Michael Skipworth: Hi, Josh, I appreciate the question. It’s interesting. There’s plenty of restaurants in our system that have a boneless mix, well north of 50%. And those restaurants they are a little bit of the basis behind that statement we’ve made that could ultimately as we drive boneless mix higher north of 50%, could be a structural change in our food cost target. And those restaurants today are enjoying food cost that’s call it 300 400 basis points lower than what we see at the system average. And we think, as we bring more of these new guests in, as we continue to win more of these occasions, it’s not just boneless. It’s not just sandwiches. There’s tenders, as well. And so there’s a ton of opportunity for us to go after to continue to win more of these guest occasions, that we believe give us line of sight to driving that boneless mix, north of 50%, which is pretty exciting for us.
It’s exciting for our brand partners, because it’s just going to further bolster those best-in-class unit economics, which we know will just continue to fuel demand for development and allow us to continue to deliver on our long-term algorithm of growing units over 10% each year, which we believe will ultimately translate to best-in-class shareholder returns.
Joshua Long: Thank you for that. And as a follow-up when we think about your commentary around being able to drive awareness across all the different channels in particular you called out the strength in delivery and just the staying power that the brand has curious what you’ve seen in terms of the brand journey depending on maybe what channel the customers come to you from. Is there an opportunity? And how have you kind of navigated the opportunity around bringing customers that maybe come through the third-party delivery channel onto your own Wingstop-branded platform over time?
Michael Skipworth: Yes, absolutely. I mean it’s been really exciting for us to see the growth in the delivery channel. But what’s really exciting is we’ve seen growth in all channels. And I think that’s really healthy for our brand. And we believe it’s a demonstration that our advertising strategy is working the execution with the restaurants is really well. And so we’re really encouraged by that. But as we think about continuing to win more occasions I really want to kind of tie back to the investments we’ve made in e-com and how we really believe that’s going to be an unlock for us to control and really customize that customer journey in a way that allows us to win more of their occasions makes them think to go to wingstop.com or our app to engage with our brand. And we think as we continue to advance this pilot towards our national launch in Q2 of 2024 that’s going to be an exciting unlock for our brand.
Joshua Long: Thank you.
Operator: The next question is from Brian Harbour with Morgan Stanley. Please go ahead.
Brian Harbour: Yes, thank you. Maybe first just one quick one. Was there a certain pricing assumption when you talk about where you think food costs will run next year?
Michael Skipworth: No, I think our comments around food costs really are centered around the progress we’ve made against our supply chain strategy. We continue to be committed to that disciplined approach to pricing that we’ve had over the years which is one to two points of price taken over two windows each year.
Brian Harbour: Okay. Thanks. And then I think it’s clear that your larger advertising budget and what you’ve done with media has really been quite successful in driving awareness. Where do you think where else do you think you kind of want to be just in terms of ad placements? If you kind of thought about today versus where you’d like to be in one to two years where else do you think you can deploy dollars? And then do you think that that new creative campaign in September was a key driver of the momentum you saw exiting the quarter?
Michael Skipworth: Brian thanks for the question. I think it’s interesting. We our ad fund has grown as we mentioned over four times what it was when we initially launched national advertising as a brand in 2018. So, that’s significant growth. And it’s allowed us to show up in these premium placements like the NFL and NBA. But even as we show up there I think you’re only seeing us in one or two spots of game. And so there’s a ton of runway just within linear TV for us to continue to show up more and continue to drive brand awareness. We mentioned and we’ve talked about it over the years that the opportunity we have to scale our brand awareness to where other more mature national brands are is that opportunity in front of us is significant.
And we think as our ad fund continues to grow with system sales we’ll continue to show up more. But at the same time we definitely lean into looking at being a digital-forward brand and leveraging that first-party data that we have to show up in the right channel with the right message even leveraging that database to target consumers who look just like those who engage with us. And so that will continue to be a key part of our strategy. But — and the exciting thing for us and what gives us a lot of confidence is our strategy is working yet we still have a ton of runway in front of us just to continue to lean in and drive the overall brand. And obviously, we’re excited about the creative. We definitely think that had an impact to the results we saw in Q3 particularly as we exited the quarter.
But we think it’s an aggregate of all the things we’re working that are working together in concert that are supporting these industry-leading results and really ultimately driving transactions which is pretty unique in the industry right now.
Operator: The next question is from Andrew Charles with TD Cowen. Please go ahead.
Andrew Charles: Great. Thank you. Clearly very encouraging commentary on 3Q comps and how the business is shaping up in 4Q. I know we’ll get the 2024 guidance next quarter, but is there anything that gives you concern in your ability to reach medium-term guidance of mid-single digits next year? I also have a follow-up.
Michael Skipworth: Andrew, thanks for the question. We were obviously really excited and pretty pleased with the results we saw in Q3. And really it was one thing that we felt was really important something we really wanted to highlight on the call today. And that is we’ve talked about these growth strategies that we’ve been executing against whether it’s winning more occasions bringing in new guests via chicken sandwich, whether it’s continuing to expand our brand awareness on the delivery channel and win more delivery occasions, continuing to scale our national advertising in a way that’s seeing us measure record levels from a brand awareness perspective or even expanding our digital channel. And all of those we’ve talked about them being multiyear drivers for our business.
And as we lapped some pretty meaningful levers that we pulled in 2022 we hope that it’s understood and appreciated that these are in fact multiyear drivers. And so as we think about 2024 it gives us a lot of confidence for us to continue to drive AUVs and continue to advance the ball north of that $2 million target that we have which we know will just further enhance those best-in-class unit economics.
Andrew Charles: Excellent. Okay. Great. And then Alex looking ahead what’s the philosophy of the balance sheet and use of cash is — close to four times leverage versus the six times to seven times target. Is the plan for the foreseeable future to use free cash flow for stock buyback? Obviously, you have the $125 million still authorized. But looking even beyond that is the plan is to use free cash flow for stock buyback until conditions become more favorable for pursuing leverage recap that you’ve historically done?
