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ouarmy2012 (65.92)

Bland Food + Overpriced Beer + Sports = gold mine?



May 06, 2013 – Comments (0) | RELATED TICKERS: BWLD

   The Buffalo Wild Wings (BWLD) mystery...How are they continueing to grow??? It is mind boggling to me, but i think i have an answer to that question.    A bit of history first, BW3 (the ohio name atleast), aka B-dubs, was founded in Columbus, Ohio by James Disbrow and good friend Scott Lowery. The BW3 that nobody really knows about comes from the original name Buffalo Wild Wings & Weck. The weck is for they type of roll that they served a beef sandwich on. Since inception in 1982 they have grown to 900 or so stores in the U.S. and Canada.  

   And now for a bit of financial facts to prove that this company has grown over the past few years. Revenue, since the 2nd quarter of 2010 revenue has declined only 1 quarter being the 1st to 2nd quarter in 2012, 251.12 mil to 238.72 mil, a  4.93% decrease. On an annual basis Revenue has increase year over year from 2008 to 2012, 422.42 mil to 1,040.53 mil respectively, a 246.32% growth,!

   Net income has risen every year since 2008, 24.44 mil to 57.28 mil, 234.36% increase going in line witht their increase of revenue. The low revenue to net income ratios is probably because of the high operating costs of a chain restaurant. However net income has decreased quarterly from the 1st to 3rd quarter of 2012. But we are fools right? And not in it for the short term?   

   Net income has risen every year since 2008, 24.44 mil to 57.28 mil, 234.36% increase going in line with their increase of revenue. The low Revenue to Net Income ratio is probably because of the high operating costs of a chain restaurant. However their Net Income has decrease quarterly from the 1st to 3rd of 2012. But hey we are fools right? And not in it for the short term?  

   Assets to Liabilities, an important ratio, atleast to me to see if they are taking on manageable debt. The ratio for 2012 was 2.84 to 1 (591.09 mil to 207.72 mil), assets to liabilities. The amount of material assets that they hold is more than that of their liabilities, so if something catastrophic happened they could sell things to pay off debt. Another thing to pay attention to is how long it would take to cover their liabilities with their net income, for BW3 it would be just about 4 yrs at the current net income and liabilities. Which to me is a pretty good time frame to pay off a multi million dollar debt even thought it is quite normal to have a constant balance of liabilities for a large company.  

   Management, the most important part of BW3, is seemingly top notch and in it for the long haul. The two top spots heald by women, Sally Smith who started working there in 1994 (ceo) and Mary Twinem who started working there in 1996 (cfo). Interesting enough they both came from the company Dahlberg Inc which is a company that produces hearing aides, yes i know a very odd change of companies.   

   Now on to the issues that make this successful company a mystery. The experience at BW3 can range anywhere from worst restaurant experience i have ever had to a just abover average sports bar. In the world of being a great company that grows consistently that usually doesn't cut it. I will talk about their food, service, environment, and advertisement to give you the idea of the mystery i see.  

  Lets not beat around the bush here, the only good food they have is their sauces, which if you think about it isn't really a food, it's a condiment. The wings that you put the sauce on are mediocre, with the combination of great sauce and mediocre wings you end up with an almost sub-par wing experience at BW3. Lets not even move onto the other menu choices they have. But i will say they made the right choice in branching off into the Burger world to help give their menu a bit more flavor. Expanding their food niche to burgers will help put up a wall to other wing competitors. I swear last thing...their beer prices are outrageous for the selection that they provide, $5 for a budweiser is unnacceptable.  

   Oh my god the service at BW3 can be painfully awful at times.  From all the locations i have been to if they are very busy expect a wait of 30+ min. from order time to chowing down time. I once had an experience at the Athens, Ohio location where i waited, no joke, an hour before a server approached me for any type of order. Now i am pretty particular with how i evaluate service at restaurants because i think that besides the food, service will make or break the experience. BW3 is a great example of service that should not be allowed by a restaurant chain. The wide variation in qualites of the service leaves me to give it an over sub-par in that category.  

   The environment  at BW3 is where the company makes up for their lack in food and service a seemingly impossible thing to come back from a lack in. Some how, MYSTERIOUSLY, they do. BW3 has effectively turned their restaurant into a family friendly man cave without the leather couches, recliners, and half naked posters of old hotties you used to fantazise about in your younger years. Dang now you have kids though and have to feed them oh so convenietly right when the game comes on. BW3 has convenietly solved that problem for you and has killed two birds with one stone. It also seemingly impossibly provides you an environment to get away from annoying watch venues like your weird neighbors house. Not to mention every BW3 has probably more square footage in tv screen than actual flooring, providing you with an endless amount of sports game combinations to watch. Last but not least they follow the principal of keeping things similar throughout all their stores in terms of environment.  

   Finally their advertisement has been integral in marketing their oh so specific experience of bland food, overpriced beer, and sports. I think the management knows that their food sucks because seldom does it have a star role in their commercials. This allows them to focus on the environment they give sports fans to watch their games in. They link their commercials with the positive experiences their customers will have tons of tvs and great times with your friends and/or family. We know what they are good at, they know what they are good at, and they remind us in every single one of their commercials and it keeps us coming back for more.  

   The mystery has been revealed, BW3 has effectively taken a sh**ty product (food and service) and turned it into a gold mine. They have overcome something that would normally destroy a restaurant chain by having extremely effective management and providing an environment in which people can carry out an american past time, watching the game.    

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