Activist investor says Buffalo Wild Wings should franchise 90 percent of outlets

The activist investor targeting Buffalo Wild Wings Inc. said Thursday the company should rely more heavily on franchisees and that its stock could triple in value over four years if it did.

Richard "Mick" McGuire of Marcato Capital Management, in remarks at an investment conference and in an interview on CNBC, revealed publicly some details of the changes he asked Buffalo Wild Wings executives to consider. They include gradually shifting the mix of franchised and company-owned restaurants, now about evenly split, to a mix that is 90 percent franchised and 10 percent company-owned units.

"Principally, they've been buying in franchisees and we think they should be shifting in the opposite direction and moving toward a more highly franchised business model," McGuire said on CNBC. He added, "A more highly franchised business model would mean higher margins, higher returns on capital and quite a bit higher stock price."

McGuire said he believes the firm would need about four years to make the change. "It certainly is a big endeavor," he said. By doing it, he said the company's stock would jump from about $140 now to the $400 to $450 range.

A spokeswoman for the company didn't return a request for comment.

Golden Valley-based Buffalo Wild Wings has about 1,200 chicken-and-sports themed restaurants worldwide and has estimated it could grow to 1,700 locations in the U.S. and Canada and targets 400 overseas in 10 years. McGuire said he believes that, with greater reliance on franchises, it could go beyond that.

At the investment conference, McGuire said his firm contacted several former executives who have been involved in restaurant franchising for validation of the restructuring idea. "We think is a pretty straightforward analysis," he said on CNBC. "We think there are a lot of compelling precedents and we're continuing to push the agenda."

McGuire's firm acquired a 5 percent stake in Buffalo Wild Wings over the summer. In August, he sharply criticized the company's executives in a letter to investors that was made public. His attack marked a first for Buffalo Wild Wings, which has been one of the nation's most successful restaurant companies over the past decade.

Since its stock went public in November 2003, it has appreciated more than tenfold. But it peaked in the summer of 2015 at around $190 a share and its sales growth has slowed since then. On Thursday, Buffalo Wild Wings shares fell 2.1 percent to $138.34.

Evan Ramstad • 612-673-4241