based on gross sales during the week ended the prior Saturday. This system is critical to our ability to accurately track sales and compute and receive royalties and Ad Fund contributions due from our franchisees. We also rely on computer systems and network infrastructure across other areas of our operations, including marketing programs, employee engagement, management of our supply chain and POS processing in our restaurants.

Our operations depend upon our ability to protect our computer equipment and systems against damage from physical theft, fire, power loss, computer, network and telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses and other disruptive software, worms, improper usage by employees and other disruptive problems. Any damage or failure of our computer systems or network infrastructure that causes an interruption in our operations could have a material adverse effect on our business and subject us to litigation or actions by regulatory authorities.

Despite the implementation of protective measures, our systems are subject to damage and/or interruption as a result of power outages, computer and network failures, computer viruses and other disruptive software, security breaches, catastrophic events, and improper usage by employees. Such In addition, such events could result in ~~a material disruption in operations,~~ a need for a costly repair, upgrade or replacement of systems, or a decrease in, or in the collection of, royalties and Ad Fund contributions paid to us by our franchisees. 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.

It is also critical that we

establish and maintain certain licensing and software agreements for the software we use in our day-to-day operations. A failure to procure or maintain these licenses could have a material adverse effect on our business operations.

There are risks associated with our increasing dependence on digital commerce platforms to maintain and grow sales, and ~~aspects~~limitations, disruptions or unavailability of our ~~information technology systems may experience disruptions, which~~digital commerce platforms, or our ability to distribute our apps, could harm our ability to compete and conduct our business.

Customers are increasingly using e-commerce websites and apps, both domestically and internationally, like wingstop.com and our mobile ordering application, to order and pay for our ~~products.~~products and select optional delivery and curbside services. As a result, we and our franchisees are increasingly reliant on digital ordering and payment ~~as a~~for such sales, ~~channel. These~~and portions of our digital commerce platforms depend on third party services, including cloud-based technologies and platforms. Our apps and other digital ordering and payment platforms could be damaged or interrupted by power loss, technological failures, ~~user errors,~~ cyber-attacks, other forms of sabotage or acts of God. In ~~particular,~~addition, the availability, distribution and functionality of our apps and updates to our apps are dependent on mobile app stores and their related policies, terms and conditions. Because we and our franchisees rely on digital orders for a significant portion of our sales, ~~and could experience~~any limitations in functionality, interruptions or unavailability of any of our digital ordering ~~platform, which~~or payment platforms could limit or delay customers’ ability to order through such platforms. ~~Any such limitation or delay could negatively impact our and our franchisees’ sales and customer experience and perception. In addition,~~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. Any such limitation, damage, interruption or unavailability of our digital ~~ordering~~commerce platforms ~~which~~or failure of those platforms to meet customers’ expectations could ~~negatively impact~~materially adversely affect our and our franchisees' sales and our results of operations and financial condition.

~~As we expand our third party delivery service to additional markets nationwide, any~~Any failure by us or our ~~third party~~third-party delivery ~~partners~~providers to provide timely and reliable delivery services may materially ~~and~~ adversely affect our business and reputation.

~~In 2017, we initiated a~~As of December 26, 2020, delivery ~~test in three markets, partnering with a third party delivery service provider. Late in 2018, we began a process of rolling out delivery nationwide, and by~~services were available at substantially all Wingstop restaurants throughout the ~~end of 2019, delivery was available to approximately 94% of our domestic system.~~

United States. Interruptions or failures in our delivery services could prevent the timely or successful delivery of our products. These interruptions may be due to unforeseen events that are beyond our control or the control of our delivery ~~partners,~~providers, such as inclement weather, natural disasters, transportation disruptions, sabotage by an outside party, civil protests or labor unrest. ~~The occurrence~~In addition, changes in business practices of ~~food safety or product quality issues may also result in interruptions or failures in~~ our delivery ~~service.~~ providers and governmental regulations could materially adversely impact delivery services and/or profitability.

If our products are not delivered on time and in safe and proper condition, customers may refuse to accept our products and have less confidence in our services, in which case our business and reputation may suffer.

If our ~~third party~~third-party delivery service ~~provider fails~~providers fail to follow the quality standards or other terms that they agreed to with us, it could result in harm to our business and reputation and could ~~also~~ force us to pursue arrangements with alternative delivery

service providers, which could result in an interruption to our delivery services. Delivery is a relatively new service for our business, and it is difficult for us to anticipate the level of sales that delivery may generate, operational challenges we may face or the experiences our guests will have with this offering. These factors may materially adversely impact our sales and our brand reputation. We also incur additional costs associated with delivery orders, and it is possible that these orders could cannibalize more profitable ~~in-restaurant visits~~carry-out or ~~carry out~~in-restaurant orders.

Uncertainty in the law with respect to the assignment of liabilities in the franchise business model could materially adversely impact our profitability.

One of the legal foundations fundamental to the franchise business model has been that, absent special circumstances, a franchisor is generally not responsible for the acts, omissions, or liabilities of its franchisees, whether with respect to the franchisees’ employees or otherwise. 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. A 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 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.

Our business activities subject us and our franchisees to litigation risk that could ~~affect us adversely by subjecting~~subject us to significant money damages and other remedies or by increasing our and our franchisees' litigation expense.

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 allegations of improper termination and 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 ~~intellectual property claims.~~state and local “dram shop” laws. Each of these claims may increase our and our franchisees’ costs, ~~and~~ limit the funds of our franchisees available to make royalty payments and reduce the execution of new franchise agreements. 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.

Regardless of whether any claim brought against us or a franchisee in the future is valid or whether we or they are liable, such a claim would be expensive to defend and may divert time, money and other valuable resources away from our or their operations and, thereby, hurt our business. In addition, ~~to decreasing~~ the ability of a defendant-franchisee to make royalty payments in the event of such claims may be decreased and ~~diverting our management and financial resources,~~ adverse publicity resulting from such allegations may materially ~~and~~ adversely affect us and our brand, regardless of whether these allegations are valid or whether we or they are liable. Our international ~~operations~~business may be subject to additional risks related to litigation, including difficulties in enforcement of contractual obligations governed by foreign law due to differing interpretations of rights and obligations, compliance with multiple and potentially conflicting laws, new and potentially untested laws and judicial systems, and reduced or diminished protection of intellectual property. A substantial judgment against us ~~or one of our subsidiaries~~ could materially ~~and~~ adversely affect our business and operating results.

We could also become subject to class action or other lawsuits related to the above-described or different matters in the future. Regardless, however, of whether any claim brought against us in the future is valid or whether we are liable, such a claim would be expensive to defend and may divert time, money and other valuable resources away from our operations and, thereby, hurt our business.

We and our franchisees are also subject to state and local “dram shop” statutes, which may subject us and our franchisees to uninsured liabilities. These statutes generally allow a person injured by an intoxicated person to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. Because a plaintiff may seek punitive damages, which may not be fully covered by insurance, this type of action could have an adverse impact on our financial condition and results of operations. A judgment in such an action significantly in excess of insurance coverage could adversely affect our financial condition, results of operations or cash flows. Further, adverse publicity resulting from any such allegations may adversely affect us and our restaurants taken as a whole.

~~Although we maintain what we believe to be adequate levels of insurance, insurance~~ 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, or judgment or other liability in excess of our or our franchisees’ insurance coverage, ~~for any claims or any adverse publicity~~ resulting from claims could materially adversely affect our business and results of operations.

We may engage in litigation with our franchisees.

Although we believe we generally enjoy a positive working relationship with the vast majority of our franchisees, the nature of the franchisor-franchisee relationship may give rise to litigation with our franchisees. In the ordinary course of business, we are the subject of complaints or litigation from franchisees, usually related to alleged breaches of contract or wrongful termination under the franchise arrangements. We may also engage in future litigation with franchisees to enforce the terms of our franchise agreements and compliance with our brand standards as determined necessary to protect our brand, the consistency of our products and the customer experience, or to enforce our contractual indemnification rights if we are brought into a matter involving a third party due to the franchisee’s alleged acts or omissions. 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 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. Any negative outcome of these or any other claims could materially adversely affect our results of operations as well as our ability to expand our franchise system and may damage our reputation and brand. Furthermore, existing and future franchise-related legislation could subject us to additional litigation risk in the event we terminate or fail to renew a franchise relationship.

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.

We believe the Wingstop brand is critical to our business and expend resources in our marketing efforts using a variety of ~~media.~~media outlets. We expect to continue to conduct brand awareness programs and customer initiatives to attract and retain customers. Should our advertising and promotions not be effective, our business, financial condition and results of operations could be materially adversely affected.

The support of our franchisees is critical for the success of the advertising and marketing campaigns we seek to undertake, and the successful execution of these campaigns will depend on our ability to maintain alignment with our franchisees. Our franchisees are currently required to contribute 4%specified percentages of their gross sales to ~~a common Ad Fund~~certain advertising funds and programs. There can be no assurances that these funds will be sufficient to ~~support the development of new products, brand development and national~~meet our marketing ~~programs. Our current form of franchise agreement also requires~~needs or that additional funds will be provided by our franchisees to spend at least 1% of gross sales directly on local advertising. Franchisees also may be required to contribute approximately 2% of gross sales to a cooperative advertising association when a franchisee and at least one other restaurant operator have opened restaurants in the ~~same DMA (the cooperative~~future. The lack of continued financial support for our advertising ~~contribution is credited toward the one percent minimum local advertising spend).~~activities could hinder our marketing efforts, which may adversely affect our business and operating results. While we maintain control over advertising and marketing materials and can mandate certain strategic initiatives pursuant to our franchise agreements, we need the active support of our franchisees if the implementation of these initiatives is to be successful. 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 ~~effected.~~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.

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 towards away-from-home and take-out dining or certain food products might shift as a result of, among other things, new information, attitudes regarding diet and health concerns or dietary trends related to cholesterol, carbohydrate, fat and salt content of certain food items, including chicken wings, in favor of foods that are perceived as ~~more healthy.~~healthier. Our menu is currently comprised primarily of chicken wings and fries, and a change in consumer preferences away from these offerings would have a material adverse effect on our business. Negative publicity over 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 ~~materially~~material adverse effect on traffic, sales and results of operations. ~~Our continued success will depend in part on our ability to anticipate, identify and respond to changing consumer preferences.~~

Regulations ~~and consumer eating habits~~ may also continue to change as a result of new information and attitudes regarding diet and health. These changes may include regulations that impact the ingredients and nutritional content of our menu items. The federal government and a number of states, counties and cities, have enacted ~~menu labeling~~ laws requiring multi-unit restaurant operators to make certain nutritional information available to customers and/or ~~have enacted~~ legislation prohibiting the sales of certain types of ingredients in restaurants. If our customers perceive our menu items to contain unhealthy caloric, sugar, sodium, or fat content, our results of operations could be adversely affected. The success of our restaurant operations depends, in part, upon our ability to effectively respond to changes in consumer preferences and eating habits, negative publicity and consumer health and disclosure regulations and to adapt our menu offerings to fit the dietary needs, preferences and eating habits of our customers without sacrificing flavor. To the extent we are unable to

respond with appropriate changes to our menu offerings, it could materially adversely affect customer traffic and our results of operations. Furthermore, aany change in our menu could result in a decrease in existing customer traffic.

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 ~~28, 2019, 57%~~26, 2020, 55% of our ~~1,231~~1,359 domestic restaurants were spread across Texas ~~(29%~~(28%), California ~~(22%~~(21%) and Illinois (6%). Given our geographic concentrations, economic conditions and other unforeseen events, including but not limited to negative publicity, ~~regarding any of our restaurants in these areas could have a material adverse effect on our business and operations, as could other regional occurrences such as~~ local strikes, terrorist attacks, increases in energy prices, or natural or man-made disasters, adverse weather conditions or the enactment of more stringent state and local laws and ~~regulations. In particular,~~regulations in these areas, could have a disproportionate adverse ~~weather conditions, such as regional winter storms, floods, severe thunderstorms, earthquakes, tornadoes,~~effect on our business and ~~hurricanes could negatively impact our~~ results of operations.

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.

We are subject to certain state franchise registration requirements, the rules and regulations of the FTC and various state laws regulating the offer and sale of franchises in the United States through the provision of franchise disclosure documents containing certain mandatory disclosures, various state laws regulating the franchise relationship, and certain rules and requirements regulating franchising arrangements in foreign countries. ~~Although we believe that our franchise disclosure documents, together~~Noncompliance with ~~any~~ applicable ~~state-specific versions or supplements,~~laws, regulatory requirements and ~~franchising procedures that we use comply in all material respects with both the FTC~~governmental guidelines ~~and all applicable state laws~~ regulating franchising ~~in those states in which we offer and grant new franchise arrangements, noncompliance~~ could reduce anticipated royalty income, which in turn could materially ~~and~~ adversely affect our business and operating results.

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. ~~Franchisees~~We and our franchisees may in the future become subject to regulation (or further regulation) seeking to tax or regulate high-fat foods, to limit the serving size of beverages containing sugar, to ban the use of certain packaging materials, or to require the display of detailed nutrition information. Each of these regulations would be costly to comply with and/or could result in reduced demand for our products. The failure of our restaurants to comply with applicable regulations and obtain and maintain required licenses, permits, and approvals (including those for the sale of alcoholic beverages) could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, which would materially adversely affect our results of operations.

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. ~~The federal minimum wage has been $7.25 per hour since July 24, 2009.~~ From time to time, various federal and state legislators have proposed or approved changes to the minimum wage requirements, especially for fast-food workers. Certain regions, such as Los Angeles, Seattle, San Francisco and New York, have approved phased-in increases that either have or eventually will increase the minimum wage in such regions to up to $15 an hour or higher. These and any future similar increases in other regions in ~~states 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. Also, reduced margins of franchisees could make it more difficult to sell franchises. If menu prices are increased by us and our franchisees to cover increased labor costs, the higher prices could adversely affect transactions which could lower sales and thereby reduce our margins and the royalties that we receive from franchisees.

Although we require all workers in our company-owned restaurants and in our corporate support office to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. We currently participate in the “E-Verify” program, an Internet-based, free program run by the U.S. government to verify employment eligibility, in all of our company-owned restaurants and in our corporate support office. However, use of the “E-Verify” program does not guarantee that we will successfully identify all applicants who are ineligible for employment. Unauthorized workers may subject us to fines or penalties, and if any of our workers are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and it may be more difficult to hire and keep qualified employees. ~~Failure by our franchisees to comply with immigration laws may also result in additional adverse publicity and reputational harm to our brand.~~ We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state employment eligibility or immigration compliance laws. 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 or results of operations.

The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and therefore have an adverse effect on our results of operations. Failure to comply with the laws and regulatory requirements of federal, state, local and foreign authorities could result in, among other things, revocation of required licenses, administrative

enforcement actions, fines and civil and criminal liability. In addition, certain laws, including the ADA, could require us or our franchisees to expend significant funds to make modifications to our restaurants if we ~~failed~~fail to comply with applicable standards. Compliance with all of these laws and regulations can be costly and can increase our exposure to litigation or governmental investigations or proceedings.

Failure to obtain and maintain required licenses and permits or to comply with alcoholic beverage or food control regulations could lead to the loss of liquor and food service licenses and, thereby, harm our business.

The restaurant industry is subject to various federal, state and local government regulations, including those relating to the sale of food and alcoholic beverages. Such regulations are subject to change from time to time. The failure of our restaurants to obtain and maintain these licenses, permits, and approvals could adversely affect our operating results. Typically, licenses must be renewed annually and may be revoked, suspended, or denied renewal for cause at any time if governmental authorities determine that a restaurant’s conduct violates applicable regulations. Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants, which would adversely affect our results of operations.

Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license or permit to sell alcoholic beverages on-premises and to provide service for extended hours and on Sundays. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, trade practices, wholesale purchasing, other relationships with alcohol manufacturers, wholesalers and distributors, inventory control and handling, and storage and dispensing of alcoholic beverages. Any future failure to comply with these regulations and obtain or retain liquor licenses could adversely affect our results of operations.

Our current insurance and the insurance of our franchisees may not provide adequate levels of coverage against claims.

We currently maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. 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. Moreover, any loss incurred could exceed policy limits and policy payments made to franchisees may not be made on a timely basis. Any such loss or delay in payment could have a material ~~and~~ adverse effect on a franchisee’s ability to satisfy obligations under the franchise agreement, including the ability to make royalty payments.

We also require franchisees to maintain general liability insurance coverage to protect against the risk of product liability and other risks and demand strict franchisee compliance with health and safety regulations. However, franchisees may receive or produce defective food or beverage products, which may materially adversely affect our brand’s goodwill and our business. Further, a franchisee’s failure to comply with health and safety regulations, including requirements relating to food quality or preparation, could subject them, and possibly us, to litigation. Any litigation, including the imposition of fines or damage awards, could exceed or be excluded from insurance coverage, and, as a result, adversely affect the ability of a franchisee to make royalty payments or could generate negative publicity or otherwise adversely affect us.

Damage to our reputation ~~or lack of acceptance of our brand in existing or new markets~~ could negatively impact our business, financial condition and results of operations.

We believe we have built our reputation on the high quality and bold, distinctive, and craveable flavors of our food, value, and service, and we must protect and grow the value of our brand to continue to be successful in the future. Any incident that erodes consumer affinity for our brand could significantly reduce its value and damage our business. For example, our brand value could suffer and our business could be adversely affected if customers perceive a reduction in the quality 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.

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 of 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. The risks associated with such negative publicity cannot be eliminated or completely mitigated and may materially affect our business.

Also, there has been a marked increase in the use of social media platforms and similar channels, including weblogs (blogs), websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. 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 opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning us may be posted on such platforms at any time. Information posted may be adverse to our interests and may be inaccurate, each of which may harm our performance, prospects, brand, or business. The harm may be immediate without affording us an opportunity for redress or correction.

~~Ultimately, the risks associated with any such negative~~ Negative publicity or incorrect information ~~cannot be eliminated or completely mitigated and~~ may materially adversely affect our reputation, business, financial condition and results of operations.

Our expansion into international markets exposes us to a number of risks that may differ in each country where we have franchise restaurants.

As of December ~~28, 2019,~~26, 2020, we have franchised restaurants in nine international countries and plan to continue to grow internationally. However, international operations are in early stages. Expansion in international markets may be affected by local economic, market and ~~market~~cultural conditions. 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 ~~and~~ adversely affected. Our 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. 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;

•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;

•the impact of the United Kingdom’s ~~pending~~ exit from the European Union;

•political and economic instability;

•the U.S. Foreign Corrupt Practices Act and other similar anti-bribery and anti-kickback laws; and

•other external factors.

Our international expansion efforts may require considerable management time as well as start-up expenses for market development before any significant revenues and earnings are generated. Operations in new foreign markets may achieve low margins or may be unprofitable, and expansion in existing markets may be affected by local economic and market conditions. Therefore, as we continue to expand internationally, we or our franchisees may not experience the operating margins we expect, our results of operations may be negatively impacted, and our common stock price may decline.

The terms of our securitized debt financing through certain of our wholly-owned subsidiaries include restrictive terms, and our failure to comply with any of these terms could result in a default, which would have an adverse effect on our business and prospects.

and guaranteed fixed rate notes and variable funding notes, contain a number of covenants, with the most significant financial covenant being a debt service coverage calculation. These covenants limit our ability and the ability of certain of our subsidiaries to, among other things:

•~~incur additional indebtedness;~~

•~~alter the business we conduct;~~

•~~make certain changes to the composition of our management team;~~

•~~pay dividends and make other restrictive payments beyond specified levels;~~

•~~create or permit liens;~~

•~~dispose of certain assets;~~

•~~make certain investments;~~

•~~engage in certain transactions with affiliates; and~~

•~~consolidate, merge or transfer all or substantially all of our assets.~~

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. There can be no assurance that market conditions will be favorable at the times that we require new or additional financing.

~~We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would adversely affect our financial condition and results of operations.~~

Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us under our variable funding notes in amounts sufficient to fund our other liquidity needs, our financial condition and results of operations may be adversely affected. 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. If we are unable to refinance any of our indebtedness on commercially reasonable terms or at all or to effect any other action relating to our indebtedness on satisfactory terms or at all, our business may be harmed.

The indenture governing the securitized debt restricts the cash flow from the entities subject to the securitization to any of our other entities and upon the occurrence of certain events, cash flow would be further restricted.

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.

We depend upon our executive officers and other key employees and may not be able to retain or replace these individuals or recruit additional personnel, which could harm our business.

We believe that we have already benefited and expect to benefit substantially in the future from the leadership and experience of our executive officers and management team. Additionally, our business strategy includes successfully attracting and retaining talented employees. The market for highly skilled employees and leaders in the restaurant industry is extremely competitive. 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. In addition, 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 ~~price~~ to decline. As our business expands, our future success will depend greatly on our continued ability to attract and retain highly-skilled and qualified executive-level personnel and other key employees. Our inability to attract and retain qualified executive officers and other key employees in the future could impair our growth and harm our business.

Our failure or inability to enforce our trademarks or other proprietary rights could adversely affect our competitive position or the value of our brand.

We believe that our trademarks and other proprietary rights are important to our success and our competitive position, and, therefore, we devote resources to the protection of our trademarks and proprietary rights. The protective actions that we take, however, may not be enough to prevent unauthorized use or imitation by others, which could harm our image, brand or competitive position. If we commence litigation to enforce our rights, we will incur significant legal fees.

We cannot assure you that third parties will not claim infringement by us of their proprietary rights in the future. Any such claim, whether or not it has merit, could be time-consuming and distracting for executive management, result in costly litigation, cause changes to existing menu items or delays in introducing new menu items, or require us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse effect on our business, results of operations, and financial condition.

~~An impairment in the carrying value~~Risks Related to our Indebtedness

The terms of our ~~goodwill or other intangible assets~~securitized debt financing through certain of our wholly-owned subsidiaries include restrictive terms, and our failure to comply with any of these terms could ~~adversely affect our financial condition and consolidated results of operations.~~

~~We review goodwill for impairment annually, or whenever circumstances change~~result in a ~~way~~default, which ~~could indicate that impairment may have occurred, and record an impairment loss whenever we determine impairment factors are present. Significant impairment charges could~~would have a material adverse effect on our business and prospects.

Unless and until we repay all outstanding borrowings under our securitized debt facility, we will remain subject to the restrictive terms of these borrowings. The securitized debt facility, under which certain of our wholly-owned subsidiaries issued and guaranteed fixed rate notes and variable funding notes, contain a number of covenants, with the most significant financial covenant being a debt service coverage calculation. These covenants limit our ability and the ability of certain of our subsidiaries to, among other things:

•incur additional indebtedness;

•alter the business we conduct;

•make certain changes to the composition of our management team;

•pay dividends and make other restrictive payments beyond specified levels;

•create or permit liens;

•dispose of certain assets;

•make certain investments;

•engage in certain transactions with affiliates; and

•consolidate, merge or transfer all or substantially all of our assets.

The securitized debt facility also requires us to maintain specified financial ratios. Our ability to meet these financial ratios can be affected by events beyond our control, and we may not satisfy such a test. A breach of these covenants could result in a rapid amortization event or default under the securitized debt facility. If amounts owed under the securitized debt facility are accelerated because of a default and we are unable to pay such amounts, the investors may have the right to assume control of substantially all of the securitized assets. 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 we are unable to refinance or repay amounts under the securitized debt facility prior to the expiration of the applicable term, our cash flow would be directed to the repayment of the securitized debt and, other than management fees sufficient to cover minimal selling, general and administrative expenses, would not be available for operating our business. 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. There can be no assurance that market conditions will be favorable at the times that we require new or additional financing.

We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would materially adversely affect our financial condition and results of operations.

Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts projected or at all, or if future borrowings are not available to us under our variable funding notes in amounts sufficient to fund our other liquidity needs, our financial condition and results of operations may be materially adversely affected. If we cannot generate sufficient cash flow from operations to make scheduled principal amortization and ~~financial condition.~~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.

Risks Related to Ownership of our Common Stock

Our stock price may be volatile or may decline regardless of our operating performance.

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.

In addition, the stock markets, and in particular Nasdaq, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many food service companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. 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.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management, and may discourage, delay or prevent a transaction involving a change of control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if stockholders view them as discouraging future takeover attempts. 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.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum, to the fullest extent permitted by law, for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers and employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such ~~claim, particularly if they do not reside in or near Delaware.~~claim. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

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. Specifically, the choice of forum provision requiring that the Court of Chancery in the State of Delaware be the exclusive forum for certain suits would (i) not be enforceable with respect to any suits brought to enforce any liability or duty created by the Exchange Act, and (ii) have uncertain enforceability with respect to claims under the Securities Act. The choice of forum provision in our amended and restated certificate of incorporation does not have the effect of causing our stockholders to have waived our obligation to comply with the federal securities laws and the rules and regulations thereunder.

We may not continue to declare cash dividends in the future.

In August 2017, we announced that our board of directors authorized a regular dividend program under which we have paid, and intend to ~~pay~~continue paying, quarterly dividends on our common stock, subject to quarterly declarations by our board of directors. In addition, we have paid special dividends in connection with refinancings of our ~~credit facilities.~~indebtedness. Any future declarations of dividends, as well as the amount and timing of such dividends, are 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 and are in compliance with all applicable laws and any agreements containing provisions that limit our ability to declare and pay cash dividends.

Our ability to pay dividends in the future will depend upon, among other factors, our cash balances and potential future capital requirements, debt service requirements, earnings, financial condition, the general economic and regulatory climate and other factors beyond our control that our board of directors may deem relevant. Our dividend payments may change from time to time, and we may not continue to declare dividends in the future. A reduction in or elimination of our dividend payments could have a negative effect on our stock price.


Item 1B.			Unresolved Staff Comments

None.


Item 2.			Properties

During fiscal year 2019, we purchased an office building in Addison, Texas, which contains approximately 78,000 square feet of office space. The building is currently undergoing renovation in order to prepare it for use as our corporate headquarters. We also lease approximately 43,000 square feet of office space located in Dallas, Texas under an operating lease with a third-party landlord.

All company-owned restaurants are leased by us, typically under five- to ten-year leases with one or two five-year renewal options, often contain rent escalation provisions, and generally require us to pay a proportionate share of real estate taxes, insurance and common area and other operating costs in addition to base or fixed rent. All 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. They tend to be located primarily in shopping centers, as in-line or end-cap locations. Our restaurants ~~tend to~~generally occupy ~~between 1,300 and 2,900 square feet (average~~approximately 1,700 square ~~feet)~~feet of leased retail space. As of December ~~28, 2019,~~26, 2020, we and our franchisees operated ~~1,385~~1,538 restaurants in 44 states and 10 countries.

~~The chart below shows the locations of our restaurants as of December 28, 2019:~~

State Franchise restaurants Company-owned restaurants Total restaurants
Alabama 6 — 6
Alaska 2 — 2
Arizona 35 — 35
Arkansas 10 — 10
California 273 — 273
Colorado 29 — 29
Connecticut 4 — 4
Delaware 2 — 2
Florida 69 — 69
Georgia 35 — 35
Hawaii 2 — 2
Idaho 3 — 3
Illinois 68 — 68
Indiana 14 — 14
Iowa 5 — 5
Kansas 2 3 5
Kentucky 6 — 6
Louisiana 22 — 22
Maryland 22 — 22
Massachusetts 6 — 6
Michigan 13 — 13
Minnesota 2 — 2
Mississippi 11 — 11
Missouri 15 1 16
Nebraska 3 — 3
Nevada 12 5 17
New Hampshire 2 — 2
New Jersey 14 — 14
New Mexico 10 — 10
New York 19 — 19
North Carolina 19 — 19
Ohio 26 — 26
Oklahoma 15 — 15
Oregon 5 — 5
Pennsylvania 10 — 10
South Carolina 10 — 10
South Dakota 1 — 1
Tennessee 17 — 17
Texas 330 22 352
Utah 5 — 5
Virginia 22 — 22
Washington 14 — 14
West Virginia 1 — 1
Wisconsin 9 — 9
Domestic Total 1,200 31 1,231

International
Colombia 4 — 4
France 1 — 1
Indonesia 33 — 33
Malaysia 4 — 4
Mexico 91 — 91
Panama 3 — 3
Singapore 7 — 7
United Arab Emirates 8 — 8
United Kingdom 3 — 3
International Total 154 — 154
Worldwide Total 1,354 31 1,385

We are obligated under non-cancelable leases for our company-owned restaurants and our current corporate office. Lease terms for company-owned restaurants are generally between five to ten years of original term with an additional five to ten years of tenant option period, often contain rent escalation provisions, and generally require us to pay a proportionate share of real estate taxes, insurance and common area and other operating costs in addition to base or fixed rent. On June 19, 2019, we entered into an agreement to purchase an office building in Addison, Texas for a purchase price of $18.3 million, which closed in the third quarter of 2019 and was funded with cash on hand. The building, which contains approximately 78,000 square feet of office space, will be used for our headquarters.


Item 3.			Legal Proceedings

From time to time we may be involved in claims and legal actions that arise in the ordinary course of business. To our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.


Item 4.			Mine Safety Disclosures

Not applicable.

PART II


Item 5.			Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock ~~has traded~~trades on the NASDAQ Global Select Market under the symbol “WING” ~~since June 12, 2015. Before then, there was no public market for our common stock.~~.

As of February ~~18, 2020,~~16, 2021, there were 5 ~~shareholders~~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 ~~28, 2019~~26, 2020 that were not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December ~~28, 2019.~~26, 2020.

Performance Graph

The following performance graph compares the dollar change in the cumulative ~~shareholder~~stockholder return on our common stock with the cumulative total returns of the NASDAQ Composite Index and the S&P 600 Restaurants Index. This graph assumes a $100 investment in our common stock ~~on June 12, 2015 (the date when our common stock first started trading)~~ and in each of the foregoing indices on ~~June 12,~~December 26, 2015, and assumes the reinvestment of dividends, if any. The indices are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of our common stock, and historical stock price performance should not be relied upon as an indication of future stock price performance. 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.

3027

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 26, 2020 and December 28, 2019.

On February 16, 2021, the Company’s board of directors declared a quarterly dividend of $0.14 per share of common stock, to be paid on March 26, 2021 to stockholders of record as of March 5, 2021, totaling approximately $4.2 million.

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 our current and forecast earnings, financial condition, cash requirements and other factors. There can be no assurance that we will continue to pay such dividends or the amount of such dividends.


Item 6.			Selected Financial Data

~~The selected financial data presented below, with~~

Pursuant to the ~~exception~~early adoption of our key performance indicators, including restaurant counts, same store sales, AUVs, system-wide sales and Adjusted EBITDA, has been derived from the audited consolidated financial statements of Wingstop.

Wingstop utilizes a 52- or 53-week fiscal year that ends on the last Saturday of the calendar year. The fiscal years ended December 28, 2019, December 29, 2018, December 30, 2017, and December 26, 2015 included 52 weeks, and the fiscal year ended on December 31, 2016 included 53 weeks. The first three quarters of our fiscal year consist of 13 weeks and our fourth quarter consists of 13 weeks for 52-week fiscal years and 14 weeks for 53-week fiscal years.

~~The selected financial data presented below should be read in conjunction with the section entitled “Management’s~~SEC Final Rule Release No. 33-10890, Management’s Discussion and Analysis, ofSelected Financial ~~Condition~~Data, and ~~Results of Operations,” and our audited consolidated financial statements and~~Supplementary Financial Information, the ~~related notes thereto included elsewhere in this report. Our selected financial data may not be indicative of our future performance.~~

Year ended
(in thousands) December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016 December 26, 2015*
Consolidated Statements of Income Data:
Revenue:
   Royalty revenue, franchise fees and other $ 88,291 $ 71,858 $ 66,076 $ 54,475 $ 46,688
Advertising fees and related income 55,932 34,484 30,174 14,561 —
   Company-owned restaurant sales 55,453 46,839 37,069 34,288 31,281
       Total revenue 199,676 153,181 133,319 103,324 77,969
Cost and expenses:
   Cost of sales
41,105 32,063 28,745 25,308 22,219
Advertising expenses 52,891 33,699 32,427 13,849 —
   Selling, general and administrative 57,295 44,579 34,898 34,552 33,350
   Depreciation and amortization 5,484 4,313 3,376 3,008 2,682
       Total costs and expenses 156,775 114,654 99,446 76,717 58,251
Operating income 42,901 38,527 33,873 26,607 19,718
Interest expense, net 17,136 10,123 5,131 4,396 3,477
Other expense, net — 1,477 — 254 396
Income before tax expense 25,765 26,927 28,742 21,957 15,845
Income tax expense 5,289 5,208 4,802 8,188 5,739
Net income $ 20,476 $ 21,719 $ 23,940 $ 13,769 $ 10,106
Consolidated Statement of Cash Flows Data:
Net cash provided by operating activities $ 38,583 $ 38,770 $ 27,435 $ 21,879 $ 13,860
Net cash used in investing activities (23,731) (10,498) (6,484) (2,056) (1,915)
Net cash used in financing activities (14,617) (13,724) (20,252) (28,213) (10,978)
Net increase (decrease) in cash and cash equivalents $ 235 $ 14,548 $ 699 $ (8,390) $ 967

* Fiscal year 2015Company has ~~not been adjusted~~elected to ~~reflect the adoption of the new accounting standards adopted in fiscal year 2018.~~omit Item 6. Selected Financial Data.

3129

Year ended
(in thousands, except per share data) December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016
December 26, 2015⁽¹⁾
Per Share data:
Earnings per share
Basic $ 0.70 $ 0.74 $ 0.82 $ 0.48 $ 0.37
Diluted $ 0.69 $ 0.73 $ 0.82 $ 0.47 $ 0.36
Weighted average shares outstanding
Basic 29,415 29,231 29,025 28,637 27,497
Diluted 29,670 29,587 29,424 28,983 27,816
Dividends per share $ 0.40 $ 6.54 $ 0.14 $ 2.90 $ 1.83
Selected Other Data⁽²⁾:
Number of system-wide restaurants open at end of period 1,385 1,252 1,133 998 845
Number of domestic company restaurants open at end of period 31 29 23 21 19
Number of domestic franchise restaurants open at end of period 1,200 1,095 1,004 901 767
Number of international franchise restaurants open at end of period 154 128 106 76 59
System-wide sales⁽³⁾
$ 1,514,590 $ 1,261,025 $ 1,087,434 $ 972,270 $ 821,248
Domestic restaurant AUV⁽⁴⁾
$ 1,246 $ 1,139 $ 1,100 $ 1,113 $ 1,126
Company-owned domestic AUV⁽⁴⁾
$ 1,874 $ 1,723 $ 1,712 $ 1,729 $ 1,646
Number of restaurants opened (during period) 146 139 147 159 142
Number of restaurants closed (during period) 13 20 12 6 9
Company-owned restaurants (acquired) refranchised (during period) (1) (6) (2) — —
EBITDA ⁽⁵⁾
$ 48,385 $ 41,363 $ 37,249 $ 29,361 $ 22,004
Adjusted EBITDA ⁽⁵⁾
$ 56,989 $ 48,986 $ 39,100 $ 32,980 $ 28,879
Same Store Sales Data⁽⁶⁾:
System-wide domestic same store sales base (end of period) 1,109 1,018 904 779 667
System-wide domestic same store sales growth 11.1 % 6.5 % 2.6 % 3.2 % 7.9 %

As of
(in thousands) December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016
December 26, 2015⁽¹⁾
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 12,849 $ 12,493 $ 4,063 $ 3,750 $ 10,690
Working capital (2,739) 3,424 (3,217) (5,863) 7,050
Total assets 166,113 139,749 119,836 111,800 120,650
Total debt 317,600 320,000 133,750 151,250 95,500
Total shareholders’ deficit (209,428) (224,830) (58,418) (81,431) (9,673)

~~(1)Fiscal year 2015 has not been adjusted to reflect the adoption of the new accounting standards in adopted in fiscal year 2018.~~

~~(2)See the definitions of key performance indicators under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators.”~~

~~(3)~~The percentage of system-wide sales attributable to company-owned restaurants was 3.7%, 3.7%, 3.4%, 3.5%, and 3.8% for the fiscal years ended December 28, 2019, December 29, 2018, December 30, 2017, December 31, 2016, and December 26, 2015, respectively. The remainder was generated by franchised restaurants, as reported by our franchisees.

~~(4)Domestic AUV and company-owned domestic AUV are calculated using the 52-week trailing period.~~

~~(5)~~EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.

We define “EBITDA” as net income before interest expense, net, income tax expense, and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for management fees and expense reimbursement, a management agreement termination fee, transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation expense. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations period over period 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.

~~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 shares.~~

By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Items excluded from these non-GAAP measures are significant components in understanding and assessing financial performance. In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with certain financial covenants. EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation, or as an alternative to or a substitute for, net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance. 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.~~

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments for transaction costs, costs and fees associated with investments in our strategic initiatives, and stock-based compensation, among other items. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants and complicate

comparisons of our internal operating results and operating results of other restaurant companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record, such as transaction costs, management fees and expense reimbursement. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

~~The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable U.S. GAAP financial performance measure, which is net income:~~

Year ended
(in thousands) December 28, 2019 December 29, 2018 December 30, 2017 December 31, 2016
December 26, 2015^(a)
Net income $ 20,476 $ 21,719 $ 23,940 $ 13,769 $ 10,106
Interest expense, net 17,136 10,123 5,131 4,396 3,477
Income tax expense 5,289 5,208 4,802 8,188 5,739
Depreciation and amortization 5,484 4,313 3,376 3,008 2,682
EBITDA $ 48,385 $ 41,363 $ 37,249 $ 29,361 $ 22,004
Adjustments:
Management fees^(b)
— — — — 237
Management agreement termination fee^(c)
— — — — 3,297
Transaction costs^(d)
— 3,898 — 2,388 2,186
Consulting fees^(e)
1,630 — — — —
Stock-based compensation expense^(f)
6,974 3,725 1,851 1,231 1,155
Adjusted EBITDA $ 56,989 $ 48,986 $ 39,100 $ 32,980 $ 28,879

^(a)~~Fiscal year 2015 has not been adjusted to reflect the adoption of the new accounting standards adopted in fiscal year 2018.~~

^(b)~~Includes management fees and other out-of-pocket expenses paid to Roark Capital Management, LLC ("Roark Capital Management").~~

^(c)Represents a one-time fee of $3.3 million that was paid in consideration for the termination of our management agreement with Roark Capital Management during the second quarter of 2015 in connection with our initial public offering. There are no further obligations related to management fees paid to Roark Capital Management.

^(d)Represents costs and expenses related to the refinancings of our credit agreement and our public offerings; all transaction costs are included in SG&A with the exception of $1.5 million during the year ended December 29, 2018, $215,000 during the year ended December 31, 2016, and $172,000 during the year ended December 26, 2015 that is included in Other expense, net.

^(e)~~Represents costs and expenses related to a consulting project to support the Company's strategic initiatives, which are included in SG&A.~~

^(f)~~Includes non-cash, stock-based compensation.~~

~~(6)~~We define the domestic same store base to include those domestic restaurants open for at least 52 full weeks. Change in domestic same store sales reflects the change in year-over-year sales for the domestic same store base.


Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations ~~(MD&A)~~(“MD&A”) should be read in conjunction with the accompanying audited consolidated financial statements and notes. 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 ~~the "Forward-Looking~~"Cautionary Note Regarding Forward-Looking Statements" ~~section of~~elsewhere in this ~~MD&A~~report and Item 1A. Risk Factors for a discussion of these risks and uncertainties.

A comparison of our results of operations and cash flows for fiscal year ~~2018~~2019 compared to fiscal year ~~2017~~2018 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 ~~29, 2018,~~28, 2019, filed with the SEC on February ~~27, 2019.~~19, 2020.

Overview

Wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong, consistent growth. As of December ~~28, 2019,~~26, 2020, we had a total ~~1,385~~1,538 restaurants in our system. Our restaurant base is 98% franchised, with ~~1,354~~1,506 franchised locations (including ~~154~~179 international locations) and 3132 company-owned restaurants as of December ~~28, 2019.~~

~~Wingstop generates~~26, 2020. We generate revenues by charging royalties, advertising fees and franchise fees to our franchisees and by operating a number of our own restaurants. ~~We report our business in~~

Historically, the Company had two reporting segments: franchise operations and company restaurant operations. In accordance with Accounting Standards Codification 280 “Segment Reporting”, the Company uses the management approach for determining its reportable segments. The management approach is based upon the way management reviews performance and allocates resources. During ~~2019, our franchise~~the second fiscal quarter of 2020, the Company reevaluated its operating segments and ~~company restaurant segments accounted for approximately 72%~~determined it has one operating segment and ~~28% of our consolidated revenues, respectively. Financial data for our~~one reporting ~~segments is included~~segment due to changes in how the ~~audited consolidated financial statements~~Company’s chief operating decision maker assesses the Company’s performance and ~~the related notes thereto included elsewhere in this report.~~allocates resources.

We plan to grow our business by opening new franchised restaurants and increasing our same store sales, while leveraging our franchise model to create shareholder value. Domestic same store sales have increased for 1617 consecutive years beginning in 2004, which includes 5-year cumulative domestic same stores sales growth of ~~31.3%~~44.8% since the beginning of fiscal year ~~2015.~~2016. 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 free cash flow and capital-efficient growth.

Impact of COVID-19

In March 2020, the novel coronavirus ("COVID-19") outbreak was declared a pandemic by the World Health Organization, significantly changing consumer behaviors as individuals are being encouraged to practice social distancing. This pandemic led to restaurants reducing restaurant seating capacity, and in some cases restaurant closures, due to various restrictions mandated by governments around the world. As of March 16, 2020, we made the decision to close our domestic dining rooms and limit our service to carryout and delivery only. Several of our international franchisees also closed their dining rooms as a result of the outbreak. Our domestic business was well-positioned for the transition to largely off-premise dining that has resulted from the outbreak. As a result of the required changes to consumer behavior to largely off-premise dining, as well as promotional activities associated with delivery, we experienced an increase in domestic same store sales growth through the end of the fourth quarter of 2020. Our international markets, which have historically had a higher mix of dine-in sales, have seen an overall decline in same store sales growth due to the required closure of dining rooms and, in some cases, temporary restaurant closures.

Highlights for Fiscal Year ~~2019:~~2020:

•System-wide restaurant count increased ~~10.6%~~11.0% over the prior fiscal year to a total of ~~1,385~~1,538 worldwide locations, driven by ~~133~~153 net unit openings;

•Domestic same store sales increased ~~11.1%~~21.4% over the prior fiscal year;

•Company-owned restaurant same store sales increased ~~9.8%~~14.2% over the prior fiscal year;

•Digital sales increased to 62.5% over the prior fiscal year;

•Domestic restaurant AUV increased to approximately $1.5 million;

•System-wide sales increased ~~20.1%~~28.8% over the prior fiscal year to ~~$1.5~~approximately $2.0 billion;

•Total revenue increased ~~30.4%~~24.6% over the prior fiscal year to ~~$199.7~~$248.8 million; and

•Net income ~~decreased 5.7%~~increased 13.8% over the prior fiscal year to $23.3 million, or $0.78 per diluted share, compared to $20.5 million, ~~while Adjusted EBITDA increased 16.3% over~~or $0.69 per diluted share in the prior ~~year to $57.0 million.~~fiscal year. Adjusted net income and adjusted earnings per diluted share

3530

increased 49.7% over the prior fiscal year to $32.5 million, or $1.09 per diluted share, compared to $21.7 million and $0.73 per diluted share in the prior fiscal year.

•Adjusted EBITDA increased 26.1% over the prior fiscal year to $71.9 million.

Key Performance Indicators

Key measures that we use in evaluating our restaurants and assessing our business include the following:

Number of restaurants. Management reviews the number of new restaurants, the number of closed restaurants, and the number of acquisitions and divestitures of restaurants to assess net new restaurant growth, system-wide sales, royalty and franchise fee revenue and company-owned restaurant sales.


		Year Ended				Year Ended
		December 28, 2019	December 29, 2018		December 26, 2020	December 28, 2019
Domestic Franchised Activity:	Domestic Franchised Activity:			Domestic Franchised Activity:
Beginning of period	Beginning of period	1,095	1,004	Beginning of period	1,200	1,095
Openings	Openings	114	105	Openings	131	114
Closures	Closures	(8)	(8)	Closures	(5)	(8)
Acquired by Company	Acquired by Company	(1)	(6)	Acquired by Company	(6)	(1)
Re-franchised by Company				Re-franchised by Company	7	—
Restaurants end of period	Restaurants end of period	1,200	1,095	Restaurants end of period	1,327	1,200

Domestic Company-Owned Activity:	Domestic Company-Owned Activity:			Domestic Company-Owned Activity:
Beginning of period	Beginning of period	29	23	Beginning of period	31	29
Openings	Openings	1	—	Openings	2	1
Closures	Closures	—	—	Closures	—	—
Acquired from franchisees	Acquired from franchisees	1	6	Acquired from franchisees	6	1
Re-franchised to franchisees				Re-franchised to franchisees	(7)	—
Restaurants end of period	Restaurants end of period	31	29	Restaurants end of period	32	31

Total Domestic Restaurants	Total Domestic Restaurants	1,231	1,124	Total Domestic Restaurants	1,359	1,231

International Franchised Activity:	International Franchised Activity:			International Franchised Activity:
Beginning of period	Beginning of period	128	106	Beginning of period	154	128
Openings	Openings	31	34	Openings	26	31
Closures	Closures	(5)	(12)	Closures	(1)	(5)
Restaurants end of period	Restaurants end of period	154	128	Restaurants end of period	179	154

Total System-wide Restaurants	Total System-wide Restaurants	1,385	1,252	Total System-wide Restaurants	1,538	1,385

System-wide sales. System-wide sales represents net sales for all of our company-owned and franchised restaurants. 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. Our system-wide sales growth is driven by new restaurant openings as well as increases in same store sales.

~~Average~~Domestic average unit volume ~~(AUV)~~(“AUV”). Domestic AUV consists of the average annual sales of all restaurants that have been open for a trailing 52-week period or longer. This measure is calculated by dividing sales during the applicable period for all restaurants being measured by the number of restaurants being measured. Domestic AUV includes revenue from both company-owned and franchised restaurants. Domestic AUV allows management to assess our domestic company-owned and franchised restaurant economics. Our domestic AUV growth is primarily driven by increases in same store sales and is also influenced by opening new restaurants.

~~Same~~Domestic same store sales. ~~Same~~Domestic same store sales reflects the change in year-over-year sales for the same store base. We define the same store base to include those restaurants open for at least 52 full weeks. This measure highlights the performance of existing restaurants, while excluding the impact of new restaurant openings and closures. We review same store sales for

domestic company-owned restaurants as well as system-wide domestic restaurants. ~~Same~~Domestic same store sales growth is driven by increases in transactions and average transaction size. 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, and depreciation and amortization. We define Adjusted EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for ~~management fees~~losses on debt extinguishment and ~~expense reimbursement, a management agreement termination fee,~~refinancing 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. Adjusted EBITDA may not be comparable to other similarly titled captions of other companies

due to differences in methods of calculation. For a reconciliation of net income to EBITDA and Adjusted EBITDA and for further discussion of EBITDA and Adjusted EBITDA as non-GAAP measures and how we utilize them, see footnote 2 below.

Adjusted Net Income and Adjusted Earnings Per Diluted Share. We define Adjusted net income as net income adjusted for losses on debt extinguishment and refinancing 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. 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 afor further discussion of Adjusted net income and Adjusted earnings per diluted share as non-GAAP measures and how we utilize ~~this non-GAAP financial measure,~~them, see ~~“Selected Historical Consolidated Financial and Other Data.”~~footnote 3 below.

The following table sets forth our key performance indicators for the fiscal years ended December ~~28, 2019~~26, 2020 and December ~~29, 2018~~28, 2019 (in thousands, except unit data):

Year ended
December 28, 2019 December 29, 2018
Number of system-wide restaurants at period end 1,385 1,252
System-wide sales $ 1,514,590 $ 1,261,025
Domestic restaurant AUV $ 1,246 $ 1,139
Domestic same store sales growth 11.1 % 6.5 %
Company-owned domestic same store sales growth 9.8 % 6.2 %
Total revenue $ 199,676 $ 153,181
Net income $ 20,476 $ 21,719
Adjusted EBITDA $ 56,989 $ 48,986

~~Key Financial Definitions~~


	Year ended
	December 26, 2020			December 28, 2019
Number of system-wide restaurants at period end	1,538			1,385
System-wide sales(1)	$	1,950,570		$	1,514,590
Domestic restaurant AUV	$	1,489		$	1,246
Domestic same store sales growth	21.4		%	11.1		%
Company-owned domestic same store sales growth	14.2		%	9.8		%
Total revenue	$	248,811		$	199,676
Net income	$	23,306		$	20,476
Adjusted EBITDA(2)	$	71,882		$	56,989
Adjusted net income (3)	$	32,500		$	21,716

~~Revenue.~~
~~Our revenue is comprised~~

(1) The percentage of system-wide sales attributable to company-owned restaurants was 3.2% and 3.7% for the ~~collection~~fiscal years ended December 26, 2020 and December 28, 2019, respectively. The remainder was generated by franchised restaurants, as reported by our franchisees.

(2) EBITDA and Adjusted EBITDA are supplemental measures of ~~development fees, franchise fees, royalties,~~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 ~~fees associated~~performance measure derived in accordance with ~~franchise~~GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity.

We caution investors that amounts presented in accordance with our definitions of EBITDA and ~~development rights, contributions~~Adjusted EBITDA may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA and Adjusted EBITDA in the ~~Wingstop Restaurants Advertising Fund (the "Ad Fund")~~same manner. We present EBITDA and ~~sales~~Adjusted EBITDA because we consider them to be important supplemental measures of ~~wings~~our performance and believe they are frequently used by securities analysts, investors, and other ~~food and beverage products by~~interested parties in the evaluation of companies in our ~~company-owned restaurants. The following is a brief description~~industry. Management believes that investors’ understanding of our ~~components~~performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of ~~revenue:~~

~~Royalty revenue and franchise fees includes revenue we earn from our franchise business segment~~operations. Many investors are interested in understanding the form of royalties, fees, and vendor contributions and rebates. Royalties consist primarily of fees earned from franchisees equal to a percentage of gross franchise restaurant sales of all restaurants developed under the applicable franchise agreement. The majorityperformance of our ~~franchise agreements require~~business by comparing our franchise owners to pay us a royalty of 5.0% of their gross sales net of discounts. Franchise agreements entered into on or after July 1, 2014 require our franchisees to pay us a royalty of 6.0% of their gross sales net of discounts. Franchise fees consist of initial development and franchise fees related to new restaurants, master license fees for international territories, fees to renew or extend franchise agreements, transfer fees, and termination fees. Initial and renewal franchise fees are recognized as revenueresults from ongoing operations on a ~~straight-line~~period-over-period basis ~~over the term of the respective agreement. Our performance obligation under development agreements~~ and ~~international territory agreements generally consists of an obligation to grant exclusive development rights over a stated term. These development rights~~would ordinarily add back non-cash expenses such as depreciation and amortization, as well as items that are not distinct from franchise agreements, so upfront fees paid by franchisees for development rights are apportioned to each franchise restaurant opened by the franchisee and are accounted for as initial franchise fees. Royalty revenue and franchise fees also include revenue from vendor contributions and rebates that are attributable to system-wide volume purchases and are received for general marketing and other purposes.

~~Ad Fund contributions are earned from domestic franchisees based on a percentage~~part of ~~gross sales net~~normal day-to-day operations of ~~discounts. Ad Fund contributions were equal to 3% in fiscal year 2018 and 4% in fiscal year 2019.~~

~~Sales from company-owned restaurants are generated through sales of food and beverage at company-owned restaurants.~~

~~Cost of sales.~~ ~~Cost of sales consists of direct food, beverage, paper goods, packaging, labor costs and other restaurant operating costs such as rent, restaurant maintenance costs and property insurance, at~~ our company-owned restaurants. Additionally, a portion of vendor rebates attributable to system-wide volumes purchases are netted against cost of sales. The components of cost of sales are partially variable in nature and fluctuate with changes in sales volume, product mix, menu pricing and commodity costs.

~~Advertising expenses.~~ 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. Advertising expenses consist of advertising, public relations, and administrative expenses to increase sales and further enhance the public reputation of the Wingstop brand.

~~Selling, general and administrative.~~ ~~SG&A costs consist of wages, benefits, franchise development expenses, other compensation, travel, marketing, accounting fees, legal fees, and otherexpenses related to the infrastructure required to support our franchise and company-owned stores.~~business.

3732

~~Depreciation~~Management uses EBITDA and ~~amortization.~~ Adjusted EBITDA:

•~~Depreciation and amortization includes~~as a measurement of operating performance because they assist us in comparing the ~~depreciation~~operating performance of ~~fixed assets, capitalized leasehold improvements and amortization~~our restaurants on a consistent basis, as they remove the impact of ~~intangible assets.~~items not directly resulting from our core operations;

~~Interest expense, net.~~ •~~Interest expense, net includes expenses related~~ for planning purposes, including the preparation of our internal annual operating budget and financial projections;

•to ~~borrowings~~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 ~~securitized financing facility~~annual incentive compensation plan and ~~amortization~~determining the vesting of ~~deferred debt issuance costs, net~~performance-based equity awards.

By providing these non-GAAP financial measures, together with a reconciliation to the most comparable GAAP measure, we believe we are enhancing investors’ understanding of ~~interest income earned on investments.~~

~~Income tax expense.~~ ~~Income tax expense includes current~~our business and ~~deferred federal tax expenses~~our results of operations, as well as ~~state~~assisting investors in evaluating how well we are executing our strategic initiatives. In addition, the instruments governing our indebtedness use EBITDA (with additional adjustments) to measure our compliance with covenants, such as our fixed charge coverage, lease adjusted leverage, and ~~local~~debt incurrence. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation, or as an alternative to, or a substitute for net income ~~taxes.~~or other financial statement data presented in our consolidated financial statements as indicators of financial performance. 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;

~~Results~~•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.

Due to these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of ~~Operations~~discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments for losses on debt extinguishment and refinancing 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. It is reasonable to expect that these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our restaurants, and complicate comparisons of our internal operating results and operating results of other restaurant companies over time. 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.

The following table ~~presents the Consolidated Statement of Operations~~reconciles net income to EBITDA and Adjusted EBITDA for the fiscal years ended December 26, 2020 and December 28, 2019 (in thousands):


	Year ended
	December 26, 2020		December 28, 2019
Net income	$	23,306	$	20,476
Interest expense, net	16,782		17,136
Income tax expense	3,637		5,289
Depreciation and amortization	7,518		5,484
EBITDA	$	51,243	$	48,385
Additional adjustments:
Loss on debt extinguishment and refinancing transactions (a)	13,816		—
Gain on disposal of assets, net (b)	(3,093)		—
Consulting fees (c)	1,358		1,630
Stock-based compensation expense (d)	8,558		6,974
Adjusted EBITDA	$	71,882	$	56,989

(a) Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend; all transaction costs are included in Loss on debt extinguishment and refinancing transactions on the Consolidated Statements of Operations, with the exception of $151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative expense on the Consolidated Statements of Operations.

(b) Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees, which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Operations.

(c) Represents costs and expenses related to consulting projects to support the Company's strategic initiatives, which are included in Selling, general and administrative expense on the Consolidated Statements of Operations.

(d) Includes non-cash, stock-based compensation.

(3) Adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share, as determined by GAAP. These measures have not been prepared in accordance with Article 11 of Regulation S-X promulgated under the Securities Act. 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.

The following table reconciles net income to Adjusted net income and calculates adjusted earnings per diluted share for the fiscal years ended December 26, 2020 and December ~~29, 2018 expressed as~~28, 2019 (in thousands):


	Year Ended
	December 26, 2020		December 28, 2019
Numerator:
Net income	$	23,306	$	20,476
Adjustments:
Loss on debt extinguishment and refinancing transactions (a)	13,816		—
Gain on disposal of assets, net (b)	(3,093)		—
Consulting fees (c)	1,358		1,630
Tax effect of adjustments (d)	(2,887)		(390)
Adjusted net income	$	32,500	$	21,716


Denominator:
Weighted-average shares outstanding - diluted	29,804		29,670




Adjusted earnings per diluted share	$	1.09	$	0.73

(a) Represents costs and expenses related to the refinancing of our securitized financing facility and payment of a ~~percentage~~special dividend; all transaction costs are included in Loss on debt extinguishment and refinancing transactions with the exception of ~~total revenue:~~$151,000 during the year ended December 26, 2020 that is included in Selling, general and administrative expense on the Consolidated Statements of Operations.

Fiscal Year
December 28,
2019 December 29,
2018
Revenue:
Royalty revenue, franchise fees and other 44.2 % 46.9 %
Advertising fees and related income 28.0 % 22.5 %
Company-owned restaurant sales 27.8 % 30.6 %
Total revenue 100.0 % 100.0 %
Costs and expenses:
Cost of sales ⁽¹⁾
74.1 % 68.5 %
Advertising expenses 26.5 % 22.0 %
Selling, general and administrative 28.7 % 29.1 %
Depreciation and amortization 2.7 % 2.8 %
Total costs and expenses 78.5 % 74.8 %
Operating income 21.5 % 25.2 %
Interest expense, net 8.6 % 6.6 %
Other expense, net — % 1.0 %
Income before income tax expense 12.9 % 17.6 %
Income tax expense 2.6 % 3.4 %
Net income 10.3 % 14.2 %
(b) Represents a gain resulting from the re-franchise of company-owned restaurants to franchisees which is included in Gain on sale of restaurants and other expenses, net on the Consolidated Statements of Operations.

(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 expense on the Consolidated Statements of Operations.

(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 26, 2020 and December 28, 2019, which includes provisions for U.S. federal income taxes, and assumes the respective statutory rates for applicable state and local jurisdictions.

Results of Operations

Year ended December 26, 2020 compared to year ended December 28, 2019

The following table sets forth the Consolidated Statements of Operations for fiscal year 2020 and fiscal year 2019 (in thousands, except for percentages):


	Year ended				Increase / (Decrease)
	December 26, 2020		December 28, 2019		$		%
Revenue:
Royalty revenue, franchise fees and other	$	108,883	$	88,291	$	20,592	23.3	%
Advertising fees	74,930		55,932		18,998		34.0	%
Company-owned restaurant sales	64,998		55,453		9,545		17.2	%
Total revenue	248,811		199,676		49,135		24.6	%
Costs and expenses:
Cost of sales (1)	48,583		41,105		7,478		18.2	%
Advertising expenses	69,428		52,891		16,537		31.3	%
Selling, general and administrative	68,985		57,295		11,690		20.4	%
Depreciation and amortization	7,518		5,484		2,034		37.1	%
Gain on sale of restaurants and other expenses, net	(3,093)		—		(3,093)		N/A
Total costs and expenses	191,421		156,775		34,646		22.1	%
Operating income	57,390		42,901		14,489		33.8	%
Interest expense, net	16,782		17,136		(354)		(2.1)	%
Loss on debt extinguishment and refinancing transactions	13,665		—		13,665		N/A
Income before income tax expense	26,943		25,765		1,178		4.6	%
Income tax expense	3,637		5,289		(1,652)		(31.2)	%
Net income	$	23,306	$	20,476	$	2,830	13.8	%


⁽¹⁾			As a percentage of company-owned restaurant sales. Includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately. The percentages reflected have been subject to rounding adjustments. Accordingly, figures expressed as percentages when aggregated may not be the arithmetic aggregation of the percentages that precede them.

~~Year ended December 28, 2019 compared to year ended December 29, 2018~~

~~The following table sets forth information comparing the components of net income in fiscal year 2019 and fiscal year 2018 (in thousands):~~

Year ended Increase / (Decrease)
December 28,
2019 December 29,
2018 $ %
Revenue:
Royalty revenue, franchise fees and other $ 88,291 $ 71,858 $ 16,433 22.9 %
Advertising fees and related income 55,932 34,484 21,448 62.2 %
Company-owned restaurant sales 55,453 46,839 8,614 18.4 %
Total revenue 199,676 153,181 46,495 30.4 %
Costs and expenses:
Cost of sales ⁽¹⁾
41,105 32,063 9,042 28.2 %
Advertising expenses 52,891 33,699 19,192 57.0 %
Selling, general and administrative 57,295 44,579 12,716 28.5 %
Depreciation and amortization 5,484 4,313 1,171 27.2 %
Total costs and expenses 156,775 114,654 42,121 36.7 %
Operating income 42,901 38,527 4,374 11.4 %
Interest expense, net 17,136 10,123 7,013 69.3 %
Other expense, net — 1,477 (1,477) N/A
Income before income tax expense 25,765 26,927 (1,162) (4.3) %
Income tax expense 5,289 5,208 81 1.6 %
Net income $ 20,476 $ 21,719 $ (1,243) (5.7) %


⁽¹⁾			Cost of sales includes all operating expenses of company-owned restaurants, including advertising expenses, and excludes depreciation and amortization, which are presented separately.

Total ~~revenue.~~Revenue. Total revenue consists of the collection of development fees, franchise fees, royalties, and other fees associated with franchise and development rights, contributions to the Ad Fund, and sales of wings and other food and beverage products by our company-owned restaurants. Total revenue was ~~$199.7~~$248.8 million in fiscal year ~~2019,~~2020, an increase of ~~$46.5~~$49.1 million, or ~~30.4%~~24.6%, compared to ~~$153.2~~$199.7 million in the prior fiscal year. These changes in revenues are more fully described below.

Royalty revenue, franchise fees and other. Royalty revenue and franchise fees were ~~$88.3~~$108.9 million in fiscal year ~~2019,~~2020, an increase of ~~$16.4~~$20.6 million, or ~~22.9%~~23.3%, compared to ~~$71.9~~$88.3 million in the prior fiscal year. Royalty revenue increased by ~~$13.2~~$23.4 million primarily due to ~~131~~152 net franchise restaurant openings ~~and~~since December 28, 2019 as well as domestic same store sales growth of ~~11.1%~~21.4%. Other revenue ~~increased $2.0~~decreased $2.4 million primarily due to contributions received for our franchisee convention that occurred in the fourth quarter of 2019.

Advertising ~~fees~~fees. Ad Fund contributions are earned from domestic franchisees based on a percentage of gross sales net of discounts. Ad Fund contributions were equal to 4% in fiscal years 2019 and ~~related income.~~2020.

Advertising fees ~~and related income~~ were ~~$55.9~~$74.9 million in fiscal year ~~2019,~~2020, an increase of ~~$21.4~~$19.0 million, or ~~62.2%~~34.0%, compared to ~~$34.5~~$55.9 million in the comparable period in ~~2018.~~2019. Advertising fees increased primarily due to the increase in ~~the Ad Fund contribution rate from 3% to 4% of gross sales beginning in fiscal year 2019 as well as a 20.1% increase in~~domestic system-wide sales in fiscal year ~~2019~~2020 compared to the prior fiscal year.

Company-owned restaurant sales.Company-owned restaurant sales were ~~$55.5~~$65.0 million in fiscal year ~~2019,~~2020, an increase of ~~$8.6~~$9.5 million, or ~~18.4%~~17.2%, compared to ~~$46.8~~$55.5 million in the prior fiscal year. The increase was primarily due to ~~the acquisition of six franchised restaurants and the opening of one company-owned restaurant since the beginning of the prior year, resulting in additional sales of $4.1 million, as well as~~ an increase in company-owned same store sales of ~~9.8%~~14.2%, which was ~~primarily~~ driven by both an increase in ~~transactions.~~transaction size and transactions, as well as an

increase in the number of company-owned restaurants. Since the beginning of the prior fiscal year period, we acquired seven company-owned restaurants from franchisees, opened three new company-owned restaurants, and refranchised seven company-owned restaurants to franchisees.

Cost of sales. Cost of sales was $41.1 million in fiscal year 2019, an increase of $9.0 million, or 28.2%, compared to $32.1 million in the prior fiscal year. Cost of sales as a percentage of company-owned restaurant sales was 74.1% in fiscal year 2019 compared to 68.5% in the prior fiscal year.

The table below presents the major components of Cost of sales (in ~~thousands)~~thousands, except for percentages):


		Year ended		As a % of company-owned restaurant sales		Year ended			As a % of company-owned restaurant sales			Year ended		As a % of company-owned restaurant sales			Year ended		As a % of company-owned restaurant sales
		December 28, 2019						December 29, 2018								As a % of company-owned restaurant sales					As a % of company-owned restaurant sales
Cost of sales:	Cost of sales:										Cost of sales:
Food, beverage and packaging costs	Food, beverage and packaging costs	20,317		36.6	%	15,540			33.2	%	Food, beverage and packaging costs	23,303		35.9	%		20,317		36.6	%
Labor costs	Labor costs	12,582		22.7	%	10,493			22.4	%	Labor costs	15,801		24.3	%		12,582		22.7	%
Other restaurant operating expenses	Other restaurant operating expenses	9,794		17.7	%	7,223			15.4	%	Other restaurant operating expenses	10,821		16.6	%		9,794		17.7	%
Vendor rebates	Vendor rebates	(1,588)		(2.9)	%	(1,193)			(2.5)	%	Vendor rebates	(1,342)		(2.1)	%		(1,588)		(2.9)	%
Total cost of sales	Total cost of sales	$	41,105	74.1	%	$	32,063		68.5	%	Total cost of sales	$	48,583	74.7	%		$	41,105	74.1	%


Delaware						47-3494862
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)
5501 LBJ Freeway, 5th Floor, Dallas, Texas						75240
(Address of principal executive offices)						(Zip Code)


Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3027
Item 6.	Selected Financial Data	3129
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3530
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4440
Item 8.	Financial Statements and Supplementary Data	4440
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4440
Item 9A.	Controls and Procedures	4441
Item 9B.	Other Information	4743


Item 10.	Directors, Executive Officers and Corporate Governance	4844
Item 11.	Executive Compensation	4844
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4844
Item 13.	Certain Relationships and Related Transactions, and Director Independence	4844
Item 14.	Principal Accountant Fees and Services	4844


Item 15.	Exhibits and Financial Statement Schedules	4945
Item 16.	10-K Summary	5147
Signatures		5248


	Year Ended						Increase / (Decrease)
	December 28, 2019		December 29, 2018		$		%
Revenue:
Franchise segment	$	144,223	$	106,342	$	37,881	35.6	%
Company segment	55,453		46,839		8,614		18.4	%
Total segment revenue	$	199,676	$	153,181	$	46,495	30.4	%

Segment Profit:
Franchise segment	$	33,683	$	30,645	$	3,038	9.9	%
Company segment	9,218		10,303		(1,085)		(10.5)	%
Total segment profit	$	42,901	$	40,948	$	1,953	4.8	%


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


WINGSTOP INC.
(Exact name of registrant as specified in its charter)


		Page
Item 1.	Business	5
Item 1A.	Risk Factors	1011
Item 1B.	Unresolved Staff Comments	2625
Item 2.	Properties	2726
Item 3.	Legal Proceedings	2926
Item 4.	Mine Safety Disclosures	2926


State	Franchise restaurants	Company-owned restaurants	Total restaurants
Alabama	6	—	6
Alaska	2	—	2
Arizona	35	—	35
Arkansas	10	—	10
California	273	—	273
Colorado	29	—	29
Connecticut	4	—	4
Delaware	2	—	2
Florida	69	—	69
Georgia	35	—	35
Hawaii	2	—	2
Idaho	3	—	3
Illinois	68	—	68
Indiana	14	—	14
Iowa	5	—	5
Kansas	2	3	5
Kentucky	6	—	6
Louisiana	22	—	22
Maryland	22	—	22
Massachusetts	6	—	6
Michigan	13	—	13
Minnesota	2	—	2
Mississippi	11	—	11
Missouri	15	1	16
Nebraska	3	—	3
Nevada	12	5	17
New Hampshire	2	—	2
New Jersey	14	—	14
New Mexico	10	—	10
New York	19	—	19
North Carolina	19	—	19
Ohio	26	—	26
Oklahoma	15	—	15
Oregon	5	—	5
Pennsylvania	10	—	10
South Carolina	10	—	10
South Dakota	1	—	1
Tennessee	17	—	17
Texas	330	22	352
Utah	5	—	5
Virginia	22	—	22
Washington	14	—	14
West Virginia	1	—	1
Wisconsin	9	—	9
Domestic Total	1,200	31	1,231


International
Colombia	4	—	4
France	1	—	1
Indonesia	33	—	33
Malaysia	4	—	4
Mexico	91	—	91
Panama	3	—	3
Singapore	7	—	7
United Arab Emirates	8	—	8
United Kingdom	3	—	3
International Total	154	—	154
Worldwide Total	1,354	31	1,385


	Year ended
(in thousands)	December 28, 2019		December 29, 2018		December 30, 2017		December 31, 2016		December 26, 2015*

Consolidated Statements of Income Data:
Revenue:
Royalty revenue, franchise fees and other	$	88,291	$	71,858	$	66,076	$	54,475	$	46,688
Advertising fees and related income	55,932		34,484		30,174		14,561		—
Company-owned restaurant sales	55,453		46,839		37,069		34,288		31,281
Total revenue	199,676		153,181		133,319		103,324		77,969
Cost and expenses:
Cost of sales	41,105		32,063		28,745		25,308		22,219
Advertising expenses	52,891		33,699		32,427		13,849		—
Selling, general and administrative	57,295		44,579		34,898		34,552		33,350
Depreciation and amortization	5,484		4,313		3,376		3,008		2,682
Total costs and expenses	156,775		114,654		99,446		76,717		58,251
Operating income	42,901		38,527		33,873		26,607		19,718
Interest expense, net	17,136		10,123		5,131		4,396		3,477
Other expense, net	—		1,477		—		254		396
Income before tax expense	25,765		26,927		28,742		21,957		15,845
Income tax expense	5,289		5,208		4,802		8,188		5,739
Net income	$	20,476	$	21,719	$	23,940	$	13,769	$	10,106

Consolidated Statement of Cash Flows Data:
Net cash provided by operating activities	$	38,583	$	38,770	$	27,435	$	21,879	$	13,860
Net cash used in investing activities	(23,731)		(10,498)		(6,484)		(2,056)		(1,915)
Net cash used in financing activities	(14,617)		(13,724)		(20,252)		(28,213)		(10,978)
Net increase (decrease) in cash and cash equivalents	$	235	$	14,548	$	699	$	(8,390)	$	967


	Year ended
(in thousands, except per share data)	December 28, 2019			December 29, 2018			December 30, 2017			December 31, 2016			December 26, 2015⁽¹⁾

Per Share data:
Earnings per share
Basic	$	0.70		$	0.74		$	0.82		$	0.48		$	0.37
Diluted	$	0.69		$	0.73		$	0.82		$	0.47		$	0.36
Weighted average shares outstanding
Basic	29,415			29,231			29,025			28,637			27,497
Diluted	29,670			29,587			29,424			28,983			27,816

Dividends per share	$	0.40		$	6.54		$	0.14		$	2.90		$	1.83

Selected Other Data⁽²⁾:
Number of system-wide restaurants open at end of period	1,385			1,252			1,133			998			845
Number of domestic company restaurants open at end of period	31			29			23			21			19
Number of domestic franchise restaurants open at end of period	1,200			1,095			1,004			901			767
Number of international franchise restaurants open at end of period	154			128			106			76			59
System-wide sales⁽³⁾	$	1,514,590		$	1,261,025		$	1,087,434		$	972,270		$	821,248
Domestic restaurant AUV⁽⁴⁾	$	1,246		$	1,139		$	1,100		$	1,113		$	1,126
Company-owned domestic AUV⁽⁴⁾	$	1,874		$	1,723		$	1,712		$	1,729		$	1,646
Number of restaurants opened (during period)	146			139			147			159			142
Number of restaurants closed (during period)	13			20			12			6			9
Company-owned restaurants (acquired) refranchised (during period)	(1)			(6)			(2)			—			—
EBITDA ⁽⁵⁾	$	48,385		$	41,363		$	37,249		$	29,361		$	22,004
Adjusted EBITDA ⁽⁵⁾	$	56,989		$	48,986		$	39,100		$	32,980		$	28,879

Same Store Sales Data⁽⁶⁾:
System-wide domestic same store sales base (end of period)	1,109			1,018			904			779			667
System-wide domestic same store sales growth	11.1		%	6.5		%	2.6		%	3.2		%	7.9		%


	As of
(in thousands)	December 28, 2019		December 29, 2018		December 30, 2017		December 31, 2016		December 26, 2015⁽¹⁾

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	12,849	$	12,493	$	4,063	$	3,750	$	10,690
Working capital	(2,739)		3,424		(3,217)		(5,863)		7,050
Total assets	166,113		139,749		119,836		111,800		120,650
Total debt	317,600		320,000		133,750		151,250		95,500
Total shareholders’ deficit	(209,428)		(224,830)		(58,418)		(81,431)		(9,673)


	Fiscal Year
	December 28, 2019		December 29, 2018
Revenue:
Royalty revenue, franchise fees and other	44.2	%	46.9	%
Advertising fees and related income	28.0	%	22.5	%
Company-owned restaurant sales	27.8	%	30.6	%
Total revenue	100.0	%	100.0	%
Costs and expenses:
Cost of sales ⁽¹⁾	74.1	%	68.5	%
Advertising expenses	26.5	%	22.0	%
Selling, general and administrative	28.7	%	29.1	%
Depreciation and amortization	2.7	%	2.8	%
Total costs and expenses	78.5	%	74.8	%
Operating income	21.5	%	25.2	%
Interest expense, net	8.6	%	6.6	%
Other expense, net	—	%	1.0	%
Income before income tax expense	12.9	%	17.6	%
Income tax expense	2.6	%	3.4	%
Net income	10.3	%	14.2	%


FORM 10-K


		Payments due by period															Payments due by period
		Fiscal year 2020		Fiscal years 2021-2022		Fiscal years 2023-2024		Thereafter			Fiscal year 2021		Fiscal years 2022-2023		Fiscal years 2024-2025		Thereafter
2018-1 Class A-2 Senior Secured Notes		$	3,200	$	6,400	$	308,000	$	—
2020 Notes										2020 Notes	$	3,600	$	9,600	$	9,600	$	457,200
Operating leases ^(a)	Operating leases ^(a)	2,219		4,230		3,140		1,492		Operating leases (a)	2,614		3,636		1,633		594
Interest payments	Interest payments	15,805		31,133		15,328		—		Interest payments	15,060		27,054		13,323		25,963
Total	Total	$	21,224	$	41,763	$	326,468	$	1,492	Total	$	21,274	$	40,290	$	24,556	$	483,757


^(a)			Includes base lease terms and certain optional renewal periods that are included in the lease term in accordance with accounting guidance related to leases.


Item 15.			Exhibits and Financial Statement Schedules

(a)			Financial Statements
			Refer to Index to Financial Statements appearing on page F-1.
(b)			Financial Statement Schedules
			No financial statement schedules are provided because the information called for is not required or is shown in the financial statements or the notes thereto.
(c)			Exhibits
			The exhibits listed below are filed or incorporated by reference as a part of this report.


Exhibit No.			Description
3.1			Amended and Restated Certificate of Incorporation of Wingstop Inc., as amended through June 15, 2020, filed as ~~exhibit~~Exhibit 3.1 to the Company’s ~~Registration Statement~~Quarterly Report on Form ~~S-1/A (Registration~~10-Q for the quarterly period ended June 27, 2020 (File No. ~~333-203891) on June 2, 2015~~001-37425) and incorporated ~~herein~~ by ~~reference.~~reference herein .
3.2			Amended and Restated Bylaws of Wingstop Inc., filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (File No. 001-37425) and incorporated herein by reference.
4.1			Form of Stock Certificate for Common Stock, filed as exhibit 4.1 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
4.2			Amended and Restated Base Indenture, dated as of ~~November 14, 2018,~~October 30, 2020, by and between Wingstop Funding LLC, as Issuer, and Citibank, N.A., as Trustee and Securities Intermediary, filed as Exhibit 4.1 to the ~~Company’s~~ Current Report on Form 8-K (File No. 001-37425) of the Company on November ~~14, 2018~~2, 2020 and incorporated herein by reference.
4.3			Series ~~2018-1~~2020-1 Supplement to Base Indenture, dated as of ~~November 14, 2018,~~October 30, 2020, by and between Wingstop Funding LLC, as Issuer of the Series ~~2018-1~~2020-1 fixed rate senior secured notes, Class A-2, and Series ~~2018-1~~2020-1 variable funding senior secured notes, Class A-1, and Citibank, N.A., as Trustee and Series ~~2018-1~~2020-1 Securities Intermediary, filed as Exhibit 4.2 to the ~~Company’s~~ Current Report on Form 8-K (File No. 001-37425) of the Company on November ~~14, 2018~~2, 2020 and incorporated herein by reference.
4.4*			Description of Wingstop Inc. Common Stock.
10.1			Purchase Agreement, dated as of ~~November 6, 2018,~~October 9, 2020, by and among the Company, certain indirect subsidiaries of the Company party thereto and Barclays Capital Inc., filed as Exhibit ~~10.1~~99.1 to the ~~Company’s~~ Current Report on Form 8-K (File No. 001-37425) of the Company on ~~November 7, 2018~~October 9, 2020 and incorporated herein by reference.
10.2			Class A-1 Note Purchase Agreement, dated as of ~~November 14, 2018,~~October 30, 2020, by and among Wingstop Funding LLC, as Issuer, each of Wingstop Guarantor LLC and Wingstop Franchising LLC, as Guarantor, Wingstop Restaurants Inc., as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, Barclays Bank PLC, Swingline Lender and Administrative Agent, and Barclays Bank PLC, New York Branch, as L/C Provider, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-37425) on November ~~14, 2018~~2, 2020 and incorporated herein by reference.
10.3			Amended and Restated Guarantee and Collateral Agreement, dated as of ~~November 14, 2018,~~October 30, 2020, by and among Wingstop Guarantor LLC and Wingstop Franchising LLC, each as a Guarantor, in favor of Citibank, N.A., as Trustee, filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-37425) on November ~~14, 2018~~2, 2020 and incorporated herein by reference.
10.4			Amended and Restated Management Agreement, dated as of ~~November 14, 2018,~~October 30, 2020, by and among Wingstop Funding LLC, Wingstop Franchising LLC, Wingstop Guarantor LLC. Wingstop Restaurants Inc., as Manager, and Citibank, N.A., as Trustee, filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-37425) on November ~~14, 2018~~2, 2020 and incorporated herein by reference.
10.5†			Wing Stop Holding Corporation 2010 Stock Option Plan, filed as exhibit 10.2 to the Company’s Registration Statement on Form S-8 (Registration No. 333-00966) on June 22, 2015 and incorporated herein by reference.
~~10.6†~~			Form of Option Award Agreement for Wing Stop Holding Corporation 2010 Stock Option Plan (Form 1), filed as exhibit 10.8 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.


~~10.7†~~			Form of Option Award Agreement for Wing Stop Holding Corporation 2010 Stock Option Plan (Form 2), filed as exhibit 10.9 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
~~10.8†~~			Form of Option Award Agreement for Wing Stop Holding Corporation 2010 Stock Option Plan (Form 3), filed as exhibit 10.10 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
~~10.9†~~			Form of Option Award Agreement for Wing Stop Holding Corporation 2010 Stock Option Plan (Form 4), filed as exhibit 10.11 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
~~10.10†~~			Wingstop Inc. 2015 Omnibus Incentive Compensation Plan, filed as exhibit 10.18 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
~~10.11†~~10.6†			Amendment One to Wingstop Inc. 2015 Omnibus Incentive Compensation Plan, filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2015 (File No. 001-37425) and incorporated herein by reference.


~~10.12†~~10.7†			Amendment Two to the Wingstop Inc. 2015 Omnibus Incentive Compensation Plan, effective as of August 3, 2017, filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (File No. 001-37425) and incorporated herein by reference.
~~10.13*†~~10.8†			Amended and Restated Form of Performance-based Restricted Stock Unit Award Agreement under the Wingstop Inc. 2015 Omnibus Incentive Compensation ~~Plan.~~Plan , filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37425) for the quarterly period ended March 28, 2020 and incorporated herein by reference.
~~10.14*†~~10.9†			Amended and Restated Form of Service-based Restricted Stock Unit Award Agreement under the Wingstop Inc. 2015 Omnibus Incentive Compensation ~~Plan.~~Plan , filed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K (File No. 001-37425) for the fiscal year ended December 28, 2019 and incorporated herein by reference .
~~10.15*†~~10.10†			Amended and Restated Form of Restricted Stock Award Agreement under the Wingstop Inc. 2015 Omnibus Incentive Compensation ~~Plan.~~Plan , filed as Exhibit 10.15 to the Company’s Annual Report on Form 10-K (File No. 001-37425) for the fiscal year ended December 28, 2019 and incorporated herein by reference .
~~10.16†~~10.11†			Amended and Restated Form of Option Award Agreement under the Wingstop Inc. 2015 Omnibus Incentive Compensation Plan , filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37425) for the quarterly period ended March 28, 2020 and incorporated herein by reference.
10.12†			Wingstop Inc. Amended and Restated Executive Severance Plan, effective as of February 26, 2019, filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K (File No. 001-37425) for the fiscal year ended December 29, 2018 and incorporated herein by reference.
~~10.17†~~10.13†			Form of Wingstop Inc. Executive Severance Plan Participation Agreement, filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K (File No. 001-37425) for the fiscal year ended December 29, 2018 and incorporated herein by reference.
~~10.18*†~~10.14†			Amended and Restated Employment Agreement, dated November 13, 2019, by and between Wingstop Restaurants Inc. and Charles ~~Morrison.~~Morrison , filed as Exhibit 10.18 to the Company’s Annual Report on Form 10-K (File No. 001-37425) for the fiscal year ended December 28, 2019 and incorporated herein by reference.
~~10.19*†~~10.15†			Letter Agreement between Wingstop Inc. and Larry Kruguer, dated January 14, ~~2020.~~2020
~~10.20†~~			~~Form of Change in Control Bonus Award Agreement~~, filed as ~~exhibit 10.15~~Exhibit 10.19 to the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1/A (Registration~~10-K (File No. ~~333-203891) on June 2, 2015~~001-37425) for the fiscal year ended December 28, 2019 and incorporated herein by reference.
~~10.21†~~10.16†			Form of Indemnification Agreement, filed as exhibit 10.16 to the Company’s Registration Statement on Form S-1/A (Registration No. 333-203891) on June 2, 2015 and incorporated herein by reference.
~~10.22†~~10.17†			Wingstop Inc. Employee Stock Purchase Plan, filed as exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37425) for the quarterly period ended March 30, 2019 and incorporated by reference herein.
21.1*			List of subsidiaries of Wingstop Inc.
23.1*			Consent of KPMG LLP, independent registered public accounting firm.
23.2*			Consent of Ernst & Young LLP, independent registered public accounting firm.
31.1*			Certification of Chief Executive Officer, pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of Chief Financial Officer, pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema Document.
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document.


104*			Cover Page Interactive Data File (formatted as Inline XBRL and Contained in Exhibit 101).


Wingstop Inc.
/s/ Charles R. Morrison
Charles R. Morrison
Chairman and Chief Executive Officer (Principal Executive ~~Officer)~~Officer and duly authorized officer)


Report of Independent Registered Public Accounting Firm			2
Consolidated Balance Sheets as of December ~~28, 2019~~26, 2020 and December ~~29, 2018~~28, 2019			5
Consolidated Statements of Operations for the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 ~~and December 30, 2017~~			6
Consolidated Statement of Stockholders’ Deficit for the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 ~~and December 30, 2017~~			7
Consolidated Statements of Cash Flows for the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 ~~and December 30, 2017~~			8
Notes to Consolidated Financial Statements for the fiscal years ended December 26, 2020, December 28, 2019, and December 29, 2018 ~~and December 30, 2017~~			9


		Fiscal Year Ended											Fiscal Year Ended
		December 28, 2019		December 29, 2018		December 30, 2017			December 26, 2020		December 28, 2019		December 29, 2018

Revenue:	Revenue:							Revenue:
Royalty revenue, franchise fees and other	Royalty revenue, franchise fees and other	$	88,291	$	71,858	$	66,076	Royalty revenue, franchise fees and other	$	108,883	$	88,291	$	71,858
Advertising fees and related income		55,932		34,484		30,174
Advertising fees								Advertising fees	74,930		55,932		34,484
Company-owned restaurant sales	Company-owned restaurant sales	55,453		46,839		37,069		Company-owned restaurant sales	64,998		55,453		46,839
Total revenue	Total revenue	199,676		153,181		133,319		Total revenue	248,811		199,676		153,181
Costs and expenses:	Costs and expenses:							Costs and expenses:
Cost of sales ⁽¹⁾	Cost of sales ⁽¹⁾	41,105		32,063		28,745		Cost of sales (1)	48,583		41,105		32,063
Advertising expenses	Advertising expenses	52,891		33,699		32,427		Advertising expenses	69,428		52,891		33,699
Selling, general and administrative	Selling, general and administrative	57,295		44,579		34,898		Selling, general and administrative	68,985		57,295		44,579
Depreciation and amortization	Depreciation and amortization	5,484		4,313		3,376		Depreciation and amortization	7,518		5,484		4,313
Gain on sale of restaurants and other expenses, net								Gain on sale of restaurants and other expenses, net	(3,093)		0		0
Total costs and expenses	Total costs and expenses	156,775		114,654		99,446		Total costs and expenses	191,421		156,775		114,654
Operating income	Operating income	42,901		38,527		33,873		Operating income	57,390		42,901		38,527
Interest expense, net	Interest expense, net	17,136		10,123		5,131		Interest expense, net	16,782		17,136		10,123
Other expense, net		—		1,477		—
Loss on debt extinguishment and refinancing transactions								Loss on debt extinguishment and refinancing transactions	13,665		0		1,477
Income before income tax expense	Income before income tax expense	25,765		26,927		28,742		Income before income tax expense	26,943		25,765		26,927
Income tax expense	Income tax expense	5,289		5,208		4,802		Income tax expense	3,637		5,289		5,208
Net income	Net income	$	20,476	$	21,719	$	23,940	Net income	$	23,306	$	20,476	$	21,719

Earnings per share	Earnings per share							Earnings per share
Basic	Basic	$	0.70	$	0.74	$	0.82	Basic	$	0.79	$	0.70	$	0.74
Diluted	Diluted	$	0.69	$	0.73	$	0.82	Diluted	$	0.78	$	0.69	$	0.73

Weighted average shares outstanding	Weighted average shares outstanding							Weighted average shares outstanding
Basic	Basic	29,415		29,231		29,025		Basic	29,601		29,415		29,231
Diluted	Diluted	29,670		29,587		29,424		Diluted	29,804		29,670		29,587

Dividends per share	Dividends per share	$	0.40	$	6.54	$	0.14	Dividends per share	$	5.50	$	0.40	$	6.54


		Common Stock											Common Stock
		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Deficit			Shares	Amount	Additional Paid-In Capital	Accumulated Deficit	Total Stockholders’ Deficit
Balance at December 31, 2016		28,747,392	$	287	$	1,194	$	(82,911)	$	(81,430)
Net income		—	—		—		23,940		23,940
Shares issued under stock plans		345,277	4		1,314		—		1,318
Stock-based compensation expense		—	—		1,851		—		1,851
Dividends paid		—	—		(4,097)		—		(4,097)
Balance at December 30, 2017	Balance at December 30, 2017	29,092,669	291		262		(58,971)		(58,418)		Balance at December 30, 2017	29,092,669	291	262	(58,971)	(58,418)
Net income	Net income	—	—		—		21,719		21,719		Net income	—	—	—	21,719	21,719
Shares issued under stock plans	Shares issued under stock plans	208,261	2		515		—		517		Shares issued under stock plans	208,261	2	515	—	517
Tax payments for restricted stock upon vesting	Tax payments for restricted stock upon vesting	(3,991)	—		—		(183)		(183)		Tax payments for restricted stock upon vesting	(3,991)	—	—	(183)	(183)
Stock-based compensation expense	Stock-based compensation expense	—	—		3,725		—		3,725		Stock-based compensation expense	—	—	3,725	—	3,725
Dividends paid		—	—		(3,466)		(188,724)		(192,190)
Dividends declared on common stock and equivalents											Dividends declared on common stock and equivalents	—	—	(3,466)	(188,724)	(192,190)
Balance at December 29, 2018	Balance at December 29, 2018	29,296,939	293		1,036		(226,159)		(224,830)		Balance at December 29, 2018	29,296,939	293	1,036	(226,159)	(224,830)
Adjustment for ASC 842 adoption	Adjustment for ASC 842 adoption	—	—		—		154		154		Adjustment for ASC 842 adoption	—	—	—	154	154
Net income	Net income	—	—		—		20,476		20,476		Net income	—	—	—	20,476	20,476
Shares issued under stock plans	Shares issued under stock plans	176,201	2		687		—		689		Shares issued under stock plans	176,201	2	687	—	689
Tax payments for restricted stock upon vesting	Tax payments for restricted stock upon vesting	(15,912)	—		—		(1,149)		(1,149)		Tax payments for restricted stock upon vesting	(15,912)	—	—	(1,149)	(1,149)
Stock-based compensation expense	Stock-based compensation expense	—	—		6,974		—		6,974		Stock-based compensation expense	—	—	6,974	—	6,974
Dividends paid		—	—		(8,145)		(3,597)		(11,742)
Dividends declared on common stock and equivalents											Dividends declared on common stock and equivalents	—	—	(8,145)	(3,597)	(11,742)
Balance at December 28, 2019	Balance at December 28, 2019	29,457,228	$	295	$	552	$	(210,275)	$	(209,428)	Balance at December 28, 2019	29,457,228	295	552	(210,275)	(209,428)
Net income											Net income	—	—	—	23,306	23,306
Shares issued under stock plans											Shares issued under stock plans	233,051	2	923	—	925
Tax payments for restricted stock upon vesting											Tax payments for restricted stock upon vesting	(3,156)	—	—	(340)	(340)
Stock-based compensation expense											Stock-based compensation expense	—	—	8,558	—	8,558
Dividends declared on common stock and equivalents											Dividends declared on common stock and equivalents	—	—	(9,612)	(154,719)	(164,331)
Balance at December 26, 2020											Balance at December 26, 2020	29,687,123	297	421	(342,028)	(341,310)


(1)				Basis of Presentation and Summary of Significant Accounting Policies


Property and Equipment			Estimated Useful Lives
Building			40 years
Leasehold and other improvements			Lesser of the expected lease term or useful life
Equipment, furniture and fixtures			3 to 7 years
Computer software			3 years


		Fair Value Hierarchy	December 28, 2019									December 29, 2018									Fair Value Hierarchy				December 26, 2020								December 28, 2019
					Carrying Value			Fair Value			Carrying Value			Fair Value		Fair Value Hierarchy			Carrying Value				Fair Value				Carrying Value				Fair Value
Securitized Financing Facility:	Securitized Financing Facility:													Securitized Financing Facility:
2020-1 Class A-2 Senior Secured Notes (1)														2020-1 Class A-2 Senior Secured Notes (1)	Level 2				$	480,000			$	483,365			$	0			$	0
2018-1 Class A-2 Senior Secured Notes ⁽¹⁾	2018-1 Class A-2 Senior Secured Notes ⁽¹⁾	Level 2	$	317,600		$	331,247		$	320,000		$	320,000	2018-1 Class A-2 Senior Secured Notes (1)	Level 2		$	0			$	0			$	317,600			$	331,247


	December 28, 2019		December 29, 2018
Vendor rebates receivable	$	2,530	$	2,224
Royalties receivable, net	1,870		1,521
Gift card receivable	477		1,484
Other receivables	298		535
Accounts receivable, net	$	5,175	$	5,764


		December 28, 2019		December 29, 2018		Weighted Average Amortization Period (in years)		December 26, 2020		December 28, 2019		Weighted Average Amortization Period (in years)
Intangible assets:	Intangible assets:						Intangible assets:
Trademarks	Trademarks	$	32,700	$	32,700		Trademarks	$	32,700	$	32,700
Indefinite-lived assets	Indefinite-lived assets	32,700		32,700			Indefinite-lived assets	32,700		32,700
Customer relationships	Customer relationships	26,300		26,300		20.0	Customer relationships	26,300		26,300		20.0
Franchise rights ⁽¹⁾	Franchise rights ⁽¹⁾	5,638		5,028		6.4	Franchise rights (1)	8,121		5,638		6.3
Proprietary software⁽¹⁾	Proprietary software⁽¹⁾	115		115		5.0	Proprietary software (1)	115		115		5.0
Noncompete agreements⁽¹⁾	Noncompete agreements⁽¹⁾	250		250		2.8	Noncompete agreements (1)	250		250		2.8
Less: accumulated amortization	Less: accumulated amortization	(15,855)		(13,453)			Less: accumulated amortization	(18,155)		(15,855)
Definite-lived assets	Definite-lived assets	16,448		18,240		17.4	Definite-lived assets	16,631		16,448		16.7
Intangible assets, net	Intangible assets, net	$	49,148	$	50,940		Intangible assets, net	$	49,331	$	49,148


Fiscal year ~~2020~~2021	$	~~2,186~~2,602
~~Fiscal year 2021~~	~~2,026~~
Fiscal year 2022	~~1,870~~2,385
Fiscal year 2023	~~1,760~~2,095
Fiscal year 2024	~~1,594~~1,817
Fiscal year 2025	1,683
Thereafter	~~7,012~~6,049
Total	$	~~16,448~~16,631


(8)				Prepaid Expenses and Other Current Assets and Other Current Liabilities


Balance as of December ~~31, 2016~~30, 2017	$	~~602~~
~~Additions for tax positions of prior years~~	—
~~Subtractions for tax positions of prior years~~	—
~~Additions for tax positions of current year~~	78
~~Subtractions for tax positions of current year~~	—
~~Balance as of December 30, 2017~~	680
Additions for tax positions of prior years	78
Subtractions for tax positions of prior years	—0
Additions for tax positions of current year	155
Subtractions for tax positions of current year	—0
Balance as of December 29, 2018	913
Additions for tax positions of prior years	187
Subtractions for tax positions of prior years	(330)
Additions for tax positions of current year	929
Subtractions for tax positions of current year	—0
Balance as of December 28, 2019	1,699
Additions for tax positions of prior years	0
Subtractions for tax positions of prior years	(959)
Additions for tax positions of current year	54
Subtractions for tax positions of current year	0
Balance as of December 26, 2020	$	~~1,699~~794


Fiscal year ~~2020~~2021	$	~~3,200~~3,600
~~Fiscal year 2021~~	~~3,200~~
Fiscal year 2022	~~3,200~~4,800
Fiscal year 2023	~~308,000~~4,800
Fiscal year 2024	4,800
Fiscal year 2025	4,800
Thereafter	457,200
Total	$	~~317,600~~480,000