| Shareholder Activism

Marcato Capital Management:  Advantage of refranchising a restaurant company

Excerpts from the letters

Marcato Capital Management is exceedingly optimistic about the future of Buffalo Wild Wings.  In the crowded and competitive restaurant universe, Buffalo Wild Wings offers an experience that is superior to and highly differentiated from those offered at any of the sports-themed competitors in its markets.  The benefits of its national scale, from marketing to purchasing to best practices, will continue to position Buffalo Wild Wings as the preferred destination to experience televised sports outside of the home.  In fact, we think the Company’s estimated addressable market of 1,700 units (compared to 1,220 expected by year-end 2016) in the United States and Canada may be far too low and deserves to be revisited.

Refranchising would be well received in Buffalo Wild Wings:

  • Franchisee market is strong and has grown significantly in the last decade. More than 150 companies with >$50m in revenue and purchasing power in excess of $100m per company. Hundreds of additional entities with individual Buffalo Wild Wings market acquisition capacity of $30m to $100m.
  • Institutional capital attracted to franchise-related investments (decades of strong return, proven operating model, “Amazon-proof”)
  • Current franchise M&A environment is at historic highs for transition sizes and valuation
  • Refranchising can enhance Buffalo Wild Wings’ brand and operating model as well as maximize future system growth by ceding development to franchisees. Cypress has expertise in maximizing current value, franchisee operational selection and commitments for future growth and reimaging. If you are interested to read insights like this, we are happy to offer you a free trial.

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