What is in this article?:
- Buffalo Wild Wings invests in growth for 2014
- Branching out growth
Executives identified opportunities for the casual-dining chain in 2014, including the rollout of the new “guest experience” service model.
Lower food and labor costs drove a 24.9-percent gain in net income in the fourth quarter of 2013 for Buffalo Wild Wings, and the company plans to capitalize on that benefit in 2014 by devoting more capital to several growth initiatives.
“We are planning on investing some of that [food cost benefit],” chief financial officer Mary Twinem said during the company’s fourth-quarter earnings call. “When we look at where wing prices are in January and February … we are investing that in the labor line or some of it with the … ‘guest experience’ model rollout. [We are] also investing some of it in minimum-wage increases across the country, which we will work to … minimize the impact that has as we go through the year.”
Twinem and chief executive Sally Smith identified additional opportunities for the casual-dining chain in 2014, including the rollout of the new “guest experience” service model to all company-owned units, the adoption of at-table tablet computers at all corporate locations, new marketing partnerships, international expansion and investments in startup restaurant brands.
Buffalo Wild Wings’ biggest tailwind came from sharp deflation in the commodity price of traditional chicken wings. The average price fell 21 percent in the Dec. 29-ended fourth quarter to $1.64 per pound, compared with $2.07 per pound a year earlier.
Combined with about 2.1 percent of menu price increases taken in the past year at company-owned restaurants and the move to serve wings by weighted portion, the wing cost benefit contributed to a 2.2-percent decline in Buffalo Wild Wings’ cost of goods sold to 29.8 percent of sales.
The chain’s labor cost dipped a slight 0.2 percent to 30 percent of sales, as the cost of expanding the new service model — in which an extra server, or “guest experience captain,” visits tables to help customers with their sports-viewing experience — was offset slightly by a change in manager staffing at those restaurants.
Tablets to drive customer experience
Twinem and Smith expected labor costs to rise slightly this year due to minimum-wage increases in 10 states and some costs from the expansion of the new service model. But ultimately, they said, the guest experience model over time would increase customer engagement and loyalty and would help Buffalo Wild Wings introduce advanced technology to guests.
“The [guest experience captain] is responsible for creating a fun, exciting environment in the restaurant and helps leverage our second initiative: new technology,” Smith said. “This [tablet] platform combines a differentiated and interactive experience, offering BuzzTime trivia, poker, arcade games and more. We’re testing guest ordering and payment capabilities, and we expect to roll out this functionality in the back half of the year.”
Eventually, as the tablets allow guests to order from those devices, Buffalo Wild Wings could mitigate labor costs by enabling fewer servers to cover more tables, she said. Smith added that tablets could have guest-facing benefits like selecting music played in the restaurant, getting sports news updates or playing other kinds of games.
She also noted that greater interactivity provided by tablets could serve as another draw to Buffalo Wild Wings during times of the year with fewer sporting events that drive a lot of traffic.
“We really believe this model has the ability to drive same-store sales, whether it’s through increasing the shift in purchases coming back for another time or just helping introduce the guest to the technology,” Smith said. “It is our goal certainly that sales for the most part cover any incremental labor. That’s not always the case in the first couple of months that it’s rolled out, but we are very pleased with the results, and that’s why we are going to continue rolling it out.”