The Secret Sauce

Issue 04-13-15   |   Reviewer:   Larry Tunnell, Ph.D., CPA
Disciplines:


Abstract

Minneapolis-based Buffalo Wild Wings has grown from about 300 U.S. locations to more than 1,000 in the past decade, with sales and a stock price that are the envy of Olive Garden, Outback Steakhouse, and other rivals. Profits last year rose 31 percent and the stock has jumped by 45 percent since mid-October.  The casual-dining industry, characterized by table service and moderate prices, scraped out sales growth of 2 percent last year, according to NPD Group. Sales at Buffalo Wild Wings’ company-owned and franchised stores grew about 6 percent.

Even after raising prices last fall to offset the surging cost of chicken wings, sales were up more than 11 percent in January. On a single day in February—Super Bowl Sunday—its customers gobbled up 11 million wings.  Chief Executive Officer Sally Smith says she thinks there’s room for an additional 600 stores in North America, especially on the coasts. The company has more than 20 outlets in Canada, Mexico, and the Philippines, and plans to keep expanding abroad. Revenue was $1.5 billion last year.

Smith, a 57-year-old accountant who’s partial to spicy garlic wings, has run Buffalo Wild Wings for almost 20 years. She says when she and her chief financial officer, Mary Twinem, pitched the company’s initial public offering in 2003, investors kept asking, “How can two women run a sports bar-and-grill?” 

The company started in 1982 with one restaurant in Columbus, Ohio. When Smith joined as CFO in 1994, Wild Wings had about 30 locations, no financial statements, and no computers. A U.S. Department of Agriculture chart showing wing prices for the past five years resembles a roller coaster, climbing and diving by as much as $1 a pound, hitting bottom at about 76 cents in 2011 and topping out at $2.04 in 2013. A year ago, Wild Wings was paying $1.36 a pound for traditional boned wings, including freight and handling charges. Lately the price has risen to $1.90. Managing the volatility is crucial, because boned wings account for about a quarter of Wild Wings’ costs. 





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