Wing Kings

By Gina LaVecchia Ragone

2007 Chain of the Year
Sports. Wings. Beer. It's more than the slogan of Restaurant Hospitality's 2007 Chain of The Year. It might also be the mantra of a large segment of the dining public: 18- to 40-year-old guys who love sports and who also just happen to be the backbone of Buffalo Wild Wings' customer base. In fact, the Minneapolis-based company has built a small empire on spicy little chicken parts, cold brews and sports on the tube.

Many casual operators sputtered their way through the first half of this decade. In recent years, same store sales at these chains have shown little or modest increases. Full-service restaurant growth has lagged behind that of the limited-service segment—four percent versus quick service's six. Faring the best in the full-service segment, however, are the operations offering a varied menu, and Buffalo Wild Wings—with menu price points below that of many of its competitors—is doing exceptionally well. In the five years from 2000 to 2005, its base of company-owned and franchised restaurants expanded from 137 to 370 units; system-wide revenues increased from $53 million to $209 million, an annual rate of 31 percent. Today, there are 443 company-owned and franchisedrestaurants operating in 39 states. Unit volumes for new locations range from$1.8 to $2.3 million. Although per-store figures lag behind other bar-and-grill concepts, the chain's numbers, unlike those of many competitors, are on an upswing.(In 2001, average unit volume was just $1.4 million.) Buffalo Wild Wings, withits eyes on the 1,000-unit mark, certainly seems headed in the right direction.

From College Campus to Main Street
The company's slogan sums up its niche simply enough: Wings. Beer. Sports. Wings account for 24 percent of total sales; alcohol, including its 20 beers on tap, 29 percent. While Buffalo Wild Wings may not have invented the Buffalo wing, it can take credit for being the first national wing concept.

Industry watchers credit Buffalo Wild Wings' success, in part, to executing the wings-sports niche concept better than anyone else. Unlike other wing joints' three-sauce selection, Buffalo Wild Wings offers 14 flavors, as well as a variety of alternative offerings—what the company calls "cravable" appetizers, salads, sandwiches and entrees. The concept's atmosphere is bright and clean and energized by multimedia systems that include dozens of TV monitors, as well as video and trivia games that guests can play at their tables. Many sports fans and families consider it the right food in a fun atmosphere at the right price.

Not only is Buffalo Wild Wings not based in Buffalo, it's not even from Buffalo, the birthplace of Buffalo wings. The company's roots are actually in Columbus, where founders Jim Disbrow and Scott Lowry opened their first restaurant near the Ohio State University campus in 1982. Originally named Buffalo Wild Wings and Weck (A Buffalo, NY, bar staple, a "weck" is a roast beef sandwich on a salty kummelweck roll), the company was renamed bw-3 in the 1990s.

From the start, the operation developed a cult-like following, one that even today helps fuel the brand. Company c.e.o. Sally Smith says she's regularly stopped in airports or shopping malls by wing afficicionados, eager to discuss the finer points of chicken wings and share their "B-Dub's" memories.

Disbrow and Lowry sold their first franchise in 1992. By 1994, with nine company units and 26 franchised locations, the company hired Smith as the company's c.f.o. Smith, who had experience with a national operator/franchisor of hearing aid centers, was brought in to make sense out of bw-3's dismal finances. Two years later, she was the CEO. Though an accountant by trade, Smith quickly showed she possessed not only financial acumen, but leadership and vision as well. What was clear to Smith was that if the brand were to fulfill its potential as a growth company, changes were in order. Thoughthese changes came gradually, Smith, in many ways, re-created the brand,broadening its appeal and setting the stage for massive expansion.

She began by closing bad locations and updating the existing restaurants' old, dark interiors. Most controversially, Smith changed the company's name. In 1997, all company-owned locations and several of the franchisees dropped the bw-3 moniker and adopted the more understandable Buffalo Wild Wings name and a new logo. "There was no awareness of the name ‘bw-3' outside of Ohio," says Smith. "People didn't even know we were a restaurant. We wanted a distinctive name and logo to tell people who we were." The company also rolled out a new prototype: A lighter, larger, more family-friendly model equipped with multiple flat screen projection televisions and nearly 40 other monitors—even in the bathrooms. The company also adopted a new "flexible" service model. Up until that point, guests ordered at a counter and waited for their name to be called. Guests still have that option (though flashing pagers are now employed), but may also choose traditional table service.

Although some franchisees backed the updates, others needed time to come around. "It helped that the changes happened over time," says Smith. "As franchisees saw the success we were having with the new name, they got behind the changes."

Keys to Success
Smith says the company's success can be credited to several factors. One is its unique experience. Rather than focusing on quick table turns, Buffalo Wild Wings' flexible service model puts diners in control of their experience. The strategy also allows guests to linger. Because of its sports orientation, customers often stay for the length of a ball game, placing several food and drink orders over the span of two to three hours. For busy game days, guests don't mind waiting for a table while they enjoy drinks and the game in the lobby or standing near the bar. Those who don't want to wait place to-go orders, says Smith. Takeout comprises 17 percent of Buffalo Wild Wings' sales.

Unlike many sports bars, where food is an afterthought, the appeal of Buffalo Wild Wings is the food, specifically, the wings. Careful expansion of the menu to include salads, wraps, dinner entrees, even kids' items, has added breadth and helped the concept appeal to a broader customer base. New items are introduced each February. "We've tried to introduce new sauces and new menu items while still retaining the original guest who wants wings and a drink," Smith says. "As we've moved across country, tastes vary, so we conduct a lot of guest research and advanced menu screening. We try to tailor menu items to what the guests tell us they want."

Exceptional value—which has led to high guest frequency— has been another element of the company's success. Company research has shown that three to four monthly visits are not uncommon among Buffalo Wild Wings guests. The company does not share average check information, but its menu prices are below that of its bar-and-grill competitors, with most items priced in the $5-$7 range. Its most expensive offering is a pound of ribs for $13.99. Six wings are offered for just $4.79. With low price points and state-of-the art media, Buffalo Wild Wings presents excellent value for its 18- to 40-year-old target market.

Efforts to build brand awareness have also helped to grow the chain. Smith recently increased franchisees' contribution rates to the chain's national advertising fund from 2.5 to 3 percent, which has allowed Buffalo Wild Wings to buy national advertising in venues such as ESPN and CBS Sports. "With all of our efforts, we are very focused on the brand, and showing everyone, whether it's customers or franchisees, what the brand is all about," Smith says.

What's Next: 1,000 Units
As for future growth, there seem to be plenty of opportunities for Smith and her company. The investment firm Morgan Keegan & Co. estimates that Buffalo Wild Wings has yet to enter one-third of the top 100 U.S. markets. The company is expected to add its own locations in existing markets, while seeking franchise partners in new regions.

Look for new units in highly populated, heavily trafficked areas near big box or grocery stores. New locations are often in areas with a high volume of weekday office traffic, taking better advantage of multiple dayparts than did their predecessors. Also, true to their heritage, Buffalo Wild Wings restaurants will continue to sprout up near college campuses, including a new unit not far from the original bw-3 site near Ohio State.

By growing at an annual rate of 15 percent over the next five years, Smith says Buffalo Wild Wings will more than double in size to 1,000 units by 2012. Writing last Spring, the analysts at Morgan Keegan opined, "We believe BWLD has strong development potential for years to come. With larger bar and grill chains like Applebee's and Chili's operating well over 1,000 units, we believe it holds the potential to more than double its current system size to well over 1,000 locations."

Currently, two-thirds of the units are franchise locations and one-third are company-owned. Smith expects the ratio to remain nearly the same going forward. Finding qualified franchise partners is easy, and Smith credits the company's branding efforts of the past decade. Opening costs are about $1.2 million per unit, and partners must be able to muster the funds to open two to seven locations. Typically, says Smith, an investment group, including a development partner, a financial partner and an operating partner, will purchase the rights to a region.

Smith says the greatest challenges will be finding real estate, as well as leaders to run the restaurants and employees to staff them. On the flip side, Smith is confident about the brand's potential to reach 1,000 units. "Our guests are passionate about the brand," says Smith, who has seen everything from engagement rings on chicken wings to requests for wing sauce from Iraqi solders. "And if they insists on calling it ‘B-Dubs?' that's absolutely okay with me," Smith notes.