Buffalo Wild Wings, Inc.

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Buffalo Wild Wings, Inc.

1600 Utica Avenue South, Suite 700
Minneapolis, Minnesota 55416
Telephone: (952) 593-9943
Fax: (952) 593-9787
Web site: http://www.buffalowildwings.com

Private Company
1982 as Buffalo Wild Wings & Week
Employees: 2,900
Sales: $96 million (2002 est.)
NAIC: 722211 Limited Service Restaurants; 722410 Drinking Places (Alcoholic Beverages)

Buffalo Wild Wings, Inc., runs a chain of more than 200 chicken wing restaurants, which are located around the United States. The companys concept of spicy wings and a sports-bar atmosphere is popular with a 20-something, mostly male crowd as well as with families, and many of the restaurants are located near college campuses or in growing residential areas. Most of the companys outlets are owned by franchisees.

1980s Beginnings

Buffalo Wild Wings was founded in 1982 by two longtime friends, Jim Disbrow and Scott Lowery. Disbrow was born in Kentucky, and had moved to Cincinnati at the age of 11 to live with figure-skating coaches David and Rita Lowery, who later became his legal guardians. Their son Scott, ten years younger, grew up regarding him as a brother. Disbrow was a talented skater, and was named an alternate to the 1968 U.S. Olympic team, later touring with the show Holiday on Ice. In 1974 he moved to Buffalo, New York, and it was there that he first experienced a spicy local version of barbecued chicken wings that had originated in 1961 at a place called the Anchor Bar.

One day in 1981, while judging a figure skating competition at Kent State University in Ohio, Disbrow met up with Scott Lowery and the pair decided to get themselves some Buffalo-style chicken wings. They looked everywhere in town and couldnt find any, and out of their frustration came the idea to open a restaurant of their own. They decided to locate it in Columbus, the home of the Ohio State University, because of its large student population. In 1982 the new restaurant was set up in an empty storeroom space near the campus, and christened Buffalo Wild Wings and Week. The latter term was a reference to kimmelweck, a German roll covered with caraway seeds and kosher salt that was also popular in upstate New York. (The somewhat unwieldy name was soon shortened to bw-3 by customers.) The menu featured barbecued chicken wings with a choice of a dozen sauces and beef sandwiches served on kimmelweck buns, all at moderate prices.

Six months after opening, Disbrow and Lowery added a third partner, Mark Lutz. Though they had no restaurant experience, they provided the college crowd with food they liked, and the trio found themselves deciding to stay in the food service business. During its early years the operation was run in a haphazard manner, with minimal attention paid to financial matters. When times were bad the partners would try to placate their creditors, and when times were good, they used the extra cash to open new restaurants. Over the next decade six more locations were added in Ohio, Indiana, and Steamboat Springs, Colorado, where the partners liked to ski.

In 1991 the company developed a plan to franchise its concept with Francorp, a Chicago-based law firm. Buffalo Wild Wings would charge a $15,000 to $20,000 fee plus a percentage of sales, and required use of its bottled wings sauces, which were manufactured by Wilsey, Inc., of Atlanta. Within two years the chain had grown to 14 locations, mainly in Ohio.

The niche the company had staked out was somewhere between a McDonalds and an Applebeesunpretentious dining with an average meal check of between $5 and $6. Reflecting the companys largely college-age clientele, the motif was a sports bar, and the restaurants featured many wall-mounted televisions tuned to sporting events as well as computerized interactive sports trivia games and memorabilia displays. The dozen sauces that were offered ranged from mild to extremely spicy, and when Better-Be-Ready-Blazin was ordered, it was delivered by a staff member wearing a firemans outfit accompanied by the wail of a siren. Customers ordered their food from a central location while drink orders were taken by waiters. Food was served on disposable plates, so that there was less clean-up involved and the outlets could operate with smaller staffs, keeping expenses down. The back of each restaurant featured a bar where 50 different beers, many on draught, were served; sales of alcohol contributed as much as 30 percent of revenues.

Mid-1990s: Expansion and a Move

In late 1994 Buffalo Wild Wings hired Sally Smith to serve as chief financial officer, initially on a part-time basis. Disbrow had met Smith through his new father-in-law, who employed Smith as his CFO at a hearing-aid company, Dahlberg, Inc. He was impressed by her intelligence and unflappable personality. Smith wanted to remain in the Minneapolis/Saint Paul area, however, so Disbrow made the bold decision to move the firms headquarters there from Cincinnati to win her services. Disbrow himself had been commuting weekly to the Minneapolis region from the companys home base since 1992, as his new wife preferred to live there to raise her two children from a previous marriage.

Upon joining Buffalo Wild Wings, Smith undertook a complete overhaul of its finances, which were in a state of chaos. The company was in trouble with both its lenders and the Internal Revenue Service, and was edging close to bankruptcy. Smith spent nearly a year working out a tax payment agreement with the IRS, updating the software systems used to pay vendors, and closing several money-losing restaurants. After getting the situation under control, she was able to secure several million dollars in loans to fund renewed expansion.

Anticipating more growth, in 1995 the company unveiled a prototype free-standing outlet that had 190 seats in a 5,000- to 7,500-square-foot space. The bar and dining areas were more clearly separated in this version than in the companys past restaurants, an indication of the firms new strategy of moving from the college sports-bar mode toward the casual dining restaurant concept. The company also became more particular about the qualifications of new franchisees and encouraged development of more outlets by existing owners. A number of new company-owned stores were planned as well. Buffalo Wild Wings now had nearly four dozen restaurants, three-quarters of which were owned by franchisees. Though Smith had literally been unable to determine the companys annual profit/loss figures prior to 1995, she tallied up losses of $1.6 million on revenues of more than $12 million for the year, while predicting a profit for 1996. System-wide revenues were approximately $80 million at this time.

In August 1996 Smiths resolution of the firms financial problems was recognized with her appointment to the positions of president and CEO. Disbrow took the title of chairman of the board. By the end of the year Buffalo Wild Wings had 75 restaurants, 65 of which were franchisee-owned.

Late 1990s: Going National But Not Public

In 1998 Buffalo Wild Wings began preparing for an initial public stock offering of 1.5 million shares, but the idea was quickly abandoned due to unfavorable market conditions. The firm had launched its first national advertising campaign in the spring with such slogans as Eat, drink and be messy, and Be on a first-name basis with your dry cleaner. The company initially made several different versions of ads that used the name variations found in different markets, bw-3 or Buffalo Wild Wings, but the decision was soon made to standardize the name throughout the system to the latter format, and future ads reflected this. At the same time the company also upgraded the packaging of its bottled wing sauces in an attempt to increase their sales for home use. The firm was targeting a mix of young and/or sports-loving types and families, and ran irreverently humorous television spots on such cable networks as ESPN and Fox Sports, as well as on MTV, VH-1, Lifetime, and CNN.

October 1999 saw Buffalo Wild Wings open its 100th restaurant, in Apple Valley, Minnesota, only a few miles from its corporate headquarters. The company now owned 23 locations. In December the firm completed an $8.5 million private placement of stock to fund further expansion, with more than 260 sites projected by the end of 2003. The funding came mainly from three venture capital firms, which would afterwards own a majority stake. During 2000 Buffalo Wild Wings also began testing a variety of new sauces, including Cajun, Thai, and Caribbean Jerk-style. The latter two were subsequently added to the menu, as was the companys first dessert offering, a chocolate peanut-butter cookie wedge. During the year the company, which now had restaurants in 19 states, opened its first location in the home of its signature menu item, Buffalo, New York. The company was now calling its outlets Buffalo Wild Wings Grill & Bar.

Company Perspectives:

Our mission is to WOW people every day! We are guest-driven. We will WOW our guests every day by achieving the highest level of satisfaction with an extraordinary focus on friendly service, food, fun and value. We are team-focused. We will WOW our team members by providing the same respect, positive encouragement and fair treatment within the organization that we expect Team Members to share externally with every guest. We are community-connected. We will WOW the communities where we do business by practicing good citizenship and helping to make these communities better places to live, work and grow. We are dedicated to excellence. We will WOW our franchisees and stakeholders with outstanding, industry-leading financial results and operational performance.

At the beginning of 2001 the chain had a total of 140 locations, which generated system-wide sales of $150 million. Same-store revenue growth averaged 8 percent per year, which was attributed to improvements in the menu and the chains tactic of locating new sites near growing residential areas. A new ad campaign was launched during the summer that was intended to enhance the chains brand identity. Wings, Beer, Sports. All the essentials was the tagline. The campaign was budgeted at $3 million, and the television spots were made with higher production values than before, in an attempt to reach beyond the core market of 2134 year old males. Takeout sales, which now accounted for 17 percent of sales, were also emphasized.

At the end of the year Buffalo Wild Wings announced plans to distribute branded potato chips to retail stores in conjunction with Frito-Lay. Wider distribution of the firms sauces was also being contemplated. In the summer of 2002 the company rolled out new Turkey and Chicken Tender Wrappers, soft flour tortillas which were wrapped around chunks of meat, vegetables, and pineapple.

The Future

On October 16, 2002, cofounder and board chairman Jim Disbrow died of a brain tumor at the age of 54. In addition to his work with the company, he had remained involved with the sport of figure skating, acting as team manager of the 1998 U.S. Olympic team and serving from 1998 to 2000 as president of the U.S. Figure Skating Association. Company leadership remained with Sally Smith, while Scott Lowery served as vice-president of franchise construction.

In 2003 the companys advertising was updated again, this time focusing on the menus finger foods. Twelve tasty appetizers. Go crazy was the theme of the $8 million promotional campaign. By summer there were 211 stores in 27 states, and Buffalo Wild Wings was now ranked the eighth largest restaurant chain in the United States by Technomic, Inc. For the most recent fiscal year system-wide sales had reached $286 million. The firm was now planning to ramp up its expansion, with a total of 400 locations anticipated by 2005.

After more than 20 years in business, Buffalo Wild Wings had opened restaurants in more than half of the countrys states, and the it was preparing to double its number of outlets in the near future. The appeal of tasty, inexpensive fare served in a lively environment was strong, and the companys core clientele kept coming back for more. As additional Americans were introduced to the the companys offerings, its growth looked certain to continue for some time to come.

Principal Competitors

Champps Entertainment, Inc.; Julians Entertainment Corp.; Wingstop Restaurants, Inc.; Slaymaker Group, Inc.; Hooters of America, Inc.

Key Dates:

Jim Disbrow and Scott Lowery open a chicken wing restaurant in Ohio.
Buffalo Wild Wings & Week, with seven outlets, starts to franchise concept.
Sally Smith joins company as CFO and begins to untangle the financial problems.
Firm expands to 60 outlets; Smith named president and CEO.
First national advertising campaign launched.
100th restaurant opened; company obtains $8.5 million in private funding.
Buffalo Wild Wings-inspired potato chips introduced by Frito-Lay.

Further Reading

Cebrzynski, Gregg, Buffalo Wild Wings Puts the Finger on New Promo, Preps TV Spots, Nations Restaurant News, March 10, 2003, p. 14.

, Buffalo Wild Wings Touts Takeout, Signs Chipper Deal With Frito-Lay, Nations Restaurant News, October 22, 2001, p. 14.

, Former Ad Agency Sues BW-3 Amid Launch of New Campaign, Nations Restaurant News, October 12, 1998.

Cebulski, Cathy, Franchising Takes Wing at BW-3, Greater Cincinnati Business Record, August 19, 1991, p. 1.

Hahn, Trudi, Skating Authority Jim Disbrow Dies, Star Tribune (Minneapolis), October 18, 2002, p. 6B.

Kincaid, Valerie Bott, Area Eatery Chain May Go Public, Greater Cincinnati Business Record, March 11, 1996, p. 2.

Linstedt, Sharon, Minnesota Firm Tries to Shoulder Into Buffalo Wing Market, Upstate, Associated Press Newswires, May 21, 2000.

Lohmeyer, Lori, Buffalo Wild Wings Co-Founder Disbrow Dead at 54, Nations Restaurant News, November 4, 2002, p. 8.

MacArthur, Kate, Wild Wings Takes Off: Chain Launches Branding Effort as Demand Rises, Advertising Age, July 9, 2001, p. 8.

McDowell, Bill, Buffalo Wild Wings & Week: Initially a College Hangout, BW-3 Aims to Cultivate its Image as a Casual-Dining Concept, Restaurants & Institutions, August 15, 1995, p. 26.

Merrill, Ann, Hot Prospects: After a Faltering Start Buffalo Wild Wings is Finding its Stride, Star Tribune (Minneapolis), February 5, 2002.

Rugless, Ron, Chicken-Wing Popularity Soars; Concepts Take Flight, Nations Restaurant News, May 8, 2000, p. 5.

Walkup, Carolyn, Buffalo Wild Wings Flies Further From the Nest, Sails Into New Territories, Nations Restaurant News, January 8, 2001, p. 24.

Youngblood, Dick, A Woman Worth Moving a Restaurant Chain For, Star Tribune (Minneapolis), December 22, 1996, p. 3D.

Frank Uhle