Buffalo Wild Wings to sell company owned units
March 29, 2017
by Erica Shaffer
MINNEAPOLIS – Buffalo Wild Wings Inc. plans to sell 10 percent of company owned restaurants. The Cypress Group, a leading restaurant and franchise investment banking firm, will help with the sale.
The move comes following a challenging fourth quarter in which the company reported a 38.2 percent decrease in net income to $15.6 million and full-year earnings slipped 0.3 percent to $94.7 million. Same-store sales decreased 2.4 percent at company owned restaurants and 2.7 percent at franchise locations for fiscal 2016.
The sale of company owned restaurants is part of the company executives’ plan to increase returns and boost shareholder value. In a call with analysts in February, CFO Alexander Ware said the locations under consideration for sale are “effectively subscale in their geographies,” and can be better managed by others. He added that some locations came with acquisitions, are in islands that are not contiguous to existing operations or they are in locations where Buffalo Wild Wings doesn’t have an effective operating model.
“We are excited to partner with The Cypress Group, which has a notable breadth of franchise deal experience and an extensive network of valuable relationships,” CEO Sally Smith said in a statement. “We anticipate engaging with successful, committed franchisees with the desire, experience and financial ability to build our brand and further strengthen the Buffalo Wild Wings system.”
Additionally, the company identified a second set of restaurants that will be the focus of location-specific improvement plans.
Marcato Capital Management LP, which retained the Cypress Group in 2016 to conduct a feasibility study of refranchising at Buffalo Wild Wings, said “We strongly believe that a shift to a highly-franchised business model is not only feasible, but also creates substantial value for Buffalo Wild Wings shareholders over the long term. Even with the Cypress Group’s support of the feasibility of Marcato’s refranchising proposal, we remain concerned that Buffalo Wild Wings will continue to resist this plan.”