bwld-businessstrategy-1.pdf

8/11/2019 BWLD-BusinessStrategy-1.pdf

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BUSINESS STRATEGY ANALYSIS

ACC 5310.160

Instructor

Dr. H. Garcia

By:

Francisco J. Castaneda


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1. What is the business, the products, the customers, what is the recent history economic performance, what

are the recent strategic decisions taken by the company?

The Minneapolis Minnesota Headquartered Buffalo Wild Wings Company (BWLD) first opened their doors in 1982at a near location to The Ohio State University. Founded by Jim Disbrow and Scott Lowery they were originallyknown by the name of Buffalo Wings & Weck, and then later changed their name in 1998 to Buffalo Wild Wings &Bar, to best describe the restaurant brand and specialty. Moreover, in 1991 the company began franchising, andopened up as a public traded company in 2003. According to their 10K annual report BWLD as of December 25,2011 owned and operated 319 restaurants and franchised an additional 498 in North America. Furthermore, theyplan to continue their growth expansion to open up 60 new company-owned and 50 franchised restaurants during2012 in the U.S.

BWLD has continued to expand the variety of their food menu to include 16 signature sauces and 4 signatureseasonings ranging from sweet to very hot and spicy. Their food choice includes a 12 and under kids menu and avariety list of specialty items: burgers, salads, chicken tenders, popcorn chicken, shrimp, wrap and mixed appetizers,finger food and a full sport-bar menu offering alcoholic beverages. Their full bar has a variety list of more than 20domestic and imported beers. Every restaurant sits in a comfortable relaxed atmosphere accompanied by trivia andsports games displayed in their big screen TVs. Their restaurant furnishings are easily rearranged to accommodate

big parties, and many restaurants locations even include patio seating.

Restaurant Marketplace

As of December 2010, BWLD operates in 44 states, and they plan to continue their growth strategy in existingestablished markets in the U.S. BWLD, short term strategy is to quickly establish their brand awareness in therestaurant industry utilizing franchisees to take the companys name into new markets.

Restaurant Operations

The company operation expenses include The Restaurant Management Team, Kitchen Operations, Food Prep andQuality Control, Purchasing, Training, and Recruiting. On average a restaurant requires an investment per businessopening of $1.8 million and $225,000 in pre-opening expenses. BWLD, has developed strategic marketing plans tospecifically attract customers who enjoy watching sports such like basketball and football games by providing their

boneless Thursday discount price of wings to sports fans looking for a comfortable and relaxed place to unwindwhile they enjoy the restaurant menu choices available and the variety of wing sauces. Their operating expenses andprofits are affected in part by special events: Super Bowl, World Series baseball, Hockey and many of the othersporting events viewed during the year. When any of this sports is interrupted by lockouts or strikes like the recentNFL lockout in 2011 the restaurant profits are negatively affected.

The unique restaurant style has given Buffalo Wild a competitive edge among other restaurants who do not offer asports bar and the ability to show sports in large T.V. screens. Their combined strengths in the unique food servicestrategy, full sports bar, trivia games with a system that attracts card players and board fans including their longextended hours of operation makes BWLD an attractive place to customers and established their restaurant in the topof their industry among competitors. The restaurants total revenues as of December 2011 were $784, 478 million,and an increase of 13% in annual revenues from 2010 (See Appendix 1A for Financial Revenues & Expenses)

Restaurant Strategies

The restaurant plans to continue strengthening the Buffalo Wild Wings brand through a very aggressive businessexpansion plan and creating new products. The BWLD companys structure has coordinated a marketing strategythat will keep strive to shed light to the restaurant to help BWLD penetrate new unchallenged markets. Themanagement team will continue developing the quality and control procedures to keep the consistency of the qualityand concept of their products to satisfy new customers and maintain their image. In addition, the Buffalo Wingsinsignia and colors have been incorporated into sports memorabilia throughout the restaurant decor and wear attireby employees. The company plans to raise the level of awareness of their logo by displaying it wherever possible.An additional business strategy is to deliver a unique guest experience by providing a WOW-Experience to the


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customer with their dozens of televisions and projections screens, and an emphasis in operational excellence byfollowing a strict set of guidelines and employee training in both company owned and franchised restaurants. Third,they will continue to offer a boldly-flavored menu items with a custom and localized appeal to more than 18 distinctsauce flavors and also introducing new food items. Fourth, maintain an inviting-neighborhood atmosphere andcontinue their involvement by participation in community projects and charity events. Fifth, continue domesticexpansion plans and keep a lookout for joint ventures and partnerships opportunities in other countries. Finally, lookto increase store sales and profits.

2. What are the key success factors and risks associated with the firms chosen competitive strategy?

Competitive Advantage

The simplicity of the kitchen food preparation and menu items provides BLWD an advantage over other restaurantsthat have higher production operating expenses. Due to the simplicity of their menu items, the kitchen only requiresbasic and low maintenance equipment like fryers, grill and food preparation stations arranged in an assembly linestyle that provides productivity maximization. In addition, due to the simplicity of the menu items, it is unnecessaryfor BWLD to hire specialize Chefs and the learning curve and training for learning to prepare the meals is minimal.

Business Opportunity and Challenges

Moreover, due to the assembly line style of the kitchen BWLD is able to hire employees in an hourly schedule andmitigate the problems caused by staff turnover by hiring a higher number based of employees. In addition, BWLDhas constantly looked to leverage the costs of chicken wings by entering into long term contracts with producers andsuppliers. However, they havent formalized a permanent contract with anyone and for the most part continue to buywings at market price.

Chicken wings prices have been in an all-time low during the recent years up until this date. Finally, the firm hasdeveloped a point of sale system that tracks all transactions and costs in company owned and franchise restaurant.The point of sale system provides up-to-date reporting information to restaurant managers and corporate staff thatallow them to adjust strategies and coordinate efforts in marketing and deal with the costs of supply.

The restaurant industry is extremely competitive but the overall competitive advantage that BWLD has allows themto keep their attractive low price menu items, and an atmosphere of flexibility and simplicity that attracts customersinterested in a casual dining experience with a wow factor. The restaurants diverse amenities and sitting

arrangements provide a dynamic theme to diners who may be looking for a luncheon sitting in a counter stool sportsbar or a family dining experience.

Operating Risks

In all the advantages Buffalo Wild Wings & Bar has developed, some risks still exist. The risk of governmentregulation that plays the watchful eye and monitors the activities and sales of alcohol and regulates the type ofcontrol the management and handling of alcoholic beverages among employees and businesses must conform to. Inaddition, BWLD is subject to additional laws that dictate the relationship between franchisor and franchiseeoperations.

In addition to law regulations, BWLD has the challenge to monitor approximately 67% of their company business inthe form of franchise restaurants, and the difficulty to find and attract qualified franchisees has also increased due tothe demanding standards and requirements set forth by the company and additional regulatory laws.

Business Threats & Opportunities

The inability to control fluctuations in wing prices could harm the friendly low costs of their menu items. However,because previous contracts agreements in the past have proven successful and the stability of chicken wing pricesduring the present time the chances of finding an opportunity in a long term partnership is possible. Furthermore, theconstant pressures to expand their business could increase the administrative expenses and put a strained in the leanresources available. Also, due to the present delays in the opening of new restaurants stockholders have questionedthe strength and ability of the company to aggressively expand and meet annual goals.


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Due to the combined challenges discussed above, BWLD could experience a fluctuation in their annual earnings.As a result, some of the major risks involve may decrease the restaurants sales volume. Labor availability and costfor hourly wage, general economic conditions and consumer confidence. Last the ability to retain and recruit talent.

The opportunity to finance new forms of income by franchising has allowed Buffalo Wild to expand rapidly, but therisks by the franchisor remain. Existing franchisees are not the employees of BWLD and therefore they sometimesfail to comply with the company standard and regulations that could easily compromise the companys brand.However, BWLD has developed a plan to acquire back those restaurants that may be harmful to their brand, and inthis way mitigate the risks accompanied by the franchising program.

3. Does the firm currently have the resources and capabilities to deal with the key success factors and risks?

BWLD has established solid policies and procedures to maintain the integrity, efficiency and effectiveness of theiroperations that allows them to keep low food costs and staff training at a minimal. Their operations strive formaintaining the efficiency and minimal costs methods while increasing customers food choices. Every manager inthe restaurant participates in a seven week hands on training in every aspect of the restaurant and also attend an off-site management skills class.

The ability of BWLD to keep their overhead costs low without sacrificing the quality of their products, allows themto excel in hardship economic times and thrive during economic prosperity. In addition, team members at BWLD

are constantly motivated for promotion opportunities when they demonstrate a positive performance. Teammembers have the opportunity to a promotion opportunity latter that allows to become certified in three levels ofexpertise until they reach the master trainers certification.

To effectively increase their profit margins and market share BWLD concentrates on a coordinated marketingstrategy that is adapted to the local community and the national brand awareness. The marketing promotions BWLDhas made have been successfully increasing the volume sales of the chicken wings and introducing new menu items.In addition, with the benefits of franchisees opening new restaurants in places yet saturated by the intensecompetition in the restaurant industry have greatly benefited by the brand recognition.

Moreover, BWLD is looking to expand not just in the U.S. but also internationally. They have been looking forpossible joint partnerships and labor and raw material cost benefits in different countries. Their productdifferentiation and restaurant style has always kept abreast with changes in the restaurant industry respectingcustomer tastes and choices. For instance, they have introduced new healthy choices of salads and sandwiches to

keep up with recent trends. In addition, their menu is always changing to meet the needs of the local customerswhile maintaining the food theyre known for.

Due to the risks involved with the alcohol handling, BWLD has focus their earnings in the food they serve. Lessthan 23% of their revenue comes from alcohol. However, the company has established strict procedures to handlethe alcohol business while maintaining their relaxed and family atmosphere style at their restaurants.

4. Has the firm made irreversible commitments to bridge the gap between its current capabilities and the

requirements to achieve its competitive advantage?

BWLD has maintained a steady increase in their annual total sales during the recent years even in economicrecession. Therefore, their ability to sustain their competitive advantage to keep prices low and their overheadbudget cost at a minimal. While the initial investment to open a restaurant has been an obstacle to their expansionplans, they have continued to slowly expand in new markets. Buffalo Wild is searching to lock their suppliers in along term contract/partnership and they have been able to accomplish that in the past. The highest risk for BWLD isfor the price for chicken wings to increase. The average price per pound of chicken wing in the last three years hasbeen around $1.17 and fluctuating 5 or 7 cents in price. However, due to their ability to lock their price in the recentyears they have been able to maintain their low prices.

5. Has the firm structured its activities (such as research and development, design, manufacturing, marketing

and distribution, and support activities) in a way that is consistent with its competitive strategy?


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The industry BWLD competes is mainly dominated by food restaurants that do not include the entertainment servicethe company offers. The BWLD has leverage a huge competitive advantage in their restaurants design andaccommodations including TVs and a full bar. The restaurants with biggest markets are Darden Restaurants whoowns places like Red Lobster and Olive Garden; Brinker International Inc., who owns restaurants like Chilis andMaggios Little Italy; Dine Equity who owns and operates restaurants like Apple Bees; and its most closely relatedcompetitor Buffalo Wild Wings who owns and operates 837 location in 48 states. Nevertheless, most of therestaurants mention above only offer one of the amenities BWLD has. They will a mini-bar, or only a few screenTVs. In addition, the restaurant design is not catering the sports fan whose sole purpose is to find a place that willaccommodate his/her needs to watch their favorite sports in an atmosphere that attracts people with the sameinterests.

BWLDs flexibility to appease a wide range of sports fans and others alike does not infringe a raise in their costs tomeet their demands. This model allows BWLD to provide customers the opportunity to dine-in and to call for take-out, sit at the bar with quick counter service or at a table. In addition, the menu choices for BWLD have evolved toinclude health conscience foods and their traditional recipes. In addition, BWLD has the advantage to turn-overhigher same-table sales during sporting events. BWLD food and beverage ordering happens through the duration ofgames as oppose to turning customers to leave to serve others.

Finally, the ability for BWLD to expand into new markets using their less risky company-owned restaurants putsthem in a position to better monitor their operations, keep costs down, and maintain the quality of their products.

Moreover, BWLD still has the second option to franchise and increase their brand recognition with the help offranchisees.

6. Is the companys competitive advantage sustainable? Are there any barriers that make imitation of the

firms strategy difficult?

The ability to keeps their costs down in operational expenses while maintaining the edge in their restaurant designmakes BWLD a dynamic restaurant with sustain profitability. The major barrier in their strategy is their inability tofind a long term contract to lock the price of their major product sales: chicken wings. The average price for chickenwings has been around $1. 30 during the last three year since 2009 (See Appendix 1A)

7. Are there any potential changes in the firms industry structure (such as new economic conditions, new

technologies, foreign competition, changes in regulation, change in customer requirements) that mightdissipate the firms competitive advantage? Is the company flexible enough to address these changes?

One of the major concerns affecting the companys bottom line is the re-occurrences of sporting event strikes andlockouts. In addition, during the times when there are less sporting events BWLD sees a decrease in their revenues.This decrease is usually felt during the second quarter of business operations. Furthermore, during the presentrecession BWLD have trouble expanding their business restaurants. They have experience delays opening newrestaurants and finding franchisees. However, they have continued to increase their sales since 2009 by 10%annually.

Finally, BWLD believes their new point of sale management information system infrastructure will help themmaintain accurate information to improve their decision making and market responsiveness to address the hardshipsexperience in the economic recession. Moreover their ability to transfer the risk of new business operations to the

franchisee helps them mitigate any loss risks from continuing to expand.


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Appendix 1A

Results of Operations

Our operating results for 2011, 2010, and 2009, are expressed below as a percentage of total revenue, except for thecomponents of restaurant operating costs, which are expressed as a percentage of restaurant sales.

The numbers of company-owned and franchised restaurants open are as follows:

The restaurant sales for company-owned and franchised restaurants are as follows (amounts in thousands):


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The annual average prices paid per pound for chicken wings for company-owned restaurants are as follows:


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Finance.yahoo.com Buffalo Wild Wings 2009-2011 SEC 10K Report

Buffalowildwings.com Company Overview and Mission Wings Circle

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