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Independent Franchisee Association Supports Roark Acquisition of Buffalo Wild Wings

BWW at nightBuffalo Wild Wings franchisee owners are speaking up in favor of private equity firm Roark Capital acquiring their publicly traded franchisor (NASDAQ:BWLD) to take it private. Roark Capital's subsidiary Arby's Restaurant Group Inc. agreed to buy Buffalo Wild Wings Inc. for $157 per share. On December 4 independent franchisee association Franchise Business Services, which Buffalo Wild Wings' franchise owners created to represent their interests some 15 years ago, announced that it is endorsing the acquisition.

Arby's announced November 28 that its chief executive Paul Brown will take over the position of Buffalo Wild Wings exiting CEO Sally Smith. The $2.9 billion deal is expected to be finalized during the first quarter of 2018.

“Buffalo Wild Wings is a major player in the casual dining sector, leading the segment in many performance indicators,” said Wray Hutchinson, chairman of the franchisee association’s board of directors and an owner of 65 Buffalo Wild Wings franchises himself. “We’ve been aware of Brown’s hands-on leadership style for some time, and we’re looking forward to continuing to move the brand forward under his leadership.”

FBS members, who invested in restaurant units under the Buffalo Wild Wings logo, have extending their support to the new leadership. Years ago the franchisee association was created to defend the interests and profits of Buffalo Wild Wings franchisees. Independent associations such as theirs exist in the franchise industry because the interests of small business and multiunit franchisee capitalists do not always match the interests of franchising firms or Wall Street. Entrepreneurs in various brands have banded together to form independent franchisee associations to protect their direct business investments.

Hot times become mild

Buffalo Wild Wings saw years of lifting sales and rising wealth to shareholders even when other casual dining chains and the sector as a whole began to drop in visits and sales. Prices for large televisions had significantly dropped to where consumers could watch games with friends in their man caves as opposed to sports bars and casual dining restaurants filled with large screens. A long rise in share prices ended for Buffalo Wild Wings at the end of 2015.

Smith had a message to shareholders that changes had been made, but that it was important to stay the course. Good sailing was ahead.

Activist hedge fund firm Marcato Capital Management disagreed. The activist argued that the company’s officers and board members thought more like management and not enough as shareholder investors. It argued that Buffalo Wild Wings was sitting on a gold mine of company-owned restaurants that could be franchised for a massive infusion of cash to the franchisor, thus maximizing the wealth of the franchisor’s shareholders.

Buffalo Wild Wings’ franchisee association came to the defense of CEO Sally Smith, the franchisor’s board of directors and the existing strategic direction of Buffalo Wild Wings against the shakeup efforts of the activist firm. Franchisees feared that the hedge fund firm's refranchising goal (the selling of company-owned units to become franchises) would negatively change the nature of the Buffalo Wild Wings system that franchisees had invested in. In essence, the franchise owners argued that Buffalo Wild Wings would lose its edge and skin in the restaurant business if it sold most of its company units for others to operate.

Shareholders ended up voting in favor of Marcato to shake things up at Buffalo Wild Wings. CEO Sally Smith promptly announced she would step down by the end of the year.

Franchisee association optimistic

The news about the acquisition of Buffalo Wild Wings is welcomed by the franchisee association. What these restaurateurs see in Roark Capital is a conglomeration of over 60 franchisor and multiunit brands in its portfolio, including Massage Envy, Arby’s, Auntie Anne’s, Carl’s Jr, Carvel Ice Cream, Wingstop and Meineke Car Care. The franchise owners expect that the new franchisor owner will be more long term in its approach.

“FBS is proud to join an already highly recognized restaurant company, and more than anything, our franchisees are optimistic about the opportunities available within the multi-brand restaurant company,” says Mark Jones, vice chairman of Franchise Business Services (FBS).

“The casual-dining industry is evolving,” said association chairman Hutchinson. “Franchisees across the country are committed to ensuring consumers continue to receive the same distinctive quality they’ve come to expect from Buffalo Wild Wings, and this deal will only strengthen that commitment.”

With speculation and then news of the acquisition, share prices for Buffalo Wild Wings have recently climbed again.

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Roark buys Buffalo Wild Wings for $2.9 billion

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