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Marcato Capital Letter To Buffalo Wild Wings Franchisees $BWLD

As you may know, Marcato is a significant investor in Buffalo Wild Wings (“BWW” or the “Company”). Over the life of our investment, we have observed a lack of urgency among the Board and senior executives that is crucial in today’s difficult operating environment. We strongly believe in the proven BWW brand and the substantial future potential of the business. In our view, if the Company’s strategy – including the franchise business model – is redesigned and executed properly, there is a significant opportunity to create substantial value for all stakeholders.

In order for the brand to achieve its full potential, we have proposed that Buffalo Wild Wings make substantial changes to its business. Returning to a predominantly-franchised business model and putting franchisees first are key components of our proposal. For this reason, we are writing to you directly to keep you informed about our work and views.

Since June, we have sought to share our views with the Company’s Board of Directors and management team. In many cases, our overtures have been ignored. While some of our communications are already public, we have launched a dedicated website where you can access ideas and materials we have shared with the Company at:

We believe it is important that all franchisees are fully aware of our ongoing dialogue with the Company and that you have the opportunity to express your perspective on how Buffalo Wild Wings can be improved.

The points below summarize how our efforts can benefit your business and the BWW brand:

I) A BRAND MANAGED FOR AND BY FRANCHISEES. We strongly believe that the future strength of Buffalo Wild Wings will be best realized through a return to a majority-franchised model, in which serving the needs of franchisees will be the key to growth and innovation. Under our proposal, Buffalo Wild Wings would adopt a franchisee-first approach:

  • Franchising will be the top priority of the business, and the franchisor will no longer be conflicted by aspirations of company-operated unit expansion.
  • Guest initiatives and related investments such as tablet order and pay, Guest Experience Captains, and loyalty programs will be vetted for franchisee feedback, ROIC analysis, and business improvement. Initiatives that do not deliver measurable and compelling results should not be rolled out.
  • Franchisees will receive equal and immediate access to new systems, tools, marketing initiatives, and operational improvements that are proven at company-operated units.
  • The result will be a franchisee-oriented corporate partner, with a leaner structure that can be more responsive to your needs.

II) DEVELOPING NEW GROWTH OPPORTUNITIES FOR FRANCHISEES. Currently, the business favors the expansion preferences of the corporate parent. We believe that markets and territories currently reserved for future corporate development should be made available to franchisees:

  • We believe all stakeholders would benefit from seeing the system transition to a 90% or higher franchise mix. To achieve this target, approximately 600+ company units would be refranchised, inclusive of expected future system growth.
  • Refranchising company-owned stores provides you an opportunity to reinvest your cash flow into additional units, leveraging your operating expertise, managerial infrastructure, and local marketing resources. Qualified existing franchisees will be favorably positioned to acquire company units in new, overlapping, or adjacent markets.
  • Seasoned, well-capitalized operators from other brands will have a unique opportunity to participate in refranchising, allowing for cross-pollination of operations best practices and sales-driving ideas, and engendering greater system diversity.
  • International growth will be a significantly larger focus of time and resources to take advantage of this largely untapped growth opportunity.

III) PRIORITIZING RETURN ON INVESTED CAPITAL IN ALL BRAND AND CAPITAL INITIATIVES. We believe Buffalo Wild Wings must refocus its priorities for capital allocation and business spending on maximizing returns on invested capital. We are concerned that capital allocation discipline and ROIC have deteriorated in support of corporate growth at any cost:

  • New unit development has been constrained due to ever-increasing capital costs and pre-opening expenses, which have reduced the number of potential locations that can achieve the volumes to justify the required investment. Our plan would initiate a value-engineering review to reduce the costs of new unit development, improve ROIC, and expand the addressable market for BWW franchisee units.
  • Capital for expensive Stadia remodels should be deployed only where supported by observable returns. The cost of these remodels should simultaneously be minimized through our proposed value-engineering process.
  • “4-wall” profitability should have pride-of-place over Average Unit Volumes through initiatives to reinvigorate the mix of alcohol sales and to reexamine the current menu design and labor model.
  • Marketing campaigns will be:
    • Considered an important financial investment evaluated through the lens of ROIC.
    • Measured against specific business objectives (comp sales / traffic, day part patterns, improved mix, etc.).
    • Data-driven so that resources can be redirected to only those programs that demonstrate quantifiable success.
  • Investments in technology, take-out, and delivery should be structured to minimize upfront cost and maximize incrementalprofits without cannibalizing in-store visits and high-margin alcohol sales.
  • This framework will drive higher returns on existing units, open more opportunities for profitable growth, and enhance the brand’s attractiveness to potential buyers of franchisee networks.

IV) THE COMPANY KEEPS THE BEST OPPORTUNITIES FOR ITSELF. The Company has retained many choice “greenfield” markets in high-AUV regions, such as California, Florida, Texas, and Washington, D.C., for its own development, effectively capping the growth opportunities available to existing franchisees and deterring investments from new entrants.

V) REMOVING OBSTRUCTIONS TO M&A AND HIGHER FRANCHISEE VALUATIONS. We believe that our recommendations would improve the valuations of franchisee networks and transaction dynamics in favor of franchisee growth:

  • The Company’s tendency to exercise its Right of First Refusal (ROFR) option reduces the universe of interested buyers who fear that their time and energy is being wasted as a stalking horse bidder.
  • A committed refranchising program would dramatically increase the demand for BWW franchisee networks, both in number and purchasing power of interested buyers. These well-funded buyers have been forced to focus on other, potentially less-desirable restaurant investment opportunities due to the low availability of BWW acquisition candidates, limited growth potential in current franchised markets, and overly-restrictive franchisee policies at Buffalo Wild Wings.
  • Availability of new Area Development Agreements would add value to your network, with a known and contractual development opportunity.
  • We have engaged multiple M&A advisors specializing in franchise transactions who believe that there is tremendous appetite for BWW franchise platforms and that the market would enthusiastically absorb any and all units to be refranchised, bringing fresh growth-oriented capital into the system.


  • The Board of Directors must include directors with real restaurant operating experience; with the financial acumen to appropriately evaluate the business considerations of BWW’s brand and strategy development; and with an appreciation for the importance of a healthy and prosperous franchise system.
  • Management incentives must be redesigned to deliver on these goals.

We believe the path that creates the most value for both franchisees and the franchisor is a strong franchise-based system in which the corporate franchisor is focused on maximizing the value of the BWW brand and empowering franchisees with the tools and opportunities to profitably grow their businesses.

We would enjoy the opportunity to hear your perspectives. Please visit to read more of our work and for a link where you can send us your ideas.