Activist Investor Suggests 'Substantial Changes' To Buffalo Wild Wings' Business

Buffalo Wild Wings BWLD may soon have its wings clipped, as hedge fund Marcato, managed by Mick McGuire, opted to address the franchisees of the company directly in a bid to force the company to adopt measures suggested by it for change and value creation. The fund has a 5.2 percent stake in the restaurant chain.

6-Point Strategy

In an open letter, the hedge fund Marcato took pains to explain that the efforts taken by it since June to make the company buy its views have gone down the drain. The six-point strategy proposed by the fund to the company earlier and shared now with the franchisees include:

1. Brand managed for and by franchisees: The fund called for a return to a majority-franchised model, with the franchisees given equal and immediate access to new systems, tools, marketing initiatives and operational improvements.
2. Developing new growth opportunities for franchisees: This calls for a 90 percent or higher franchise mix, which would require refranchising of 600+ company units, and focusing on international growth.
3. Prioritizing return on invested capital in all brand and capital initiatives: Value engineering review to be done to reduce costs of new unit development, improve ROIC and expand the addressable market for franchisee units, investment to be made in technology and prudence to be exercised in marketing campaigns.
4. The company keeping the best opportunities for itself.
5. Removing obstruction to M&A and higher franchisee valuations.
6. Alignment at the board and management level.

Marcato also said it has launched a dedicated website www.winningatwildwings.com to share its views on how it can help the company realize its full potential and solicit views from stakeholders regarding ways for improving the company.

Buffalo Wild Wings reported mixed third-quarter results in late October, as same restaurant sales fell for the third straight quarter. The restaurant space is facing rough weather, hit by food deflation, rising labor costs and competitive pressure.

At last check, Buffalo Wild Wings was sliding 1.79 percent to $167.80.