Hooters’ fast casual chain Hoots Wings signs first franchise deal

Dive Brief:

Hoots Wings, Hooters' fast casual concept, struck a 60-unit franchise deal with Dallas-based AE Restaurant Group, according to a press release. This is the chain's first franchise agreement since parent company HOA Brands announced in December it would expand Hoots Wings through franchising.
AE Restaurant Group aims to open at least six locations this year, and plans to launch eight to 10 units annually starting in 2022. As of December, Hoots Wings had seven locations in Illinois, Georgia and Florida. At that time, Hoots said it would focus on Southeast, Midwest and Northeast expansion and would open 102 locations between 2021 and 2023.
Casual chains are finding growth opportunities in fast casual spinoffs that are geared toward off-premise traffic as diners continue to seek fast, contactless dining experiences. Cracker Barrel and Bloomin' Brands are also looking to grow their footprints via their Maple Street Biscuit Company and Aussie Grill concepts, respectively.

Dive Insight:

Hoots Wings plans to differentiate itself from rivals through its new franchising program. Its virtual wings competitors are run through existing kitchens at national concepts like Applebee's and Chili's, which limits the growth of those brands to existing physical footprints. This also appears to be the first time a full-service chain has franchised its fast casual brand.

Franchising can facilitate a speedier expansion process, especially here as Hoots seeks out smaller (and likely cheaper) real estate parcels for its smaller prototype. The parent company notes it has spent the past few years testing the business model in several markets, and touts its 35-plus years of experience in franchising to ensure strong unit-level economics.

Hoots Wings is on a "fast track for growth" thanks to its small and quick-to-build prototype and the support and resources of a national brand in Hooters, AE Restaurant Group's Jackie Albert said in the release. Still, it will be competing with a tidal wave of new competitors in the virtual wings space. In the past year, Brinker International's It's Just Wings, Dine Brands' Cosmic Wings (preceded by Neighborhood Wings by Applebee's), Smokey Bones' The Wings Experience and Fazoli's Wingville delivery-only concepts have all come online, posing a competitive challenge for Hoots Wings.

Some of these virtual wings brands have become quite ubiquitous, too. Cosmic Wings recently launched across nearly 1,300 Applebee's locations, for example, while It's Just Wings has about 1,000 locations through Brinker's Chili's footprint.

Few major brick-and-mortar national players exist in this space, however, which could bode well for Hoots Wings. QSR Magazine's list of top 50 chains by sales, for example, includes just one brand exclusively focused on wings — Wingstop. This is why Wingstop CEO Charlie Morrison often refers to his company as a "category of one." Wingstop doesn’t expect demand for its wings to wane anytime soon and is pressing the gas on development, with about 700 new restaurants in the pipeline. That is a long runway for just one player, and opportunity seems ripe for others to take advantage of demand as well with traditional restaurant formats.

Wing servings were up 7% in 2020 versus 2019 despite an 11% decline in restaurant traffic, according to The NPD Group. Additionally, retail chicken wing sales were up more than 10% year-over-year, according to IRI. This demand has led to a shortage of wings, however, so expansion won't be without its challenges.