Buffalo Wild Wings Announces Refranchising Of 83 Outlets
Zacks Investment Research | Jun 20, 2017 08:47AM ET
Buffalo Wild Wings, Inc. (NASDAQ:BWLD) launched its refranchising program via which it is ready to sell about 83 of its company-owned restaurants to potential franchisees.
The company has selected outlets across Canada, Central and Eastern Pennsylvania, Northeast U.S., South Texas and Washington, D.C. as part of this “on-going portfolio optimization process” through which it plans to sell 13% of company-owned restaurants. To assist in managing the initiative, the company has hired The Cypress Group, a leading restaurant and franchise investment banking firm.
Refranchising is a key strategy of activist investor Marcato Capital Management, which holds about a 9.9% stake in the company and is becoming increasingly powerful within it. The firm has pushed Buffalo Wild Wings to franchise about 90% of its locations by 2020, in a bid to save costs.
The firm had also been agitating for Buffalo Wild Wings CEO Sally Smith’s removal, who has finally announced her retirement from the position before the end of 2017. Moreover, Marcato acquired three seats on the nine-member strong board of directors of Buffalo Wild Wings, last month.
Notably, at the end of the last reported quarter, Buffalo Wild Wings managed about 623 company-operated Buffalo Wild Wings locations around the globe and franchised about 607 brand outlets.
Evidently, the company has a somewhat similar mix of franchised and company-owned restaurants, at present. While franchised restaurants reduce capital needs to a large extent and provide revenues in the form of royalty, company-owned restaurants allow it to have full control over operations as well as keep the profits.
As the company shifts more toward franchising, this optimization initiative coupled with the savings as a result of efficiency improvement is likely to aid it in offsetting slowing consumer traffic, greater promotional activity, higher wing costs, and labor headwinds.
Many restaurateurs like McDonald’s Corporation (NYSE:MCD) , Domino’s Pizza, Inc. (NYSE:DPZ) , The Wendy’s Company (NASDAQ:WEN) also rely on franchising to boost earnings. Meanwhile, restaurant operators including Brinker International, Inc. (NYSE:EAT) are focused on a fully company-owned model.
We note that shares of Buffalo Wild Wings have declined nearly 11% year to date against the Zacks categorized Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.