Buffalo Wild Wings’ new wing pricing structure and guest-focused service model got off to a solid start in the third quarter, company officials said, giving the company confidence in future growth.
During the Sept. 29-ended quarter, in which net income grew 66.9 percent to $17.9 million, the chain rolled out a new pricing structure systemwide to sell wings by portion size — snack, small, medium and large — rather than by discrete numbers of wings. The move accounted for one-third of Buffalo Wild Wings’ 1.2-percent reduction in food costs for the third quarter, to 30 percent of sales, chief financial officer Mary Twinem said.
Chief operating officer James Schmidt added that servers and managers were thoroughly trained to explain the change to guests, who had few complaints about the new pricing structure.
“We haven’t seen any issues with its acceptance in any particular area at all,” Schmidt said. “We see no evidence of any adverse impact either on same-store sales or our wing sales. We captured the [cost of goods] improvement that we hoped to capture as a result of the rollout, and guest loyalty and value perception across our system have held fairly steady.”
Buffalo Wild Wings also began implementing its “Guest Experience Model” to company-owned units during the quarter, in which “guest experience captains” were added to hourly server teams to accommodate customers’ sports-viewing experience and to guide in the use of new in-restaurant technologies, like tableside tablets for playing games and trivia.
Twinem said the new service model, in place at about half the brand’s company-owned system, contributed to a slight 0.2-percent increase in labor cost to 30.3 percent of sales in the third quarter, as higher hourly labor was partially offset by efficiencies in a new manager structure.
Chief executive Sally Smith said the brand would “remain focused on providing a unique, compelling and social sports-viewing experience for our guests through our Guest Experience Model” and expand the service style to the remaining 50 percent of the company-owned system by the end of 2014.
Through the first four weeks of the fourth quarter, same-store sales are trending up 5.3 percent at company-owned locations and 3 percent at franchised restaurants, Twinem said. She added that the Minneapolis-based company anticipates opening 54 corporate Buffalo Wild Wings restaurants and 53 franchised units in the United States and two international franchised locations for the full fiscal year of 2013.
Building beyond the core business
Buffalo Wild Wings’ domestic unit growth would decelerate slightly next year, officials said, to an expected 45 company-owned openings and 40 franchised openings. Yet the company would remain in aggressive growth mode through an increase in its international expansion, as well as through its partly owned PizzaRev concept, and possibly more growth vehicles in the future, Smith said.
The chain aims to increase its unit count in the U.S. and Canada from 959 locations currently to 1,700 over the next 10 years, Smith said. She conceded that this would represent a slower domestic-development pace than the past few years for Buffalo Wild Wings, but as the chain builds out the United States and opens more units on the East Coast and West Coast, it will be more discerning in its real estate selection.
“You want to be careful about the cannibalization, making sure that you do get that right location,” Smith said. “We really ramped up our unit growth when we were able to take advantage of some of the weaker real estate markets in 2009 and 2010. Certainly a slowdown by developers makes finding that exact site more difficult.”
The company remains bullish on its prospects for revenue and earnings growth even with a more prudent growth pace for its namesake brand because of its newer strategy of acquiring possible growth vehicles, Smith said. The chain invested in Los Angeles-based pizza chain PizzaRev last March to begin the initiative, and would be open to more strategic investments, she said.
“We’ve begun implementing strategies to build an enduring, diversified portfolio of restaurant brands to sustain long-term growth,” Smith said. “Our equity investment in PizzaRev is an example of how we’re evaluating emerging brands to fuel our future growth.”
The first two PizzaRev locations are scheduled to open in Minneapolis in the first quarter of 2014, with several more planned by the end of next year.
Franchisees are expected to open at least 10 international locations next year in Mexico, the United Arab Emirates, Saudi Arabia and the Philippines, officials said. Smith also disclosed that she recently traveled to India to meet operators interested in potentially becoming franchisees.
“We think that the international market is tremendous,” she said. “The world is pretty large, and we think that wings and pork certainly are welcome everywhere. … It’s hard to put a number on it, but we have some goals.”
Buffalo Wild Wings operates across 49 states and Canada.