Buffalo Wild Wings  
Mick McGuire, founder of Marcato Capital Management, believes share price could triple if the restaurant chain improves its core business.

MINNEAPOLIS – Activist investor Marcato Capital Management LP demanded new leadership on the board and management levels of Buffalo Wild Wings Inc. The hedge fund is the chain’s fourth-largest investor with 950,000 shares, or a 5.2 percent interest in the company.

In a letter to James Damian, chairman of the Buffalo Wild Wings board, Marcato founder Mick McGuire revealed making Marcato’s discontent public became necessary despite a private dialog held two months ago regarding strategies for enhancing shareholder value.

“Given the Company’s lackluster analyst day presentation and observable discontent among shareholders and research analysts, we have determined that it is appropriate at this point to share our perspectives with the investment community,” McGuire wrote. “Along with this letter, we are filing the analysis that we shared with management at our first meeting in June and hope that research analysts as well as current and prospective shareholders will consider this information and express their views on the subject matter.”

In response, Buffalo Wild Wings said in a statement “We welcome communications with our shareholders and we value constructive input toward the goal of enhancing shareholder value.”

In the letter to Damian, McGuire said Marcato is “exceedingly optimistic about the future of Buffalo Wild Wings.” Nevertheless, the lack of detail around basic metrics of the business and “sub-optimal” capital allocation decisions were symptoms of a larger problem.

“The management team of Buffalo Wild Wings communicates its strategic and financial rationale to the investment community with inveterate avoidance of specificity,” McGuire wrote. “The chronic absence of detail around even the most basic of metrics causes us to question whether the right questions are being asked and answered.”

Necessary changes, McGuire wrote, include:

  • Fresh talent at the board of directors and management levels
  • A greater focus on Buffalo Wild Wings' core business
  • Higher sense of urgency, follow-through and accountability.

McGuire also called for a cessation of the company’s “emerging brands” growth plans, which focus on “hit-or-miss growth drivers — particularly those in the highly competitive fast-casual space.

“Experiments with new restaurant concepts are distracting management from advancing Buffalo Wild Wings’ core brand,” McGuire wrote. “At this point in time, any corporate resources, be they personnel, capital, or attention, would be better allocated to addressing the operational improvement opportunities at core Buffalo Wild Wings.”

Buffalo Wild Wings said “Members of our board and management team, as well as our outside advisors, have met with and spoken to Marcato numerous times since learning of its investment. We have reviewed Marcato’s June 2016 presentation, and will carefully consider its August 17, 2016 letter.”