Buffalo Wild Wings looks for growth beyond its core restaurants

"Beer, sports, wings" has been a winning mantra at Buffalo Wild Wings. But the new Wild Wings restaurants that open this year in the Middle East will be beerless, in deference to Muslim prohibitions on alcohol.

Closer to home, the Golden Valley-based company will soon open restaurants that will be, well, wingless: fast-serve pizza outlets dubbed PizzaRev, a concept in which Buffalo Wild Wings is an investor.

Buffalo Wild Wings is flying beyond its traditional space. While it still has considerable room to expand its U.S. wingprint, a saturation point will eventually come. So the company is launching plans now to help it keep booming in the long-term.

"You can make choices on what kind of company you want to be," CEO Sally Smith told the Star Tribune in a recent interview. "You can be a high growth or you can be a dividend paying company. We'd like to remain high growth."

Buffalo Wild Wings is one of the restaurant industry's biggest success stories, growing at a torrid pace while many other chains have flatlined, casualties of stagnant consumer demand. The company's TV-bedecked restaurants — chock-full of sports programming — are particularly humming this month during the NCAA's March Madness basketball tourney.

"They certainly have found a great niche and great following in the U.S.," said Bob Goldin, executive vice president at restaurant consultant Technomic Inc.

And not only among consumers. Over the past 52 weeks alone, the stock is up 81 percent. Wild Wings' revenue has tripled in the past five years, crossing the $1 billion mark in 2012, with profits steadily rising.

Earlier this year, the company hit a milestone, opening its 1,000th restaurant. Wild Wings believes it has room for at least 700 more in the United States and Canada. "We'd certainly like to do that within 7 years," Smith said.

The biggest growth opportunities are on the East and West Coasts, particularly California. Next month, the company plans to open a restaurant in New York's Times Square, a crown jewel twice the size of a standard Wild Wings. And Canada, which came online in 2011, is now home to 14 outlets, mostly in the Toronto area.

The next phase of Buffalo Wild Wings' expansion began in December with the opening of a restaurant in Chihuahua, Mexico. Two more followed in January, one each in Monterrey and Merída. The three franchisees behind those restaurants each have rights to open about 10 outlets.

Buffalo Wild Wings opted to initially stay out of Mexico City, where doing business is more difficult, Smith said. "If you are going to fail, you'd rather do it in a way that doesn't damage the concept or brand for the rest of Mexico."

Not that it hasn't gone well so far. Sales are about 50 percent higher than expected, she said. "We're thrilled."

Buffalo Wild Wings has an agreement with a franchisee in the Philippines for five or six restaurants. It expects to sign a franchise agreement for Mumbai, India, within the next six months, Smith said. And a partnership with Saudi Arabian conglomerate Olayan Group calls for up to 20 Wild Wings outlets in four Middle Eastern countries.

The first is slated to open in Saudi Arabia in June or July, while a second is planned for Dubai around September. "They'll have a bar, but it won't serve alcohol," Smith said. Instead, fruit juices, lemonades and other beverages will be on tap.

Wild Wings could serve alcohol in some Muslim countries if it chose to locate in hotels that cater to tourists and business travelers. "But that wasn't our strategy," Smith said. "It is to truly serve guests who live there and are not just visiting."

Goldin of Technomic had some doubts on how well Wild Wings would translate in overseas markets. "I have kind of a yellow light on it. Buffalo Wild Wings seems like such a unique U.S. experience," he said, noting the heavy reliance here on American-style football.

Smith said sports is universal, though the games may be different. "Soccer is huge everywhere. I think there's a soccer game on every night in Mexico." And in the Middle East, she said, a lot of people go to the United States for college and return with a favorite college basketball team.

While it expands internationally, Wild Wings is branching into new concepts, starting with PizzaRev, a "fast-casual" pizza purveyor that does Chipotle-like production of pizza. Customers get in line, pick out a crust and sauce and choose from about 30 toppings. The single-serving pizza is cooked within a few minutes. It costs about $8, regardless of the number of toppings.

Buffalo Wild Wings last year became a minority investor in PizzaRev, a small Southern California chain. Wild Wings plans to open up to six PizzaRev outlets — effectively playing the role of franchisee — in Minnesota this year. The first is slated for May in Hopkins near Knollwood Mall, the second in July at Centennial Lakes in Edina.

The goal: Grow PizzaRev across the country, with restaurants opened by a combination of Wild Wings itself, Wild Wings' own franchisees and PizzaRev. If it's successful, Wild Wings would possibly buy the whole company.

Wild Wings is scouring the nation for other restaurant companies that would merit minority investments. The search parameters: The concept must be in the fast-casual or casual dining niche; it must work across the country, not just regionally; and it must be easily replicated. Also, its food should have a fresh and healthy theme.

"You should see us invest in the next five years in five to seven concepts," Smith said.

Branching off into new concepts is inherently risky for a restaurant company. "The danger occurs when the other investments distract from the core brand," said Dennis Lombardi, a restaurant consultant with WD Partners. "Sally is too smart to let that happen," he added.

Buffalo Wild Wings' approach to new concepts is akin to that of venture capitalists who invest in a host of companies, hoping for a big payoff in just a few. "You only need one [restaurant concept] to become a very successful brand," Lombardi said.

Buffalo Wild Wings is proof of the home-run investment. When Smith started at the company in the early 1990s, it had only 30 restaurants, mostly in Ohio. Since then, its basic formula hasn't changed much. "It's been a time-enduring winner," Lombardi said.

Mike Hughlett • 612-673-7003