Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Wingstop Inc. Fiscal First Quarter 2021 Earnings Conference Call. Please note this conference is being recorded today, Wednesday, April 28, 2021. On the call, we have Charlie Morrison, Chairman and Chief Executive Officer; and Michael Skipworth, Executive Vice President and Chief Financial Officer. I would now like to turn the conference over to Michael. Please go ahead, sir.

Thank you, and welcome. Everyone should have access to our fiscal first quarter 2021 earnings release. A copy is posted under the Investor Relations tab on our website at ir.wingstop.com. Our discussion today includes forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. Finally, we will discuss preliminary sales results for the first 4 weeks of the second fiscal quarter. We have not, of course, completed closing procedures for the second fiscal quarter, so preliminary sales results discussed today are subject to change pending finalization and actual results could differ materially. Lastly, for the Q&A session, we ask that you please each keep to 1 question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Charlie.

Thank you, Michael. We had a fantastic first quarter for Wingstop and a carryover of the incredible momentum we experienced during 2020. While the COVID-19 pandemic is far from over, we are glad to see that an economic recovery appears to be well underway, and our long-term growth strategies continue to fuel strong results for the brand. During the first quarter, we opened 41 net new Wingstop restaurants, an all-time record first quarter that translated to year-over-year unit growth of 11.7%. This growth is representative of our strongest new restaurant development pipeline in the history of our brand, with over 700 commitments at the beginning of 2021. This compares to 610 development commitments a year ago. We anticipate our new unit growth to achieve record levels this year. And as such, we are providing guidance of 11%-plus unit growth for 2021, highlighting our confidence in this acceleration. Same-store sales grew by 20.7% in the first quarter, which represents a 30.6% 2-year comp, an acceleration from the fourth quarter of 2020. Our average unit volume of $1.5 million, combined with an average initial investment of under $400,000, can generally yield cash-on-cash returns in excess of 50% for our brand partners, fueling the acceleration in restaurant development. The growth in our average unit volume has created efficiencies in our restaurant P&L that have resulted in growth in 4-wall profits for our franchisees despite record high bone-in chicken wing prices. We value the strong relationships we have with our supplier partners, which have allowed us to successfully mitigate this inflationary period with land-in prices for our wings that are well below the spot market prices. We believe that these prices are likely to continue to be elevated in 2021 as suppliers are struggling, just as many in our industry are, to hire people…

Thank you, Charlie. As you saw in our press release and from Charlie's remarks, we had an outstanding first quarter. We grew royalties, franchise fees and other revenue by $7.4 million. Not only was this due to domestic same-store sales growth of 20.7% and 165 net franchise openings since the year ago comparable period, but also due to the strength we are seeing in noncomp restaurants, which are well above $1.2 million in average unit volumes as they enter the comp base. To put this into perspective, the 2019 vintage generated year 1 average volumes of just over $900,000, all while the investment has remained relatively the same. Company-owned restaurant sales increased $2.3 million due primarily to same-store sales growth of 13.4%, driven by a healthy mix of both transactions and ticket growth. Cost of sales as a percentage of company-owned restaurant sales increased by 220 basis points compared to the first quarter last year. Bone-in wings on the spot market increased more than 50% year-over-year, but the combination of our data-driven approach to menu pricing and the wing price mitigation strategy in place with our largest poultry suppliers helped to effectively lower the cost of wings relative to the implied market value. The effective year-over-year increase in the price we paid for wings was 25.8%. Importantly, we were very pleased to see leverage on both labor and other operating expense lines, helping offset some of the inflation in food costs, a demonstration of the strength and efficiency of our model. Until we see a marked change in the availability of labor for poultry producers, a labor shortage that we believe is largely fueled by the amount of government stimulus, we anticipate that wing prices could remain elevated for the balance of 2021. For modeling purposes, we expect food costs…

[Operator Instructions]. And the first question will come from David Tarantino with Baird.

Congrats on a great start to the year. My question is about the dynamics around lean costs and your supply arrangement. So I guess, Michael, I think you mentioned that you expected your food cost to be around 42% for the year and that's close to what you did in the first quarter. So is that meant to imply that the supply arrangement you have in place is expected to continue for the balance of the year? And if so, could you talk about kind of when that contract might expire or that arrangement might change?

David, thanks for the question. Yes, I think, for us, obviously, we're going to do everything we can to mitigate the impact of inflation on food cost. Obviously, these are unprecedented times that we're in. And I think the real question for us is around whether or not there's going to be additional stimulus and the implications of that on the labor market, particularly the labor market for our poultry suppliers. But we feel confident that we've got the right strategic partnerships with our suppliers. And we have assured supply, and we're going to continue to lean into that, but we feel comfortable as we sit here today with our ability to manage to the number we guided to of food cost of roughly 42%. But again, I think the X factor, if you will is whether or not there's any further stimulus.

Fair enough. And then Charlie or Michael, the elevated wing costs, obviously, some of that's being offset by leverage in the rest of the P&L for your franchisees. But can you just maybe talk about how wing cost inflation is affecting or not affecting the psyche of franchisees and their willingness to continue investing in new unit development?

David, I think -- there are a couple of things to keep in mind. If you reflect on Michael's comment about what we expect the balance of year to be as it relates to food cost, those -- that level is not something we haven't seen before. We've seen that in prior years. In fact, we've seen more impact to the P&L in prior years associated with wing inflation. And I think the work we've done to mitigate the Urner Barry cost of chicken wings with our strategic suppliers is important and recognized by our brand partners. I think second to that, the AUV growth and achieving our $1.5 million AUV generates a lot more cash dollars to the bottom line, which we believe is significantly different than what we saw in prior years when we had inflation like this and is continuing to fuel growth in the business. So I think the combination of both of those is important. Yes, there is leverage, but I think the substantial growth in the AUV and the absolute dollars to the bottom line are what give us confidence in the continued growth algorithm that we're seeing.

Makes sense.

The next question will come from Andy Barish with Jefferies.

Hey, guys. Congrats on the development pipeline building. Wondering if you can offer a little bit more color on kind of the cadence of development this year. I know typically thinking about the domestic business, 4Q is the highest, but you're off to a good start, as you mentioned it. Even if you straight line the first quarter, you're -- through every quarter, you're still well above the 11%-plus target. So just kind of wondering if there were some pull forward or pull back, I guess, from last year into the first quarter and then things moderate. Just a little bit more color on the cadence of openings this year domestically, please.

Andy, yes, the cadence, obviously, is a little different at the start this year. There was some expected pull forward in Q1 associated with the complete shutdown in Q2 of last year. And we saw some of that. But we also would reinforce the fact that our pipeline for development at the beginning of the year was extremely strong, a record high, over 700 restaurants in the pipeline. So that is fueling our strong development and our guide towards the 11%-plus number. We won't see an even balance throughout the year. We never do. We usually see a little softening in that around the third quarter, but a strong fourth quarter is typical for us. So I do think the cadence is a little different than last year and, hence, why our guide is on the plus side of 11%.

Okay. And then just a quick follow-up on the international side of things, which was off to a little bit of a start. Do you still expect gross openings to exceed last year's levels or kind of get back to that 30% mark you were running at prior to the pandemic?

Yes. It's an excellent question. We do expect the gross openings to be consistent with what we've seen in prior years. The pipeline is still strong. And as these markets are emerging now and starting to pick up their pace, we're seeing development activity follow suit with that. We did note some closures in the first quarter. We would expect more of those to get the net number down a little bit from what we've done in the past. But some of those are specifically associated with the impact of the pandemic and the prolonged closure of the restaurants. But on a gross basis, which I think is the most important metric, we expect it to be consistent with prior years.

The next question will come from Andrew Charles with Cowen.

Charlie, last quarter, you spoke about your aspirations for mid-single-digit comps in 2021. And curious how you rate your confidence in this aspiration now versus 90 days ago, recognizing, as you said, that there's been a temporary jolt from stimulus impacting the industry over the last month.

Well, yes, I'm still confident in our long-term -- near term guide of mid-single-digit comps for the year. I think we made note in the commentary that we've seen positive results to date this quarter and an acceleration in the 2-year quarter-to-date as well, which are indicative of what we believe is, one, pulling all the levers that we knew we could just to reinforce. We had a surplus of advertising dollars coming into the year. We strategically placed those during this time frame to make sure that we really pushed hard during this really tough lap that we had from last year's performance, especially in Q2. And then, of course, the -- we couldn't predict exactly what or when the stimulus would occur. But obviously, as you're seeing with so many other brands, it's fueling strong performance. And I think our only caution there is to make sure that everybody knows that some of that stimulus is fueling not only the top line, but it impacts so many other parts of the industry right now. And so we feel very confident in our long-term outlook, especially even related to this year. But note that not knowing when we're going to stop providing stimulus into the market will have an impact on how the top line will look for the balance of the year.

Okay. That's helpful. And then just one follow-up on that long-term outlook. What was your mix of -- apologies if I missed this, but what was the mix of delivery sales in 1Q? We saw better-than-expected other operating expenses 1Q. I was curious if that meant that the mix decelerated from 25% you saw in the back half of 2020. And just longer term, how do you foresee the mix of delivery sales settling out relative to the 15% or so that was running immediately before the pandemic?

Well, we've been running in the mid-20s ever since the beginning of the pandemic, and that was also our launch of delivery nationally. So prior to Q2 of last year, we were still ramping up delivery. We did not see any sort of shift in the delivery mix during the quarter. That would have an impact on the P&L. The P&L results are strictly because of our strong top line performance and the mitigation strategies we put in place to affect food costs. So long term, we noted the investments in technology that we are going to make to continue to drive a digital transaction of which we believe delivery will be a sizable portion of those digital transactions, as it already has been, and expect it to grow over time. We don't expect it to subside back to where we were pre pandemic for any reason.

The next question will come from Michael Tamas with Oppenheimer & Co.

You mentioned that the first quarter saw your highest customer retention through your digital platform. Is there any way to put that in a context? Has it been building over the last couple of quarters? Or is this really a big change in that trend? And then part of that, can you talk about maybe what you changed to allow you to achieve that? And what does it tell you about how you can sort of manage your business going forward?

Michael, thank you. Yes. The retention levels, we are seeing higher retention levels now. And the way we measure that is how often they come back within 90 days if they're a new customer to the business. And I think we mentioned last -- over the last few quarters that we've had a substantial number of new customers coming into our business that are fueling this database that's growing so fast. So our efforts have been placed on making sure that we know a little bit about who they are. So in many cases, we will append information to them so that we can understand their preferences better. We'll invite them back more aggressively than we have before. And I think we are starting to see, albeit very early, signs that we are seeing some momentum gaining because we believe that if we can get those guests not to just be a once a quarter, but even more frequently than that, a guest of Wingstop, it can have a meaningful impact on our top line performance. So it is a big lever we're pulling. We're applying a lot of resources to it, and we have seen the effectiveness of that strategy start to take place during the first and early second quarter.

Awesome. And then you talked about using some of that advertising surplus worked over from last year and the early part of 2021 here. Is there any way you can frame up how much of that extra surplus you've used, whether either qualitatively or quantitatively?

Yes, qualitatively, a big portion of it, I'd say. We carried roughly $11 million into the year from that surplus on the balance sheet. More than half was used in the first media window, which is what we're in right now. We do 2 large windows a year. One starts right around March Madness and carries through into June. And then the other one starts later in the year around September -- late August, September and carries into late October, early November. So we deliberately put more of those dollars in this quarter, but we have moved them throughout the year.

The next question will come from Brian Harbour with Morgan Stanley.

Maybe just first question on the Canada agreement. Will those stores kind of look similar to the U.S.? And will kind of the market and trade approach to be similar to the U.S.? Obviously, I know you approach certain international markets very differently and the stores look different. But just curious on how kind of the approach there compares to some of the markets you're already in.

Yes, I think they'll be similar in terms of their look and feel to the U.S. I think there will be a blend of, for instance, what we've experienced in the U.K. in terms of the strategy for penetrating the market like Canada and the major metros first. You'll see perhaps a high street location like we did in the U.K., followed by a series of restaurants that surround that. And those could include alternative formats like ghost kitchens. So we're adopting a strategy that not only is one we've always had in the U.S., but applying as well some of the strategic thinking that we've learned in Europe as well.

Great. Maybe just a question on the technology investments you talked about. What will that kind of cover in terms of -- what kind of software you'll be buying versus perhaps what will you be building? Is it a pretty substantial headcount increase? And is that something you're going to do kind of hopefully this year? Or will it be more spread out?

Yes. We want this -- well, we know this to be a multiyear approach, and we -- this is the first year. It will involve capital expenditures to develop software. We may acquire some component parts or develop APIs that connect with leading software providers for component parts of our tech stack as we move forward. And it will involve additional headcount, which Michael called attention to, and is factored into our SG&A outlook for the year already. But yes, I mean, we expect that we will be, in a sense, rebuilding the stack to make sure that it is one that is scalable globally. Much of our component parts in the domestic platform do not scale internationally. And we want to develop a single global tech stack with this project. So it will take us a few years to get that done. And the investments in that will continue for the next couple of years as well. And incorporated into that will be some headcount necessary to support the component parts of that technology for our brand partners, both here in the U.S. as well as overseas. And I'll say that some of this is the customer-facing applications and the infrastructure underneath that. Also parts of this will incorporate a robust business intelligence platform that will make us a best-in-class brand as it relates to the information that we can gather from our systems as we continue on our journey towards digitizing all of our transactions.

The next question will come from Chris O'Cull with Stifel.

This is Patrick on for Chris. I was curious if you could maybe give an update on how you're thinking about the reopening of dining rooms. And within that, Michael, if it's possible to quantify rough sales and margin impact in the quarter from lower beverage attach?

Yes, sure. I think as it relates to dining rooms, I think the Q1 results and the comment we shared earlier about quarter-to-date being positive, I think, really suggest and support the case that we're not really in a rush. We do have roughly restaurants in the system where our partners have requested and we've approved them to dining rooms. The results there on the overall business are fair mix. There's not a material impact that I would call out. So to your second part of your question, I don't know that I would model or expect a material change to the results. And if anything, it's really supported the case for kind of what we're seeing and hearing from brand partners about even a smaller box and leaning into off-premise as the future for our business. And so we're not in any immediate rush or hurry to reopen our dining rooms, and we're going to continue to monitor the situation and assess as we progress through the year.

Great. That's helpful. And then just one follow-up pertaining to potentially delivery. We heard a lot about staffing issues. And just curious if you're seeing anything within DoorDash in terms of not having the delivery drivers available to meet demand or anything else that might be causing any issues there.

Yes. We are certainly aware that the market is difficult for staffing on all fronts, driven by the fact that we have this huge stimulus that's creating challenging wage rates comparisons, if you will, by way of it. And so with DoorDash in particular, we're not experiencing anything that's impacting the business. I know they've been challenged by it. But overall, our business performance, I think, demonstrates that they've been able to keep drivers staffed and supporting our business.

The next question will come from Michael Rothstein with Goldman Sachs.

So I had a quick -- I want to learn a little bit more about the menu. And we saw that you guys had launched that $16.99 bundle of boneless wings. And I was wondering how has that affected your shift maybe in bone-in mix amongst consumers and whether you guys are looking more kind of to the menu. We know you guys have done the test on size to continue to offset that bone-in pressure.

Yes. We've had that bundle and bundles like that in the mix over the years. It does have an impact on driving more of a mix of boneless wings over the bone-in wings. And that's been effective. It's been in place for, gosh, a little over a year, if not 2 years on and off in our system. So it's a good driver of mix shift to help take some pressure off food cost. But at the end of the day, our customers still see us as Wingstop, and they like the bone-in wings. And so it's embedded. The impact of that is embedded in our food cost numbers that we project going forward.

The next question will come from Joshua Long with Piper Sandler.

I was curious if you could comment on your progress in attracting or getting access to some of those more heavy QSR customer or users of the QSR segment that might not have frequented Wingstop in the past. We talked about this at the Analyst Day. And there was a nice opportunity for that. I'm just curious if leaning into the digital and then also with the increased TRPs and ad placements that's allowed you to get access to them at the same rate that you expected, if you've been able to accelerate that? Maybe sort of update there in terms of that customer segmentation would be very helpful.

Yes. Definitely, our growth over the last year or 2 has been driven primarily by acquisition of new guests. And our clear target for our advertising was that heavy QSR user that just either hasn't tried Wingstop or doesn't use us as frequently. And so our frequency rates are pretty consistent quarter in and quarter out. But what we're seeing is all these new users coming in. And then our job now is to leverage that platform. We've talked about our CRM platform. To engage those new users and bring them in and increase their frequency, which is part of our -- it's not only a key part of our strategy, but it's also something that we believe is working really well. As demonstrated in the first quarter, our retention rates have improved to 12-month high. So that is clear. Our advertising is clearly pointed at those heavy QSR users and bringing them into Wingstop as an alternate occasion for their dining needs.

And one follow-up, if I may, just to clarify the positive comps to date here in the second quarter, which is obviously very exciting. When we think about the prior year period, 2Q of '20, can you remind us the cadence of kind of progression of that near 25% comp that you posted for the quarter?

Yes. To give you a perspective, last year, we did note in April our same-store sales grew by 33.4%. And during that time frame, we experienced extraordinary comps, and some of that carried through the rest of the second quarter. And then into Q3 and Q4, it started to taper off. But that second quarter comp, being north of 30%, was a big mountain to climb for us this year. And I think we've been able to demonstrate that we had all the right levers in place so far to do that.

The next question will come from Jake Bartlett with Truist Securities.

Great. My question was about check and traffic and whether you're seeing any change there. Is the check starting to normalize a little bit kind of being made up by traffic? Or any change in those dynamics?

Yes. As expected, Jake, we have seen, when we started rolling over the impact of the pandemic and the shift away from dine-in occasions, we immediately saw a check lift last year that was associated with that because we had, for all intents and purposes, eliminated a bunch of smaller transactions that were dine-in and replaced those with higher ticket average carryout and delivery transactions. So as we're lapping that performance, we did expect to see the check growth slow down, but we are seeing good, strong transaction growth in the business as well today. And I'll note without opening...

Great. And then my follow-up is on anything you can say regionally? Different markets obviously are at different points of the reopening of the economy. Any variances there? And then maybe in the context of that, if you could comment on maybe why the company's same-store sales is materially below where the franchisees are doing?

Yes. So I would say, very typical for Wingstop over the years, we don't see much regional variation. The only one to call out in the first quarter would be the winter storm that impacted primarily Texas and the Southern Plains had a negative effect, but I think a lot of that was reversed by the stimulus. So we didn't see that the net of those two was meaningful to the performance of the company during that time frame. But regionally, otherwise, to call attention to the company-owned restaurants, we constantly see positive growth across all regions of our restaurants continue to play out through this time frame. However, these company-owned restaurants tend to be older than most of our average restaurants, just because they're in mature markets like Dallas and Las Vegas. So their performance may be a little bit softer, but I don't think that's indicative of anything otherwise as compared to the rest of the business.

The next question will come from James Sanderson with Northcoast Research.

I wanted to drill down a little bit more on the growing number of clients in your digital database. I wonder if you could give us a sense of who these clients are, whether they're heavy wing users, new users and what strategies you're going to deploy to try to increase frequency or engagement, especially as we lap or get through some of this government stimulus. And then I do have a follow-up.

Thank you, Jim. To reiterate what I mentioned earlier, and I think the question was asked about these heavy QSR users as a target for our business, we have definitely seen a lot of net new users that fit that profile. So a heavy QSR user tends to be a little higher in income than our core user and uses QSR platforms more so than our -- even our core user does. Those were an attractive target for the brand, and we're bringing them in large numbers. We're growing just pure new customer counts. Our strategy to retain them, as mentioned before, is to incorporate our CRM platform, which provides one-to-one messaging to those guests to encourage them to repeat that first occasion and come back to Wingstop. And our goal is to get them in, certainly within 90 days, but to convert them into a heavy user, which might use us as many as 5 times in a quarter. So our strategies are well in place. They are effective. And as we noted, a 12-month high on our overall retention rate.

Okay. So these new Wingstop users are coming into your system as relatively light Wingstop clients? And the idea would be to move them up to have your engagement over time. Is that the right way to look at it?

Yes.

Okay. And I just wanted to clarify the comp to date for company-operated stores in the current period. Is that also flattish compared to prior year?

Jim, this is Michael. We didn't disclose the company quarter-to-date number. Obviously, it's not an area we want to highlight or focus, primarily because it's 30 restaurants out of the whole system and they're doing $2.2 million in AUVs. And so really, what we're focused on is the broader system, the health of our franchisee base, our brand partners, which is really kind of the long-term story here that's going to continue to help feed the unit development pipeline that we talked about earlier.

Understood. If I can just add one more quick question regarding your Canadian development, are the royalty rates on that relationship comparable to the rates we see to date? I know...

They are, yes.

The next question will come from Todd Brooks with CL King & Associates.

First, and this follows up on the Canadian deal that was announced this week, as you're looking for the other countries that were highlighted as kind of early access to drive the international expansion. Are you looking to structure those with this type of larger master franchise type of structure after striking the deal in Canada?

We are. We would call it a master development agreement. So it's one single operator that opens and develops restaurants in the market. There are no sub-franchise specific considerations in these deals.

Okay. Great. And then a second question, if I may. You talked about your success in mitigating wing cost inflation and just that raw 50% type of increase that you've seen in the Urner Barry. When it's turning that discussion about new entrants that has been asked over the couple of quarters into a different type of discussion, the competitive advantage that the Wingstop brand has with the ability to mitigate those wing costs and how do you think new entrants are dealing with this? Do you expect to drive some people out of the wing category that kind of flooded into it with virtual brands, this persistent pressure on wing cost across fiscal '21?

Yes. It's an excellent question. Again, I go back to the competitive dynamics. And if I were in the shoes of some of these other brands, I'd probably do something quite similar. But we do expect that, at these elevated prices, it will be very difficult for them to blend that into their desired margin structure. And if that's the case, then should take some pressure off chicken wings for the balance of the year. But I will say that one of the other material factors is not just the competitive nature. It has much to do with the impact of the government stimulus and creating an artificially high wage rate that is competitive to the people that are necessary to actually process chicken. And so the absolute number of chickens that are being processed is down. That's why you see pressure even in the sandwich business and everywhere else on chicken right now. Labor shortages are the real challenge we're dealing with. And so dealing with that in and of itself would alleviate some pressure on the market on its own. Because there's just not the volume of product out there before. But I think our strategic positioning, our great partnerships that we have with some very large chicken suppliers affords us the opportunity to make sure that we have adequate supply to drive our business at a reasonable price. And when the market does subside and demand for those wings goes down as we reopen the economy and get restaurants back operating again, Wingstop will always be there with them to continue to not only grow but be buyers of chicken wings.

The next question will come from Peter Saleh with BTIG.

I just want to come back to the conversation around delivery. Can you give us an update on how much of the delivery mix now is coming through your own website, your own app versus your third-party partners?

Yes, it's been hovering around 70-30 the marketplace to Wingstop. So it's -- that's been our consistent mix.

Great. And if I could just follow up on that, do you guys see any crossover in customers? I don't know if you get the data to see. Are there any crossover between those? Are the customers coming through DoorDash, are they unique? Or do they -- do you see them come to the Wingstop website as well?

Well, I think our pure desire that they come through the Wingstop website. But the way we've established this, we're a little bit agnostic as to which platform they come through. What I will say is that they enjoy a more competitive price if they come through wingstop.com than through the marketplace. And so our price differential creates an incentive for them to use the Wingstop platform. And I also would submit that, through our CRM efforts, we will be pushing more and more of them into that Wingstop platform than through the marketplace.

Excellent. So just lastly, so will you be marketing that going forward to try and kind of shift that? Is that how we should shift the mix a little bit more towards Wingstop? Is that how we should understand that?

Yes. Yes, we've always marketed -- anything we market directly from Wingstop is always pointing to wingstop.com. That would be in TV advertising as well as in our paid social and also our CRM platform. So we always point them there first.

The next question will come from Chris Carril with RBC.

So I wanted to ask about capacity and throughput. And any updated thoughts on those topics specifically? Clearly, the gap between system AUV, company AUV implies significantly more capacity remains in the restaurants? I'm curious to hear any updated thoughts around throughput and any efforts to improve throughput now that system AUVs are above the $1.5 million level.

Yes. We've commented many times in the past that we believe our restaurants have the capacity to go well above even the $2.2 million mark where we see our existing corporate-owned restaurants. As our restaurants mature over time, they continue to grow. It's a very unique curve, applicable to Wingstop in this industry. What I can tell you is, at our highest volume levels, we are operating right at or above $3.5 million out of the same platform annually. There are a handful of restaurants that can do that. So we know that we don't have a capacity or throughput issue. We can -- as we get more volume, we can increase the number of deliveries each week to the restaurants and leverage that small space that we have very efficiently. So we have a long way to go in that domestic AUV before we'll hit a capacity constraint.

Got it. And then just on SG&A, can you help us frame up how you're thinking about this line item longer term just relative to maybe the total system sales, just in light of the reclassification of expense related to advertising noted this morning and then just the commentary to you around just investing in technology and growth?

Yes, Chris, this is Michael. We've historically shared the comment around anchoring expectations around core G&A, where we've historically had, as you pointed out, we backed out any headcount related to national advertising as well as any convention-related expenses. Now those have been removed from the number, but we do also back out noncash stock-based compensation as well. And so when you get to that core SG&A number, how we think about that longer term is really a number that we've benchmarked to more mature brands, but it's roughly around 2.5% of system sales is the target we kind of guide to.

The next question will come from Brian Vaccaro with Raymond James.

It's Dan Docherty on for Brian. I just wanted to circle back on international growth for a second. I think you mentioned the prolonged pandemic conditions as sort of the driver of the closures. Are you adapting your prioritization of certain geographies internationally as market dynamics kind of remain pretty fluid with the pandemic?

Yes. That's a fantastic question. The answer is yes. You may recall that a year ago -- a little over a year ago, we did a big strategic study globally to identify a few things. Number one, which markets fit the right archetype for us to go aggressively develop in and which one should we shy away from. And our efforts in markets like Canada, the U.K., our work we're doing in China to continue to prepare for expansion there. I'll highlight what we talked about in Canada, which is the ability to have a premium positioning with a very high off-premise mix. That's our sweet spot. And we know just our early indications in the U.K. and the great success we're having there would lead to that. Now some of these markets where we are experiencing closures were markets that didn't fit that mix perfectly. And so we've had some challenges. Larger restaurants that are sit-down-oriented or are in markets where we don't enjoy that premium price position have been the harder challenges for us, and that's where we are experiencing some closures. But for the most part, markets like the U.K., Mexico, our entry into Canada, further expansion in Europe and parts of Southeast Asia, where we enjoy that price premium will be the markets that will stabilize and continue to grow for us long term.

Great. And then just one item. Apologies if I missed this, but did you guys provide any color on the cadence for sales within the first quarter?

We did not, no.

This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.