In the Buffalo Wild Wings fight, the identity of rivals becomes an issue

Who competes with Buffalo Wild Wings?

The issue arose again Thursday in the company's battle with an activist investor because of the two sides' competing views of its recent stock performance. Buffalo Wild Wings gave investors a new statement explaining who it thinks its share performance compares with — and quite favorably, it added.

The Golden Valley-based company went public in 2003 and became one of the fastest-growing stocks in the country over the following decade, rising more than 10 times in value. Since 2013, its growth has leveled off and it has seesawed in a range that peaked in August 2015.

Depending on who it is compared to, the company's seesawing stock price can look pretty good or not as good over the past year, three years or five years.

Marcato Capital Management, the investment firm that is seeking changes in leadership and strategy at Buffalo Wild Wings, has repeatedly said the company's shareholder returns underperformed against a broad number of other chain restaurant companies.

But Buffalo Wild Wings, using a narrower group that includes Cheesecake Factory Inc. and Cracker Barrel Old Country Store Inc., says it outperformed them in each of the three time periods.

To some investors, the argument is secondary to the differences between the company and Marcato on strategic ideas for the future.

Marcato advocates a major shift in the ownership portfolio of the company's nearly 1,200 restaurants, half of which are owned by the firm with the rest owned by franchisees. It wants nearly all of them shifted to franchisees, a move it argues would free the company's capital and unlock value for shareholders.

Buffalo Wild Wings executives envision a more gradual shift in the restaurant portfolio.

But stock performance is given careful consideration by Institutional Shareholder Services Inc. — a research group known as ISS and hired by major investors — when it researches corporate actions. Executives from both Marcato and Buffalo Wild Wings are expected in coming weeks to visit the firm. ISS will then make a recommendation to investors on who to support in the battle for control of the company's board, which will be settled in a shareholder vote on June 2.

An ISS rep on Thursday said the firm doesn't comment on meetings with participants in proxy battles. It typically issues its recommendation about two weeks ahead of a shareholder vote.

Over the past two weeks, Marcato has three times leveled criticism at the company over the one-, three- and five-year share performance.

And after the company's statement on Thursday, Marcato followed up with a chart that showed how Buffalo Wild Wings used a different group of competitors to explain its decisions about executive compensation than it did for the comparison on the recent-year stock performance. It said the company used yet another group in a meeting with stock analysts last summer.

"The peer group Buffalo Wild Wings management used today is the third different one presented by the company in recent months," Marcato said.

In its statement, the company said Marcato was making a mistake by using a broader group of restaurant firms, including larger ones, to draw comparisons on stock performance. "Buffalo Wild Wings should instead be compared to its casual dining peers — companies that are similar in service delivery and business model and that compete for similar consumers," the company said.

Using the 14 companies it chose, Buffalo Wild Wings says its stock outperformed the group by nearly 18 percentage points over the past year, 16 percentage points over the past three and 10 percentage points over the past five.

Other companies Buffalo Wild Wings cited as peers in the stock comparison were BJ's Restaurants Inc., Bloomin' Brands Inc., Bravo Brio Restaurant Group, Brinker International Inc., Chuy's Holdings Inc., Darden Restaurants Inc., Denny's Corp., DineEquity Inc., Ignite Restaurant Group Inc., Red Robin Gourmet Burgers Inc., Ruby Tuesday Inc. and Texas Roadhouse Inc.

Evan Ramstad • 612-673-4241